World Wrestling Entertainment (WWE) is in chaos because of the sudden and unexpected downfall of Vincent K. McMahon Junior.
McMahon was one of America’s most visible and longest-serving chief executive officers (CEO). Vince has been running WWE, his family business, since 1982. Yet, McMahon shocked fans by unexpectedly resigning during a hush-money and sexual harassment scandal on 22 July 2022.
McMahon’s retirement is shocking because most wrestling observers thought Vince would serve until death. Most wrestling fans and journalists thought Mr. McMahon was all-powerful and untouchable.
In the past, McMahon has survived federal drug charges, the-too movement, the lunacy of the Monday Night Wars, and the near bankruptcy of the WWE. Yet, a rather tame sexual harassment scandal drove him out. What’s going on here?
Why is Vince McMahon Gone?
Predictably, there is more to Vince’s departure than the sex and hush money. Notably, McMahon’s departure comes after several years of glaring business and creative failures.
The biggest failure was the WWE Network, a video streaming service designed to give the company recurring revenue. Vince’s hope was that tens of millions of wrestling fans would fork over $10 to $20 a month to see their favorite entertainment.
The network became too expensive to operate, causing WWE to shut it down, Sportskeeda speculates. On 4 April 2021, all WWE Network content in the US moved to NBC Universal’s Peacock streaming service. The WWE Network is still available to some foreign subscribers.
The WWE Network failed because it could not attract enough subscribers to cover its costs. Sportskeedia estimates the WWE Network had 1.5 million subscribers in April 2021.
Where have all the Superstars Gone?
Beyond the Network, WWE has been having serious creative problems for a long time. Notably, the WWE has not created a new wrestling star in over a decade.
The last big homegrown star to appear at WWE is Roman Reigns, who has been appearing since 2012. Reigns is popular, but he is not a breakout superstar like Hulk Hogan, Stone Cold Steve Austin, or John Cena. Notably, WWE hasn’t had breakout star since John Cena. Tellingly, Cena just celebrated his 20-year anniversary in the ring.
Instead of creating new stars, WWE keeps bringing back older stars. For example, Brock Lesnar, Bill Goldberg, John Cena, and Edge. Notably, Goldberg is over 50, and the rest of those guys are in their 40s.
Nor is the company’s vaunted women’s division in better shape. The Four Horsewomen, Charlotte Flair, Bayley, Becky Lynch, and Sasha Banks (Mercedes Varnado) still dominate the women’s roster. All of them have been around for years. Worse, Banks recently walked out after a dispute with management and shows no sign of returning.
WWE’s Talent Development Disaster
World Wrestling Entertainment (NYSE: WWE) has reportedly spent tens of millions on talent development and has nothing to show for it. The company built an elaborate “Performance Center” in Orlando and created the NXT brand with a USA Network TV program to showcase new talent. Yet, anybody who watches WWE’s programs knows the company has a serious shortage of name wrestlers.
One problem is that the most successful creations of WWE’s development process are now working at the rival All Elite Wrestling (AEW). For example, Adam Cole, Athena (Amber Moon), Swerve Strickland, and Keith Lee.
Unlike WWE, AEW has had no problem finding and showcasing new talent. For example, Sammy Guevara, Darby Allen, Jungle Boy, MJF, Absolute Ricky Starks, Hook, the Lucha Brothers, and Dante Martin to name a few.
In addition, AEW has manufactured one superstar as popular as any WWE wrestler Dr. Britt Baker DMD. Baker is the number one woman wrestler in the country. Additionally, two other AEW stars, Thunder Rosa and MJF, are close to the superstar level.
AEW succeeded by searching independent (“indie”) wrestling for talent and bringing in Mexican and Japanese wrestlers. Moves WWE could easily take but refused to consider. One reason for WWE’s development failure was McMahon’s refusal to acknowledge Indie Wrestling or take Japanese and Mexican wrestling seriously.
WWE’s Talent Relations Mess
AEW’s roster shows talent relations is a problem at WWE. Several former WWE stars are working at the organization, including Chris Jericho, Toni Storm, Claudio Castagnoli (Caesaro), John Moxley (Dean Ambrose), Keith Lee, Adam Cole, and C.M. Punk.
Additionally, there are rumors three of the world’s top wrestling stars, Kenny Omega and the Young Bucks (Matt and Nick Jackson), turned down big WWE contracts. All three men are now AEW headliners.
