Earlier today, WWE stock fell $0.63 to $13.82 a share, a decline of 4.36%. That fact isn't particularly newsworthy by itself, but what precipitated the drop is.
No, it wasn't Stephanie McMahon breaking wrestling kayfabe to Yahoo Sports as Jim Cornette would have you believe, but the founder of the hedge fund Mangrove Partners, Nathaniel August, arguing that World Wrestling Entertainment investors should short sell their stock to CNBC (the video can be seen below the quote):
"The company has roughly a billion dollar market cap and they've launched an over the top network and pretty much all their profitability going forward is dependent on the OTT network and right now based on the number of subscribers that they have, they'll earn nothing at a corporate level and they need to double the number of subscribers just to justify their current valuation and we think that that's never going to happen.... So they launched it in April at WrestleMania and at the time they launched with 670,000 subs and at the end of the second quarter they only managed to add an additional 30,000 subs and as we've done scuttlebutt based research in how people are reacting to the network, we think people are really unhappy and that the number of additions is going to prove very disappointing."
In the short term, Nathaniel should be proved right, as barring huge international growth and surprisingly strong retention rates, it's hard to see WWE coming anywhere close to hitting their target of 1.3-1.4 million subscribers before the end of the year. But if WWE comes up with the right special attraction for WrestleMania 31 (like The Rock vs. Triple H perhaps), then that number might be reachable on the night of March 29th, 2015.
WWE is set to report their third quarter 2014 results next Thursday, so we'll update you then Cagesiders on WWE's uncertain financial future.