Investment Firm Calls For WWE To Fire Management Or Explore Sale Of Business

Lemelson Capital Management, a private investment management firm, announced on Friday they have a stake in shares of WWE and are calling on the Board of Directors to replace the executive management team or explore the sale of the business.

The firm called on the changes following “a period of consistent losses, execution issues and material misstatements.”

“WWE has affirmed that even with one million subscribers for its WWE network, the company stands to lose between $45 million and $52 million in FY 2014, which validates the original short thesis,” said Emmanuel Lemelson, Chief Investment Officer of Lemelson Capital Management. “This follows what we believe to be material misrepresentations by the company about both the performance and operating profit model of its WWE network, which the company has wrongly labeled ‘a homerun’,” said Lemelson.

Below is the release in its entirety:

Lemelson Capital Announces Stake In World Wrestling Entertainment And Calls On Board To Pursue New Management Or Ownership

Marlborough, MA, May 16, 2014 — Lemelson Capital, LLC, a private investment management firm, today announced that they had taken a stake in shares of World Wrestling Entertainment (WWE) and called on the Board of Directors to replace the executive management team of the company following a period of consistent losses, execution issues and material misstatements.

Despite the stock’s roughly 63% correction since Lemelson Capital’s original short call less than two months ago (from $30.37 on March 17 to $11.33 as of publication of this release), the firm today also reiterated that fair value of WWE’s common stock is between $8.25 and $11.88.

Lemelson Capital’s original short thesis can be found here:

“WWE has affirmed that even with one million subscribers for its WWE network, the company stands to lose between $45 million and $52 million in FY 2014, which validates the original short thesis,” said Emmanuel Lemelson, Chief Investment Officer of Lemelson Capital Management. “This follows what we believe to be material misrepresentations by the company about both the performance and operating profit model of its WWE network, which the company has wrongly labeled ‘a homerun’,” said Lemelson.

Lemelson Capital today also called on WWE’s Board of Directors to promptly replace the company’s executive management team, or explore the sale of the business, and said that such changes are a necessary component of any successful strategy going forward. “For example, promoting the WWE direct network’s value to shareholders without a fair and accurate discussion of the implications to a traditional network revenue circumvented management’s fiduciary responsibility as stewards of investor’s capital, and is part of what has emerged as a pattern over recent years. Further, there are no pending operational developments in the pipeline to offset these significant losses,” Lemelson added.

Lemelson Capital and its clients are long shares of WWE.

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  • M.C. Elroy

    The problem with WWE is that you can enjoy the product without spending a penny.

    • Vic Jose

      Not really, it is not on free tv, you pay with your subscription.

      • Bob’s Diner

        But you can download as much as you want illegally

        • Vic Jose

          Well if you do that’s stupid

  • MadDawg

    So… Now would be a good time to buy WWE stock?

    • Jesse Sherwood

      Speaking from a prior investment point of view, no. The current value of the stock is around $11.50 a share, which is the high end of what they are projecting as the valuation of WWE stock as a whole. I’d personally wait until it hits $8-9 a share to buy into it. I had bought 500 shares of it about a year and a half ago when it hit $8 a share, and I sold at $28.13, a profit of over $10,000. I don’t see it getting that high again, but if it drops to $8 again, I’d invest in around 2000 shares this time and sell at $11-13.

      • Mathew Lisett

        “I’d invest in around 2000 shares this time” wow if only people had $16000 to spare

        • Jesse Sherwood

          That’s my retirement find right now, the bit I squirreled away while I was in the Air Force. Up until 2 years ago, I had $4000 tied up in mutual funds. I figured when WWE hit $8 a share, I’d take a gamble and invest it all there, and it paid off. Granted, that is quickly looking like a one time affair thanks to the recent news…

    • Walter

      In investor parlance – Don’t try to catch a falling knife…

  • Evon Callaway Bitterweed Reese

    It’s looking like the network may be their downfall.

    • Mathew Lisett

      I think a LOT of poeple saw this coming from a mile off to be honest, i certainly did. #wwenetwork

      • LeftyTosser

        Stephanie and others sure saw it coming. The amount of stock dumped over the past 12 months should have opened someone’s eyes.

      • michael foulds

        And you’ll be the same person who says he always said it would be a success when it turns into one.

        • Mathew Lisett

          nope, i dont believe it will be. i think its an ego trip for vince and not a well thought out plan .

          • michael foulds

            How is it not a well thought out plan and how is it an ego trip? NHL, NFL, NBA networks all work so why shouldn’t this? They are only in one country so far, when they expand they will be doing a lot better business. How so called “wrestling fans” complain at $10 a month for every ppv which cost more than $10 for one, plus new ppvs instead of paying $55 dollars or £15 over here in England, is a joke. It’s only $10.