WWE’s failure to develop new talent, attract talent, and keep talent is a threat to its future. I think the failure to keep talent is one reason Vince is gone. Notably, Vince’s departure came two months after two of WWE’s biggest stars, Sasha Banks and Naomi, walked out of a Monday Night Raw taping on 16 May 2022. The two reportedly walked because of “creative differences with management.” McMahon was in charge of creative at the time.
Tellingly, WWE’s head of talent relations John Laurinaitis was put on administrative leave in June 2022 and fired in August, Sports Illustrated reports. McMahon’s son-in-law Paul Levesque, known to fans as Triple H or Hunter, became WWE’s executive vice president of talent relations on 22 July 2022.
Levesque is trying to bring back some wrestlers McMahon drove out of the company, Bleacher Report speculates. For example, Karrion Kross (Indie favorite Killer Kross) came back on 5 August 2022. WWE creative drove Kross away by treating him like a clown in 2021. Another released wrestler, Dakota Kai, returned earlier in the month.
One reason for Levesque’s actions is that executives at the Fox Network which airs Smackdown were complaining of WWE’s limited roster. As fans know, WWE keeps restaging the same matches while AEW is constantly bringing in new talent.
Is WWE a Value Investment?
Observers will wonder if WWE (WWE) could become a value investment. Management is trying to fix the company’s problems.
Mr. Market likes these efforts. For instance, WWE’s stock price rose from $62.56 on 1 July 2022 to $72.21 on 10 August 2022. Furthermore, WWE’s stock price rose from $49.76 on 9 August 2021.
Moreover, WWE was experiencing significant revenue growth before McMahon’s departure. For instance, WWE’s revenues grew by 26.53% in the quarter ending on 31 March 2022. Revenues grew by 30.27% in the quarter ending on 31 December 2021.
Unfortunately, that revenue growth was making up for COVID-19 pandemic losses. WWE’s revenues fell by 26.21% in the quarter ending on 31 December 2020. WWE suffered huge losses in 2020 because COVID-19 shut down its popular live shows.
WWE has Recovered from COVID-19
Revenues show World Wrestling Entertainment (WWE) has recovered from the COVID-19 pandemic. For example, the quarterly revenues rose from $263.52 million on 31 March 2021 to $310.30 million on 31 December 2021 to $333.45 million on 31 March 2022.
Similarly, the quarterly gross profit grew from $110.53 million on 31 March 2021 to $130.36 million on 31 December 2021 to $143.06 million on 31 March 2022. Meanwhile, the quarterly operating income rose from $65.06 million on 31 March 2021 to $83.67 million on 31 December 2021 to $92.41 million on 31 March 2022.
Conversely, the quarterly operating cash flow grew from $59.91 million on 31 March 221 to $95.41 million on 31 March 2022. Comparatively, the Quarterly ending cash flow fell from $300.42 million on 31 March 2021 to $105.59 million on 31 March
What Value Does WWE Offer?
Another reason Vince is gone is the WWE’s value, which appears stagnant. For instance, WWE had total assets of $1.177 billion in Total Assets on 31 March 2021. The total assets grew from $1.297 billion on 31 December 2020.
The total assets grew to $1.245 billion on 31 March 2022. Yet, the total assets were smaller than the $1.297 billion reported on 31 December 2022. Comparatively, WWE’s cash and short-term investments fell from $593.4 million on 31 December 2020 to $443 million on 31 March 2021 to $416 million on 31 December 2021. The cash and short-term investments rose to $448 million on 31 March 2022.
Plus, WWE’s debt grew over the past year. The Total Debt fell from $696.69 million on 31 December 2020 to $621 million on 31 March 2021 to $619 million on 31 December 2021. Yet the Total Debt grew to $634 million on 31 March 2022.
Is WWE a Good Stock?
Hence, WWE retains value, but it struggles to retain cash. I can’t call World Wrestling Entertainment (WWE) a value investment because of its small size, just $1.245 billion in Total Assets on 31 March 2022. Yet, WWE’s stock has some attractive features.
For instance, WWE has scheduled eight 12₵ quarterly dividends through 26 June 2022, Dividend.com reports. WWE shares offered a 48₵ forward dividend and a 0.66% forward dividend on 10 August 2022.
Vince McMahon’s departure does not make WWE a good stock. I still consider this company overpriced and too risky to be an investment. Mr. McMahon’s absence will not change that.