World Wrestling Federation to Give Shareholders a Piece of the Action August 3, 1999
In an attempt to give a new meaning to the Wall Street phrase "underwriting takedown," professional wrestling promotion machine World Wrestling Federation (WWF) Entertainment, Inc. filed a registration statement with the Securities and Exchange Commission today to raise as much as $172.5 million in a proposed initial public offering.
If all goes according to script, investors will soon be able to own shares in the company responsible for adding terms like "smackdown" and "wrestlemania" to the vernacular and keeping spandex suppliers in business lo these many years after the fall of big-hair hard rock bands in the late 1980s.
Besides knowing how to make personalities like Stone Cold Steve Austin and The Rock universally known to junior high school boys across the country, the WWF also knows how to make some serious money. According to the registration statement, revenues totaled $251 million for the fiscal year ended April 30, doubling the prior year's results, while earnings increased nearly seven-fold to $56 million. Gross margin has climbed from 25% in fiscal 1997 to 42% in fiscal 1999, underscoring the company's recent success in building out higher-margin revenue streams such as product licensing and home video sales.
The revenue streams, like the wrestling characters the WWF promotes, come in various shapes and sizes. All told, the company has money flowing in from 200 live events per year, 9 hours of television programming each week, approximately 12 pay-per-view offerings per year, licensing agreements with 85 companies, home video and music sales, and two magazines with a combined annual circulation of 5.8 million. The firm also operates a website at www.wwf.com that generated 100 million page views and boasted 1.6 million unique visitors in June. Proceeds from the stock offering are initially being earmarked for expanded Web offerings, new TV programming ventures, and updating the firm's TV and post-production facilities.
As one Foolish fan pointed out in a recent article about Titan Sports, Inc. (the former name of WWF), a big reason for the firm's success thus far has been the violence and decidedly politically incorrect nature of its always crass, sometimes downright melodramatic sporting spectacles. By going public, there is a risk that the bravado that has served the WWF so well as a private firm could be bodyslammed by profit-obsessed shareholders. It's also not hard to imagine the company's shares getting smacked around if fans are lured away to its main rival, World Championship Wrestling, which is owned by the deep-pocketed Turner Broadcasting unit of Time Warner (NYSE: TWX).
In any event, the annual meetings should be a hoot.
Brian Graney (TMF Panic) (TMF Panic)