Yet Another Class Action Lawsuit Filed Against Vince McMahon And WWE
Posted by Joseph Lee on 08.28.2014
A lot of people are angry...
WWE stockholder Curtis Swanson has filed a lawsuit against WWE, Vince McMahon and WWE CFO George Barrios on behalf of himself and "all others similarly situated". The suit was filed in the United States District Court of Connecticut on August 25. It claims that the defendants "(i) made false and misleading statements, (ii) engaged in a scheme to deceive the market, and (iii) engaged in a course of conduct that artificially inflated the price of WWE securities and operated as a fraud or deceit on Class Period purchasers of WWE securities by misrepresenting the Company's business and prospects."
Swanson claims that he bought WWE stock while the company was negotiating its TV deal with NBC Universal. He thinks the company made "false and misleading statements about the WWE's much publicized ability to transform the Company's earnings profile through, among other things, the negotiation of a lucrative new long-term television license deal." He said the company claimed the new TV deal was going to be the "primary driver of WWE's transformation" and compared it to NASCAR's recent TV contract, which is worth $820 million. The company also allegedly claimed their programming was "DVR-proof" and they downplayed "the fact that advertisers pay less to reach WWE's viewers than traditional sports and any other show on the USA Network and the negative impact on the television license negotiations resulting from the Company's launch of its WWE Network, a 24/7 subscription-based streaming network containing pay-per-view events and original and historical programming."
WWE's negotiations led to a $92 million deal, which was an increase from their $57 million deal. The lawsuit claims that "the stock price of WWE fell to $11.27 per share on May 16, 2014, a decline of 43% from the previous closing price of $19.93 per share." McMahon and Barrios are also being sued because of statements they made during stockholder conference calls. Barrios also had a presentation at the December 2013 UBS Global Media and Communications Conference during that time.
The lawsuit claims that WWE knew the following bits of information but hid it from stockholders:
"-WWE's ability to command premium pricing for its television license agreement was significantly undermined by the Company's rollout of the WWE Network.
-WWE's ability to command premium pricing for its television license agreement was significantly undermined by the low advertising rates for professional wrestling compared to other live sports
-As a result of the foregoing, there was no reasonable expectation that WWE could double the value of its domestic television license agreement."
Swanson wants the court to name his lawsuit as a "proper class action lawsuit", award members of the class damages (including interest) and rule that the defendants will cover "reasonable costs and attorney' fees." WWE hasn't responded, but they have until November 25 to file a motion to dismiss.