We Said WWE Was a Takeover Target; Now It’s Being Bought by UFC’s Parent Company (Here’s What’s Next)
“The opportunity to buy a content producer like the company we’re about to share is rare.”
That’s how TradeSmith CEO Keith Kaplan described World Wrestling Entertainment Inc. (WWE) in our inaugural issue of Special-Situation Central on Aug. 10, 2022.
And that “rare” buying situation has played out just eight months later, with Endeavor Group Holdings Inc. (EDR) — the owner of the Ultimate Fighting Championship (UFC) franchise — purchasing a majority share of WWE at 51%.
As a result, Endeavor is expected to create a brand-new publicly traded company that will unite WWE and UFC assets.
We selected WWE as a potentially profitable opportunity because of the investment clues we identified and what our proprietary stock-picking tools had to say.
Here’s how we made our choice… and how we’ll approach similar opportunities in the future.
The Profitable Case Study
First, current WWE CEO Nick Khan was once asked if the company would ever sell itself, and his reply was, “We’re open for business.”
While that’s a speculative clue, it is still a clue that the WWE was potentially being wooed already or, at the very least, was open to hearing takeover bids.
Second, even if WWE wasn’t acquired, it was still a good investment in its own right. Here’s why…
WWE is in our Green Zone, which means it is considered to be in a “healthy” and investable state. It is classified as a “medium risk” investment according to our Volatility Quotient (VQ).
We can also turn to Quantum Edge Pro Editor Jason Bodner’s system to see that Big Money is pouring into the stock and saying it is a buy. The green lines in the chart below indicate when Big Money has bought up the stock, with seven signals triggered in the past 30 days:
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When that original Special-Situation Central report was released, the WWE stock price opened at $72.81.
As of the closing price of $102.81 on April 10, anyone who had followed along would have had a chance at a solid gain of 41.20%.
But now that the acquisition offer has surfaced, we wanted to follow up with what’s next for WWE and what current shareholders or anyone interested in investing should think of it.
So we turned to TradeSmith Editorial Director Bill Patalon for his expert insight.
Clearly, there are some big opportunities here. Really big.
But, as I can tell you from having spent more than two decades covering public companies as a business journalist, it’ll come down to execution.
Both of these companies are fascinating for their brands, corporate storylines, and their impact on our entertainment culture.
For instance, I’m old enough to have seen how Vince McMahon elevated wrestling into a national and even global icon.
Prior to the McMahons, wrestling was a regional deal… I remember growing up outside Pittsburgh in the 1960s and ’70s, where WIIC-TV Channel 11 broadcasted a live, Saturday evening TV show called “Studio Wrestling.” It was at one point hosted by a guy named Bill Cardille, who doubled as a late-night horror-movie host known as “Chilly Billy.” (Cardille played a fictional version of himself in the 1968 film “Night of the Living Dead.”)
Studio Wrestling featured folks like Bruno Sammartino, and a guy named Tony Marino, who donned a hood and cape and called himself ‘The Batman.’ It revived interest in wrestling in Pittsburgh. And, at one time, it was Channel 11’s highest-rated show — in fact, it was one of the most popular wrestling shows in the entire country. But it was eventually canceled because of falling ratings — and allegedly because station execs felt it hurt WIIC’s image as a news channel.
Fast-forward to 1985, when McMahon held the very first WrestleMania… which revived interest in wrestling on a national level, and which helped turn folks like Hulk Hogan and Rowdy Roddy Piper into household names.
UFC has traveled a similarly unique path. And it’s had the same kind of impact on its own.
And ties between the two companies already exist — especially when it comes to sharing talent.
Stars like Brock Lesnar and Ronda Rousey have “crossed over” between the two organizations.
But anytime you have two organizations, you have integration challenges. Each company has its own culture. Each has its own way of doing things. Each has its own fan base. For investors who opt to stick around or people thinking about buying the stock… this is what you need to watch, to key in on: How is the merger going?
No merger goes perfectly; that just doesn’t happen. There will be challenges.
Just watch to be sure these aren’t challenges that will drain value from the merged company.
Bottom line: We can’t offer personal financial advice, so if you have followed along by investing in WWE and are sitting on a 40% (or greater) profit, it is up to you if you want to sell. For anyone thinking of holding or investing in shares of this new super producer of original content, remember Bill’s advice on the challenges of mergers and keep close tabs on how it appears to be going.
We’ll see you tomorrow morning with a new issue of TradeSmith Daily.