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The UFC and WEmerged to establish TKO, a new corporation, which has filed its third quarter financial filings with the SEC.
Since then, Bloody Elbow has been able to secure a copy of the UFC‘s most recent filing, which confirms the company’s continued status as an extraordinarily profitable venture with rising revenue and profitability and expectations for yet another historic year. BE’s financial information will be available in due course, but in addition to TKO executives’ self-serving boasts about their impressive performance, it’s worth noting the few risk concerns they’ve included.
More particularly, it’s intriguing how it raises the UFC antitrust case updates and Vince McMahon‘s board membership as potential threats to their company.
TKO warns UFC antitrust lawsuit could have adverse effect on business
The newest development in the ongoing antitrust complaint was mentioned in TKO’s SEC filing: the boxers received class certification, and an April 2024 trial is scheduled.
The paper included a warning to shareholders that our business and operating performance could be negatively impacted by unfavorable decisions in legal processes.
They explained the prospective consequences of the action, in which fighters are requesting damages over one billion dollars, as well as the potential for significant adjustments to the current state of the sport:
Unfavorable decisions in our legal processes could expose us to material liability or harm our standing in the eyes of our staff and other stakeholders. According to the text, the results of litigation, especially class action lawsuits, are hard to evaluate or measure.
Class action lawsuit plaintiffs may ask for very large or uncertain sums of money to be recovered, and it may take a long time to determine the exact amount of possible loss associated with these cases. We are currently facing five related class-action lawsuits alleging that we monopolized a market for the promotion of elite professional mixed martial arts bouts and monopolized a market for the services of elite professional MMA athletes, in violation of Section 2 of the Sherman Act. The class-action lawsuit plaintiffs were certified as a class on August 9, 2023. A negative resolution of these or other issues might have a negative impact on our operations, business, and financial situation.
They also threatened to fine us money or subject us to penalties, injunctions, fines, or other forms of censure if things did not go their way.
In addition to severe losses that might total in the billions, UFC may also be subject to an injunction forcing them to alter their business practices.
All the information you require regarding the ongoing antitrust litigation is available here, providing a concise and comprehensive overview of the case.
TKO says Vince McMahon s board seat could hurt public image
Though Dana White gave Vince McMahon a lot of credit for helping to arrange a UFC contract in Saudi Arabia, it’s interesting to note that TKO specifically mentioned the controversial WWE executive’s position as a risk to their business.
The presence of Mr. McMahon on our board may put us in the public eye and/or have other detrimental effects on our company’s operations and finances. His membership might potentially lead to more scrutiny or worsen the other concerns mentioned above. Any of these results could negatively affect our company’s finances and operations, either directly or indirectly.
TKO details Vince McMahon s legal issues, hush money, and WWE investigation
The business also provided information about Vince McMahon‘s legal problems. McMahon has been charged with sexual misconduct multiple times and has allegedly paid millions of dollars in hush money.
Federal law enforcement officers presented Mr. McMahon with a federal grand jury subpoena and carried out a search warrant on July 17, 2023. Through these investigations, no charges have been filed. WWE has been subject to both voluntary and mandatory legal requests for documents pertaining to the inquiry and related subjects, including requests for documents from federal law enforcement and regulatory agencies.
TKO also kept records of its internal inquiry of this financial statement, which was intended for the US government and its shareholders.
A special committee made up of independent board members was established on June 17, 2022, by WWE and its former board of directors to look into allegations of wrongdoing by Vincent K. McMahon, the company’s then-chief executive officer. Mr. McMahon left all of his roles at WWE on July 22, 2022, but he continued to be a shareholder with a majority stake. Following Mr. McMahon’s return to WWE, the WWE Board of Directors elected him as Executive Chairman on January 9, 2023.
Based on the Special Committee investigation’s conclusions, WWE declared on July 25, 2022, that it had discovered that some payments Mr. McMahon had agreed to make between 2006 and 2022—including sums paid and payable in the future totaling $14.6 million—had not been properly recorded as expenses in WWE‘s consolidated financial statements.
WWE later discovered that Mr. McMahon had made two more payments totaling $5.0 million in 2007 and 2009 that had not been properly recorded as expenses in the WWE‘s consolidated financial statements. These payments had nothing to do with the allegations of misconduct by Mr. McMahon that prompted the Special Committee investigation. These unreported costs come to a total of $19.6 million.
TKO: Vince McMahon will pay and reimburse the company personally
The paper also stated that Vince McMahon will cover the settlement money and the expenses of the WWE‘s internal inquiry.
According to the paper, Mr. McMahon has made or will make all of the payments that underlie the Unrecorded Expenses. WWE came to the conclusion that one or more serious deficiencies caused its internal control over financial reporting to be ineffective in light of the Unrecorded Expenses and related facts.
Following the restatement of Unrecorded Expenses by WWE, Mr. McMahon has settled several further allegations that were brought to WWE‘s attention. WWE recognized an additional $7.4 million in expenses when the amounts became probable and estimable in the fourth quarter of 2022, taking into account events that happened after December 31, 2022. All related payments have been made, or will be made, personally by Mr. McMahon.
The document highlighted the substantial expenses incurred during the internal inquiry and cautioned shareholders once more about the potential adverse effects of both the probe and McMahon’s conduct.
As the company continues to incur costs from ongoing and/or potentially new regulatory, investigative, and enforcement inquiries, subpoenas, demands, and claims, professional costs resulting from WWE‘s Special Committee’s investigation have been significant and are expected to remain significant. We anticipate that Mr. McMahon will pay the Company back for any appropriate costs he incurred over the course of the investigation.
It’s possible that the inquiry or other issues mentioned above will cause our business partners’ perceptions to shift. Furthermore, additional operational adjustments, including but not limited to personnel changes, have occurred and may continue to occur as a result of the inquiry and other problems mentioned above. These developments could have a negative financial and operational impact on our company. Any negative effects from the inquiry and other matters, as well as from any further claims or inquiries, may make any of the risks mentioned above worse.
Vince McMahon had multiple sexual assault accusations
Over the years, a number of parties have accused Vince McMahon of sexual assault, abuse, and misconduct on multiple occasions. This resulted in multiple multi-million dollar payouts and non-disclosure agreements between 2006 and 2022, as TKO previously said.
According to reports, McMahon retired from his position as CEO of WWE in 2022, but he quickly rejoined the organization. Following the merger of the UFC and WWE, McMahon was appointed executive chairman of the board by Endeavor and TKO CEO Ari Emanuel.
In a recent public statement, Emanuel expressed his desire for McMahon and White to continue serving as the faces of the UFC and WWE.
Regarding the UFC and WWE merger, Emanuel declared, “I’m the luckiest guy in the world.” Because I have the visionary, the one who sees around corners, Vince McMahon. Dana White and what we’ve created are with me. It seems almost uncontrollable. The two of us together are rarefied air. Analysts, in my opinion, will conclude that it benefits both the Endeavor and WWE stockholders.
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