Topline
World Wrestling Entertainment’s stock skyrocketed to its highest price since April 2019 on Tuesday, as Wall Street buys into the potential of the wrestling giant’s newly-formed sports empire with UFC.
Key Facts
WWE shares rose as much as 9% to $97.68 in early afternoon trading, settling into a milder 8% gain by 3 p.m. ET, up some 40% since its controversial CEO Vince McMahon returned to the company January 5 to oversee a potential sale.
Tuesday’s jump entirely wiped out WWE shares’ initial 9% plummet Monday after the firm officially announced the terms of its sale to Endeavor, best-known as the parent company of fellow fighting titan Ultimate Fighting Championship.
The transaction is not exactly a sale as WWE shareholders are not offloading their holdings but rather sliding their equity into a 49% stake in the new publicly traded company while Endeavor shareholders took 51% equity.
The deal valued WWE at $106 per share, a valuation investors initially thought was far too rich, with LightShed analyst Brandon Ross declaring the valuation “meaningless” given the structure of the deal.
But several experts bought into the seemingly rich valuation multiples for the new UFC and WWE venture.
Moody’s analyst Emile El Nems said the “merger should result in higher operating leverage and greater long-term value creation” in emailed comments Monday and a Bank of America group led by Jessica Reif Ehrlich said the company will “have an attractive financial profile with ample flexibility” in a Monday note to clients.
Key Background
Shares of Endeavor, also the parent company of the talent agencies WME and IMG, also rallied 5% in Tuesday trading. McMahon, who spent six months away from WWE last year amid a sexual misconduct scandal, will be chairman of the new company’s board. UFC President Dana White will retain his role, weathering through a controversy of his own earlier this year after a video emerged of him hitting his wife; Endeavor shares slid 6% in the first day of trading following the incident, wiping out hundreds of millions of dollars in market value.
Surprising Fact
WWE shareholders will not be subject to taxes in the sale under its proposed terms, tax expert Robert Willens told Forbes’ Mike Ozanian on Tuesday, since it’s a transfer of ownership rather than a true sale.
Big Number
$150 million. That’s how much McMahon’s wealth pile swelled Tuesday. He’s worth $3 billion, according to our latest estimates.
UFC-WWE Deal Will Make The Combined Company The World’s No. 2 Most Valuable Sports Empire (Forbes)
Why The UFC-WWE Merger Would Be Tax-Free For Shareholders (Forbes)
UFC Parent Company Acquires WWE At $9.3 Billion Valuation (Forbes)
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