When Vince McMahon not-quite-voluntary resigned from WWE last summer, Wall Street began suggesting World Wrestling Entertainment should be sold. But, the consensus thinking went, there was no way McMahon’s attachment would allow a sale—after all he’s the controlling shareholder of the business his grandfather founded, and Vince made it into an entertainment giant through his knack for promotion—of both himself and his wrestlers.
Last week we learned that the consensus was way off the mark. Instead, it seems McMahon is looking to force a sale—and probably place an exclamation mark on WWE’s supremacy over UFC. Already, McMahon’s return to “maximize shareholder value” has rallied shares up 30% this year, after a superb 2022 that saw WWE stock advance 40%. The company is built on drama, and discipline: on Tuesday evening, Stephanie McMahon, WWE co-CEO and Vince’s daughter, resigned– while noting WWE is positioned to “drive maximum value to shareholders.” Meanwhile, UFC parent Endeavor lost 35% off its share price last year.
It’s not news McMahon and his slap-happy counterpart at UFC, Dana White, are rivals—White boasted on a morning radio show a few years back that McMahon offered to fight White in the ring early last decade. And in recent years, UFC has seemed to run neck-and-neck with WWE for the title of the world’s favorite ringed event (sorry, Barnum and boxing). Founded in 1993 and not even half the age of WWE, UFC is now about even on two major metrics: social media followers (WWE 60.4 million; UFC 59.5 million) and revenue (for 2021: WWE $974 million; UFC roughly $1 billion*).
But in a sale, expect WWE to trounce UFC’s value.
The reason ties back to a common theme in sports and entertainment these days: WWE’s control of its media rights and intellectual property. WWE has a deep bench of archival material it can use to create documentaries and other non-event content to, say, appeal to GenXers looking to relive 1980s Hulkamania. At the same time, it holds IP rights to the raft of characters created over the years, which can supply a steady stream of POP! figures and theme park attractions for the kids.
Also, its current slate of live offerings is as popular as ever, with the company already breaking its sales record for the upcoming WrestleMania in Los Angeles. McMahon can offer all this in what may well be the golden age of media rights, with bidding sure to be influenced by the needs of traditional broadcasters eager to clutch whatever viewers they can as well as streaming behemoths looking to establish themselves with consumers.
The market capitalization of WWE is now $6.6 billion, compared to Endeavor’s $10.1 billion—but only part of that is value that can be attributed to UFC, since Endeavor generates billions of dollars in non-UFC revenue from talent representation, film and TV content production, and sports betting.
By another metric, Endeavor and UFC are more valuable than WWE. Endeavor has an enterprise value of $14.9 billion. Enterprise value, which is the value of its equity plus debt, minus cash on hand, is probably a better reflection of a business’ true worth. But net debt—of which Endeavor has almost $5 billion—doesn’t put cash into shareholders’ hands. WWE had net debt of just $112 million as of its latest quarter, according to data compiled by Morningstar. That means any purchase of WWE is going to be result in lots of cash flowing to shareholders’ wallets. Endeavor’s heavy debt load—already a weight on the stock—is one reason the chatter that Endeavor wants to buy WWE probably won’t amount to anything.
Plus, in the stock market, acquisitions tend to come at a 28% premium to a company’s stock price. That premium does vary, but it’s been fairly consistent on average over the years. Assuming the same for WWE, a 28% premium would put shares at $113. That would exceed WWE’s all-time high of $96 set in spring 2019, surely a bar shareholders will need to see bested in order to sell.
At that price, WWE’s enterprise value of $8.6 billion is just a one-digit multiple of the rights fees committed to WWE already—before this year’s negotiations begin for SmackDown and Raw, currently with Fox and Comcast’s USA, respectively. The upcoming negotiations make Fox and Comcast favorites among those speculating on bidders to buy WWE, along with Amazon. Media analysts at LightShed suggested in a 2023 outlook that Amazon may be very interested in adding WWE events to its slate of live programming. Add to that list Walt Disney, since it recently secured WWE rights for its India-focused Hotstar streaming service—although there is a feeling among some analysts that Disney may seek to ease spending on sports-related content, now that the Disney+ service is stand-alone profitable.
Whoever the buyer, at the average price premium, Vince McMahon would find his 28.7 million shares worth $3.2 billion, putting his total wealth close to $4 billion, based on data from Forbes. It’s a good bet that wealth would place McMahon well within the ranks of the Forbes 400 list of richest Americans, a club that McMahon surely would be fine retiring in, for good.
*Endeavor reported revenue of $1.1 billion for its owned sports divisions, which include Professional Bull Riders and a European basketball league. Those two probably account for maybe $100 million of that topline figure.
(This article has been updated in the seventh and eight paragraphs to reflect Endeavor’s market cap, enterprise value and net debt.)