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WWE’s USA Network Deal Smacks Down TKO and Endeavor Stock

brendan coffey
·3 min read
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For more than a year, WWE management has been teasing to Wall Street analysts the hot marketplace it sees for the rights to its SmackDown and Raw franchises, which have been under contract to Fox and USA Network, respectively, for the past five years.

Now, the first of the two deals been struck Thursday, with SmackDown leaving Fox and going to Comcast’s basic cable fixture USA Network for a five-year deal. The contract is reportedly worth $1.4 billion, according to The Wall Street Journal.

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That’s a jump of 40% over the five-year deal WWE had with Fox. Despite that healthy premium, investors weren’t impressed and hammered down shares of WWE’s parent, TKO Group Holdings, as much as 16% Thursday on much higher than average volume. Shares recovered somewhat during the trading day but were stuck under $90 a share after closing yesterday at $100.88.

“Investors are reacting to the rights deal,” said LightShed Partners analyst Brandon Ross in an email. “There was some investor hope for a higher value on SmackDown and uncertainty over who takes Raw.”

Call it a miss in the expectations game. In an August 2022 call with analysts, WWE management walked through the universe of new potential bidders for its two franchises, detailing how Netflix, Alphabet and Apple were moving toward live events, adding deep-pocketed potential bidders on top of the networks expected to be interested. Last week, WWE president Nick Khan said on a phone call with Sportico that the negotiations for SmackDown and Raw “have only been affected in a positive way” by the merger with UFC.

TKO Group and Endeavor Group declined to comment.

Now, with SmackDown going to NBC, which has already had Raw, it would suggest Fox is out as a bidder on Raw, for which a deal has yet to be struck. It also suggests streaming services haven’t been as aggressive as hoped.

It’s possible that the deal underwhelmed Wall Street expectations because, despite the high value of live sports and entertainment content, NBC faces headwinds in selling more expensive advertising into WWE shows. The perceived brand of pro wrestling scares off some premium advertisers, despite its appeal to younger viewers.

Thursday’s stock plunge puts WWE well below the value placed on the business by Endeavor Group. Just last week, Endeavor closed its purchase and spin-off of WWE into TKO Holdings with UFC at a valuation of nearly $106 a share. Endeavor, which owns the majority of TKO equity, saw its shares tumble as much as 12% Thursday also on heavier-than-average volume.

It’s the second high-volume conflagration in the market in the past three weeks. To end August, Endeavor and WWE, whose price history TKO has inherited, fell 10% and 16%, respectively, over two days after Saudi Arabia’s sovereign wealth fund injected $100 million into MMA upstart Professional Fighters League, creating fears of higher talent costs for TKO.

Still, Wall Street is renowned for its knee-jerk reactions to news that diminishes in importance over time. TKO still has the rights to Raw to sell, which presumably could happen at a similar or better premium than SmackDown.

“We believe the company will take its time on Raw, as potentially interested partners like Disney and Warner Bros. Discovery solidify their own internal strategies,” said analyst Ross.

With assistance from Anthony Crupi

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