World Wrestling Entertainment (WWE) is facing a flurry of class-action lawsuits as a result of an ongoing stock value free-fall since the beginning of the year.
Dave Meltzer from Wrestling Observer reports (subscription required) that the decline directs at factors relating to the stock market more than internal matters. Internal factors — including the firings of executives Michelle Wilson and George Barrios — resulted in a stock free-fall to the mid-40s.
With the stock market in free-fall as a result of the COVID-19 pandemic, WWE stock fell Wednesday to $38.62 per share. By late Thursday, the stock would plummet to roughly $32.30 per share. WWE stock closed Friday at $34.61 per share, a sharp decline from the $50 mark the stock was in late February.
Meltzer stated at least seven law firms have either filed or are seeking to file class-action suits against the company over the week. The original complaint was filed by the Warren, Ohio Police and Firefighters Retirement Fund.
The class-action suit will be directed toward investors who purchased stock between February 7, 2019, and February 5, 2020. Currently listed as defendants are the WWE, chairman and CEO Vince McMahon and former executives Wilson and Barrios.
What Criteria Are Specified in the Suits?
The suits make several claims in regards to WWE:
Materially False and Misleading Statements
The suits claim that WWE senior executives made materially false and misleading statements regarding the company’s future financial situation.
It cites a shaky, high-tension relationship between WWE and the Kingdom of Saudi Arabia, which stems as far back as 2018:
Saudi Disapproval of WWE’s Regards of Women
Saudi officials showed disapproval in late 2018 at how the wrestling organization regards women. The suit does not explicitly state what the conservative elements the Saudi kingdom was referring to.
WWE Allowed a Saudi Television Deal to Go Sour, Then Lied About a New Deal
A television deal negotiation between WWE and Saudi satellite TV provider Orbit Showcase went sour in 2019. The deal reportedly went sour because the Saudi government failed to make payments to WWE. The dispute led Orbit to make an executive decision in March 2019 to terminate the agreement early.
WWE claimed they had made progress to renew or establish a new television deal. Prospects worsened after Saudi officials failed to pay WWE for the Super ShowDown event held last June in Jeddah.
WWE executives revealed August 25 that new TV negotiations were in progress, having reached an agreement. On Halloween, a later report reveals that the deal was on an indefinite delay.
On February 6, a new media deal in the region was no longer part of the company’s fiscal forecasting.
Barrios and Wilson Cashed Out
Former executives Michelle Wilson and George Barrios cashed out on WWE stock holdings. Wilson collected $10.96 million, while Barrios earned $8.58 million. The suits claim both sold stock when the stock prices were at its peak between February 2019 and July 2019. The sales took place when the stock ranged from roughly $89 per share up to its peak just over the $100 mark.
The suits also claim that the Barrios and Wilson sales may have contributed to much of WWE’s fiscal problems.
McMahon Cashed Out to Use Proceeds to Relaunch the XFL
In the same time frame, Vince McMahon cashed out just over $261 million in stock. The proceeds would later establish Alpha Entertainment. Alpha is the parent company of the revived XFL, which funded the first three seasons of the league.
XFL announced a suspension of league operations on March 11 because of the COVID-19 epidemic. League officials, including commissioner Oliver Luck, announced they have plans to return for a full season in 2021.
Alpha Entertainment and the XFL serves as a separate private entity separate from WWE.
Can the Claims Stick?
WWE has a history of lawsuit dismissals as a result of questionable arguments in litigation and has been an issue of much speculation.
Jerry McDevitt has represented WWE in various high-profile cases in the past 26 years with the law firm K.L. Gates. He’s less than impressed with the current class-action filings against the company.
McDevitt claims the lawsuits are from a “bunch of scab lawyers trolling for clients.” He adds that the other suits have the same language as the pension fund lawsuit.
“The real persons suing are the class action law firms who hope to get big paydays while shareholders typically get peanuts,” McDevitt adds.
“The suit is full of bogus and false gossip,” McDevitt retorts. “Like there is tension over fact females could not perform there, when in fact females have performed in last couple events, including days before they filed the lawsuit.”
It’s not currently certain how soon these WWE class-action lawsuits will enter the courtroom with suspended court operations.
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