World Wrestling shares slammed amid Saudi Arabia investment in UFC competitor (NYSE:WWE)
Update 2:10pm: Adds analyst comment defending WWE and EDR.
World Wrestling Entertainment (NYSE:WWE) shares plunged 12% after dropping 4.6% on Wednesday after a Saudi Arabian sovereign wealth fund acquired a minority stake in a competing league to the UFC. Endeavor Group (NYSE:EDR), which is merging with WWE, fell 10%.
The Professional Fighters League partnered with SRJ Sports Investments, a fund that’s controlled by Saudi Arabia’s PIF, by purchasing a minority stake in PFL, according to a press release on Wednesday. The PFL Middle East division is scheduled to start near year and events will be heald in Saudi Arabia.
SRJ Sports is investing $100 million in the Professional Fighter’s league, according to a Financial Times report on Wednesday.
“While there is room for all to succeed in the growing MMA market, PIF backing augurs poorly for WWE and UFC’s medium/long term talent costs,” Wolfe analyst Peter Supino, who has an outperform rating and a $137 price target on WWE, wrote in a note on Thursday. “We think PFL’s accelerating investment plans represent a new overhang on WWE’s (and soon TKO’s) valuation multple.”
The Saudi Arabian investment in mixed martial arts comes after the country has previously made investments in soccer and most recently in golf, creating LIV Golf a few years back.
Guggenheim analyst Curry Baker doesn’t see the Saudi Arabian investment as a “game changer” for WWE or EDR.
“Bottomline: We do not view this as a game changer relative to the UFC’s MMA dominance,” Baker, who has buy ratings on WWE and EDR, wrote in a note on Thursday. “In our view, the investment is not material enough to allow PFL to compete in depth of champions or across weight classes with the UFC or start developing a monetization ecosystem to sustainably compete against the UFC.”
Baker said he remains positive about the pending combination of UFC and WWE (WWE), which will be called “TKO. He expects $100 million or more in annual run-rate operating synergies with the new company.