The complaint centers around allegations that WWE hid the fact that its media rights deal with Orbit Showtime Network (“OSN”) in the Middle East-North Africa, or MENA, region had ended early. It was touted, and the market believed, that the OSN Agreement with the Company was worth millions of dollars a year to WWE.
Specifically, on February 7, 2019, the Company announced its fourth-quarter and full-year 2018 financial results and issued a press release that the Company expected to achieve revenue of approximately $1.0 billion. The Company informed investors that this financial outlook depended on the Company’s ability to renew a number of expiring media-rights agreements, including in the Middle East.
Unbeknownst to the public, due to financial troubles at OSN and a change in its strategic direction, OSN privately informed WWE in November 2018 that it intended to cancel the OSN Agreement and exit sports broadcasting altogether. Carlo Nohra, Vice President and General Manager of WWE—Middle East, would later reveal that OSN had been delinquent in making certain payments to WWE for several months during 2018. Thus, it is unlikely that the Company was surprised by OSN’s termination request.
Between November 2018 and December 18, 2018, WWE and OSN negotiated a termination and settlement agreement to formally end the OSN Agreement effective March 31, 2019—nine months before its original expiration date. The foregoing was confirmed by Andrew Warkman, Vice President and General Manager, WWE UK & Ireland.
For several months after learning that OSN intended to cancel its agreement early, the Company withheld this critical information from shareholders. WWE only revealed the truth about the OSN Agreement on July 25, 2019—eight months after OSN’s notification to WWE and four months after the agreement’s termination date. However, the Company falsely reported that a replacement media rights agreement would soon be forthcoming with an entity controlled by the Kingdom of Saudi Arabia. The Company also assured the market that a new deal would get done “very soon,” which they claimed would allow the Company to meet its full-year 2019 guidance. But no such deal was near. As the Company eventually disclosed in its 2019 Form 10-K, filed on February 7, 2020, “In certain places, notably India and the Middle East, agreements that were expected to be completed have not been signed to date.
These revelations caused the price of the shares to drop and led purchasers of WWE stock to file multiple lawsuits against the Company and certain of its executives for violating multiple provisions of the Securities Exchange Act of 1934, including the Securities Action. In addition to the costs of defending, and potential class wide liability in, the Securities Action, the wrongful conduct described herein has also exposed the Company to massive reputational harm and loss of goodwill.
To make matters worse, during the time when WWE stock was trading at an artificially inflated rate due these false and misleading statements, McMahon and at least four other WWE executives made hundreds of millions of dollars in insider trades.
A copy of the complaint can be viewed here:
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