Lemelson Capital Announces Stake In World Wrestling Entertainment And Calls On Board To Pursue New Management Or Ownership

Summary

• Lemelson Capital, previously short the stock, announces a new stake in company.
• Ongoing losses, operating failures, material misstatements warrant and require urgent executive management changes or a sale of the company.
• Underlying business has value, but not under current management.

Marlborough, MA, May 16, 2014 -- Lemelson Capital, LLC, a private investment management firm, today announced that they had taken a stake in shares of World Wrestling Entertainment (WWE) and called on the Board of Directors to replace the executive management team of the company following a period of consistent losses, execution issues and material misstatements.

Despite the stock's roughly 63% correction since Lemelson Capital's original short call less than two months ago (from $30.37 on March 17 to $11.33 as of publication of this release), the firm today also reiterated that fair value of WWE's common stock is between $8.25 and $11.88 with current management in place.

Lemelson Capital's original short thesis can be found here:

"WWE has affirmed that even with one million subscribers for its WWE network, the company stands to lose between $45 million and $52 million in FY 2014, which validates the original short thesis," said Emmanuel Lemelson, Chief Investment Officer of Lemelson Capital Management. "This follows what we believe to be material misrepresentations by the company about both the performance and operating profit model of its WWE network, which the company has wrongly labeled 'a homerun'," said Lemelson.

Lemelson Capital today also called on WWE's Board of Directors to promptly replace the company's executive management team, or explore the sale of the business, and said that such changes are a necessary component of any successful strategy going forward. "For example, promoting the WWE direct network's value to shareholders without a fair and accurate discussion of the implications to a traditional network revenue circumvented management's fiduciary responsibility as stewards of investor's capital, and is part of what has emerged as a pattern over recent years. Further, there are no pending operational developments in the pipeline to offset these significant losses," Lemelson added.

Lemelson Capital and its clients are long shares of WWE.

About Lemelson Capital Management

Lemelson Capital Management, LLC is a private investment management firm focused on deep value and special situation investments. For more information, see: http://www.lemelsoncapital.com

SPECIAL NOTE REGARDING THIS REPORT

THIS REPORT INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA IS RELIABLE, WE HAVE NOT SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR INFORMATION IN THIS PRESENTATION. MANY OF THE STATEMENTS IN THIS PRESENTATION REFLECT OUR SUBJECTIVE BELIEF.

THE INFORMATION CONTAINED ABOVE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF WORLD WRESTLING ENTERTAINMENT MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED ABOVE SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING WORLD WRESTLING ENTERTAINMENT AND ITS PROSPECTS BASED ON SUCH INVESTORS' OWN REVIEW OF PUBLICALLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED ABOVE. NEITHER LEMELSON CAPITAL MANAGEMENT, LLC NOR ANY OF ITS AFFILIATES ACCEPTS ANY LIABILITY WHATSOEVER FOR ANY DIRECT OR CONSEQUENTIAL LOSS HOWSOEVER ARISING, DIRECTLY OR INDIRECTLY, FROM ANY USE OF THE INFORMATION CONTAINED ABOVE.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this letter are forward-looking statements including, but not limited to, statements that are predications of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Forward-looking statements are not guarantees of future performance or activities and are subject to many risks and uncertainties. Due to such risks and uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. Forward-looking statements can be identified by the use of the future tense or other forward-looking words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "should," "may," "will," "objective," "projection," "forecast," "management believes," "continue," "strategy," "position" or the negative of those terms or other variations of them or by comparable terminology. Important factors that could cause actual results to differ materially from the expectations set forth in this letter include, among other things, the factors identified under the section entitled "Risk Factors" in World Wrestling Entertainment's Annual Report on Form 10-K for the year ended September 28, 2013. Such forward-looking statements should therefore be construed in light of such factors, and Lemelson Capital is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Disclosure: I am long WWE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Comments

[Roland Rick Perry]

Personally, I've never been able to pull off the "cover short and go long" trick nor the "sell long position and go short trick" ! Very impressive..

[Research and Value]

While WWE management has made significant mistakes in the past, the management lives and breathes WWE, and they are critical to its success, I think. I do not think a Corporate or Wall Street type management can be successful here. One needs to be kind of crazy passionate to run this business well, and current management is uniquely suited for this. Overall, the strategic direction of the company is the right one and quite courageous (launching network, investing more in content and shows, pushing global), though they made a very bad mistake in terms of timing of the network launch with NBCu negotiations, which backfired. Over-optimism of analysts could also be understood, because they likely compared their TV rights fees that NASCAR and some of the others were getting, so then their projections did not look that outlandish. Overall, a very interesting situation is developing here, it seems to me.

[Phil Anthropy]

WWE's future is not in the USA. Other countries have always had a great appreciation of both live entertainment and combat arts. Just look at the various Kung Fu movies from the Far East. In this country there is a diminishing attraction to classical fighting styles, such as boxing or wrestling, in favor of mixed martial arts. The degree of athleticism and showmanship in today's WWE is so far beyond what professional wrestling had in the 1950s that it defies comparison. The acrobatics today weren't even attempted back then in the days of announcer Vince McMahon, Antonino Rocca, Gorgeous George, Haystacks Calhoun, Bruno Sammartino, Killer Kowalski, Chief Big Heart, Jack Vansky, and the countless other ring stars. Foreign audiences, who actually attend live events on a regular basis instead of watching tv reruns, admire the performers for these skills and will want to see them in person. On other fronts, the movie The Marine that WWE produced was quite good for an early effort, and will continue to generate small royalties, although film revenues will likely remain small in comparison to box office receipts and other revenues. WWE and professional wrestling have been around for many decades. As long as children and adults can be thrilled by the sweaty excitement of the ring, there is money to be made. But there is more money to be made overseas than here these days, in my view, so the thing to watch is the level of funding and success of the overseas expansion efforts.

[zerofill52]

Blah, that type of network is the future. Cable as we know it will be done in the next 10 years. Most companies that have jumped in to this type of media streaming, have done it with the future outlook. They know they will be ridiculed and lambasted in public, until it finally comes to reality. Just like the telecom industry, the old school businesses models cause them to start choking. Cable companies know they will not have a firm grip on the internet forever. The FCC knows they will never control it long term as well. So the best thing they can all do is slow progress.

A group like this, buys in to stir the pot. Because of other companies they represent somewhere in the chain. Now they can say they bought such and such amount of stock, and pound their chest. Even though the stock they bought gives them no control or power at all. What it does is give them 5 seconds of fame.

[Love_U_Short_Time]

Oversold. Too much bashing. This stock will regain on its dead cat bounce on Monday. I have a feeling we will settle in the $12+ before the 11am EST conference call. Then Spike to $14 a share.

[idkmybffjill]

$14 a share - sweet. Still down over 50% from it's high a month ago.

[Urbannek]

I owned this stock a while ago. Bought it for the dividend. Always thought the company was a little strange. Glad I sold it without losing too much money.

[idkmybffjill]

Here's what happened to WWE stock today:
http://bit.ly/RIZlTv

[bugtuna212]

VM owns 87% of the float. He goes into the bathroom and looks into a mirror and says all those in favor of replacing me raise your hand...no one...Thank you. Comes out tells Board it was a unanimous no.

[Dennis Tikkanen]

Can't believe Vince and Linda misjudged things so badly with the new network and getting a renewal rate so much lower than expectations. They're usually decently savvy.

[burt.blair]

What is the voting structure of the company? Do public shareholders have any sort of voting control? NO. You essentially bought non-voting stock my friend. Good luck making demands of the Board.