WWE Sees Stock Drop Following Saudi Arabia Investment In UFC And Other Competitors

The world of professional wrestling has been thrown into turmoil as Saudi Arabia’s sovereign wealth fund makes waves in the world of mixed martial arts (MMA). World Wrestling Entertainment (WWE) and Endeavour Group (EDR) are grappling with the implications of this new player in the ring. In a surprising twist, WWE’s stock took a sharp hit, plummeting by 12% in response to the news. Let’s dissect the situation and understand the impact of Saudi Arabia’s investment in a competing MMA league, the Professional Fighters League (PFL).

A Pivotal Investment

The catalyst for this wrestling drama came in the form of SRJ Sports Investments, a fund controlled by Saudi Arabia’s Public Investment Fund (PIF). SRJ Sports decided to invest a substantial $100 million in the Professional Fighters League (PFL). This investment has ruffled feathers across the wrestling landscape.

The PFL, a notable player in the MMA arena, announced a partnership with SRJ Sports Investments, signalling the fund’s entry into the world of mixed martial arts. The PFL Middle East division is on the horizon, set to kick off next year with events slated to take place in Saudi Arabia. This move into the MMA market by Saudi Arabia’s PIF adds another dimension to the country’s growing sports investments, which have included soccer and golf in the past.

Wrestling Stocks Take a Beat

The repercussions of this investment were swift and harsh for WWE. Its shares plummeted by 12%, following a 4.6% drop the previous day when news of the Saudi Arabian investment emerged. WWE, which was already navigating a merger with Endeavour Group (EDR), saw EDR’s shares fall by 10% as well.

Investors and analysts alike are concerned about the potential implications of this move. Peter Supino, an analyst from Wolfe, expressed his reservations about the situation. Supino noted, “While there is room for all to succeed in the growing MMA market, PIF backing augurs poorly for WWE and UFC’s medium- and long-term talent costs. He elaborated on the threat posed by the PFL’s increasing investment, stating, “We think the PFL’s accelerating investment plans represent a new overhang on WWE’s (and soon TKO’s) valuation multiple.”

The uncertainty surrounding WWE’s valuation is causing unease among investors. The prospect of heightened competition and potentially inflated talent costs is raising questions about the company’s long-term financial prospects.

Analysts Offer Differing Perspectives

As always, the financial world is a battleground of opinions. Guggenheim analyst Curry Baker offers a more optimistic take. He doesn’t believe that Saudi Arabia’s investment in MMA is a “game changer” for WWE or EDR. Baker pointed out that the investment isn’t substantial enough to enable PFL to compete with the UFC in terms of the depth of champions or across weight classes. Furthermore, Baker believes that PFL might struggle to develop a monetization ecosystem to compete sustainably with the UFC.

In the midst of this turmoil, Baker remains positive about the impending merger of UFC and WWE, which will bear the name “TKO. He foresees substantial annual run-rate operating synergies of $100 million or more with the formation of this new company.

The wrestling world’s uncertain future

WWE and EDR find themselves at a crossroads, navigating the complex terrain of the professional wrestling and MMA industries. The Saudi Arabian investment in PFL is a significant development, and its impact on the wrestling landscape is still unfolding. While some analysts believe that WWE and EDR will weather this storm, others see a cloud of uncertainty looming over the future of these wrestling giants.

The story of Saudi Arabia’s foray into MMA and its effects on the world of professional wrestling is far from over. Wrestling enthusiasts and investors alike will be closely watching how these developments play out in the coming months. The wrestling world, known for its unpredictability, is once again living up to its reputation, leaving fans and investors on the edge of their seats.