          • Mathew Lisett

            “NHL, NFL, NBA networks all work so why shouldn’t this?” ok going by that example of this worked so why couldnt this, well we should simply bring up XFL, we didnt that work since it basically followed the ones you just mentioned. just because something of the same form succeeded doesnt mean what you bring to the table as your own product will also succeed

          • michael foulds

            No, that obviously didn’t work because it was a blantant NFL rip off with players and standards nowhere near as good as the NFL, and obviously they didn’t have a network for the XFL because it didn’t survive. There were a lot of reasons the XFL didn’t work, but my point is you get all the content for NFL, NHL, NBA etc. on a network for a set price a month and their fans buy it, so wrestling fans should and will do the same once they see the advantages.

          • Steve pritchard

            Exactly! That’s what I’ve been saying for months. It’s gonna be like netflix. Slow out of the gate, but once people see how bad they’re getting ripped off by cable and satellite company’s . It will take off like wildfire. Just like netflix. I know plenty of people that ditched cable in favor of streaming services .

          • Cubed56

            Netflix has many, many, many movies and programs to choose from, wwe network is just wrestling, and unfortunately wwe is nowhere near as popular as it was 10-15 years ago. As a wrestling fan, I’d like to agree with you, but unfortunately with its limited programming, i dont see the network ever becoming like Netflix, quite honestly i don’t think it will even sniff the success of Netflix.

          • Steve pritchard

            Your missing my point. Why would you shell out. $55 to $70 a ppv ? When you can get them all with. $10 a month . It makes no sense. Sure it’s not netflix , well I take that back it is. You get the entire back catologue of ppv an other original programing. So how is it not like netflix ? Maybe not thousands of movies. , but you get a shit load of content for $10 a month. So yeah it is a lot like netflix! People need to actually try it out before they go knocking it. I wouldn’t mind it being the only way to watch wwe programming . I can watch nba playoffs or Monday night football and come back and watch raw without having to fast fwd through commercials. All I’m saying is people were slow to pick up on netflix and the same will happen with wwe network. . As long as all these haters quit hating and actually try it out.

          • Cubed56

            I actually am a subscriber to the network and I agree with you its good, but you are missing my point. Netflix is multi-dimensional with thousands of movies, shows, and original programming, making it attractive and suitable for many different kinds of people. Now your right, the network is like Netflix with one big exception…it’s a one trick pony. Everything about the network is wrestling, there is no variety, even its original programming is based on wrestling, making it far less attractive and solely suitable for only one type of person, and that is wrestling fans. There in lies the downfall for the network. There is no real reason for a casual fan to get the network, and as much as people might not like it, the number of hardcore wrestling fans is significantly less then it was 10-15 years ago. Why shell out $55-$70 a ppv you asked, well that’s simple, some people only order one ppv per year(usually wrestlemania) so right there they are saving at least $50, also you can get all the ppv’s a year for half of the cost of the wwe network with $5 live streams. Look, im with you hoping it succeeds and things turn around, but the truth is it will never be as successful as netflix.

          • Steve pritchard

            The XFL was not a network! It was an alternative to nfl , kinda like afl. So that’s a bad example. Wwe network is a streaming service. The problem is the investors we’re mislead by wwe into thinking the network was going to be a success out if the gate. Which it wasn’t. But neither was netflix at first. Once people started embracing the digital age a little more . Netflix became a multi billion company and is still growing . So I don’t see this hurting wwe yet , but if they don’t get a handle on it pretty quick . It could snowball . Then again the investors should have known better. . Given the time netflix took to get where they are. The network is a good deal . I don’t understand why people don’t get that . So they would rather pay $55 to $70 bucks for something they can watch for $10 a month. sounds like a no brainer to me .

          • Steve pritchard

            Exactly! Like I said netflix was barely a blip on the radar . When it first came out. Now it’s practically becoming an alternative to cable. They have enough money to produce they’re own programs now . Wwe had way more going into this than netflix had when they started . People need to quit complaining and try it before they knock it .

          • michael foulds

            Rome wasn’t built in a day, is the saying. People are just pessimistic and complain about any small thing because their lives are that shit haha.

  • Bob’s Diner

    Wow… Irony is I’ve been discussing this for the last couple of weeks and someone kept trying to explain to me how business-wise the company was doing better than ever with HHH having more corporate responsibility… and here we now with investors calling for EVERYONE to be replaced. This is crazy. I’m sure they will bounce back from this, but the network sure is not starting well for the company

  • kayvonbeiram

    Looks like Jerry McDevitt is going to be a very busy man in the coming weeks…

  • paul

    So they buy into a business. Then urge for the top management to be fired. Or they will sell the shares.
    May as well sell up then. Vince is vince. And you won’t change his mind.
    There is more chance of Vince taking the company of the stock exchange than a company effectively holding him to ransom as it seems like with there calls for changes.

    Richard may be able to answer better. How much of the shares does the McMahon/leveque own. 75% or so.

  • Vic Jose

    So does this mean the McMahons are being fired? lol

  • Jerry

    Since Vince owns approximately 80% of the shares with voting power in WWE stock, this company is going to have to convince Vince to accept the change. There is practically nothing they can do to change things without that.

  • Kurt

    I wonder what the stock was selling for just a few short months ago when Stephanie dumped a rather large amount of it.

    • Jesse Sherwood

      $10.39 was the average price of what she sold.