There’s a new top heel in the WWE, and he’s a Greek Orthodox minister named Rev. Fr. Emmanuel Lemelson. Even worse than wrestling villains who stop at nothing to eliminate the fan favorite, this enemy of the people is targeting the WWE’s front office. Emmanuel Lemelson isn’t a wrestler – he’s an investor; and like the best wrestling heels, it’s hard to blame him for his actions deep down.
Lemelson is the CFO of Lemelson Capital Management, which basically controls Amvona Fund, LP. Financial experts consider Amvona to be one of the top hedge funds in the world, often ranking No. 1. Needless to say, Lemelson is highly influential on Wall Street.
Lemelson has taken an interest in WWE stock and bought a sizable share earlier in the year. After publishing an analysis on the value of the stock, Lemelson determined that the WWE was significantly overvalued and should be shorted. That was on St. Patrick’s Day. Since Mar. 17, WWE has lost approximately $1.4 billion in market capitalization, which is directly correlated to price per share. When speculation was at its highest due to ongoing television rights negotiations and WWE Network subscriber predictions, the stock was worth more than $30 per share. As of press time today, it’s worth less than $11.
The big drop-off can largely be attributed to Lemelson’s analysis, but the WWE has gotten nothing but bad news on the business front. We still don’t know the exact nature of the new TV deal, but Vince McMahon predicted the company would almost triple their old deal with NBCUniversal, doubling at worst. The company didn’t come close to either prediction. Even though they increased their revenue, investors were very discouraged.
Lemelson, who has since bought back in, was chief among those who felt misled by McMahon’s statements. In fact, he is calling for major changes to be made at the executive level of the company. We’re taking big, important people. He has also threatened the WWE with another huge sell-off, which would further decrease their stock value.
Profitability is the key issue for the WWE, and is the main reason why investors are jumping ship. Overall company profitability is down across the board, even though they’re grossing more money. This year, the WWE stands to lose $45-52 million. The company readily admitted they would be losing money in 2014, but this number caught them off guard.
Company officials knew that Network startup costs would be significant, but they assumed their PPV providers would stick by them. When the Network offered customers every PPV for $10 a month, DirecTV and Dish Network bailed. In Demand remains WWE’s only PPV provider in the United States.
PPV was always going to be down, and the company budgeted for 40 percent of last year’s PPV business. If In Demand decides to pull out after WWE Payback, which has been one of the most horribly promoted shows of the last 10 years, McMahon would be left without any PPV revenue.
Interestingly enough, the company noted in a conference call on Monday that they budgeted 2015 accordingly. They are moving forward under the assumption that they won’t be offering PPV next year, which is much sooner than their initial 2-3 year projection.
The Network numbers aren’t good either. The WWE has yet to release the current number of subscribers, but at last check they had somewhere in the neighborhood of 600,000-700,000. Long-term company growth is dependent on Network subscribers, and thus far the numbers have been disappointing.
To break even on the network, they’ll need around 1.4 million subscribers. The company believes they will accumulate 2.5-3.8 million worldwide subscribers in the next two to three years. They claim this will help them break all previous financial records. Let’s just say Wall Street isn’t bullish on those figures.
Lemelson is demanding some sort of explanation for the astonishing losses the company expects to encounter this year, especially considering how optimistic McMahon has been publicly. At this very moment, there are more than a few ongoing investigations by various law firms looking into whether or not McMahon broke any laws.
The WWE still believes they’re in good shape, but this is quickly turning into a disastrous situation. It doesn’t help that Emmanuel Lemelson isn’t on their side.