NEW HAVEN, Conn. (Legal Newsline) - A WWE stockholder has filed a class action lawsuit against World Wrestling Entertainment Inc. for violating the Securities Exchange Act of 1934.
Curtis Swanson filed the class action lawsuit on behalf of people who purchased or otherwise acquired the securities of WWE between Oct. 31 and May 15, according to a complaint filed Aug. 25 in the U.S. District Court for the District of Connecticut.
Swanson claims WWE, Vincent K. McMahon and George A. Barrios all violated the Securities Exchange Act and caused him and class members damages.
"WWE is an integrated media and entertainment company that was founded in Stamford, Connecticut in 1980 and focuses on the wrestling entertainment business worldwide," the complaint states. "Today, WWE primarily operates in four core segments: Live and Televised Entertainment, Consumer Products, Digital Media, and WWE Studios."
The company's flagship televised entertainment includes its Monday Night Raw and Friday Night Smackdown properties which air in the United States on Comcast Corporation's USA Network and Syfy Channel, according to the suit.
Swanson claims this matter arises out of false and misleading statements about the WWE’s much publicized ability to transform the company’s earnings profile through, among other things, the negotiation of a lucrative new long-term television license deal.
"This new television deal was supposed to be the 'primary driver' of WWE’s transformation," the complaint states. "In particular, defendants caused WWE to issue false and misleading statements in WWE’s public filings, press releases and conference calls that touted the company's ability to command a fee in its upcoming negotiations to renew its U.S. television license agreement worth double the value of the existing agreement."
The defendants claimed that their ability to command a premium fee in WWE's upcoming negotiations to renew its television license agreement by pointing to WWE's high ratings, DVR-proof live programming, potential to attract multiple bidders and comparing the company's new deal to recent license agreements for live sporting events.
Swanson claims the defendants downplayed the fact that advertisers pay less to reach WWE's viewers than traditional sports and any other show on the USA Network and the negative impact on the television license negotiations resulting from the company's launch of its WWE Network.
"Defendants, however, could not maintain their ruse concerning the company's business prospects indefinitely," the complaint states. "WWE was not able to negotiate the lucrative television rights deal that defendants led investors to expect."
On May 15, WWE announced that it had reached a multi-year deal with NBCUniversal Cable Entertainment to distribute its Monday Night Raw and Friday Night Smackdown properties, according to the suit.
Swanson claims absent from the release was any information concerning the value and length of the agreement.
"On that same day, after the market closed, WWE issued a press release which provided investors with some insight into the true value of the company's key content agreements," the complaint states. "The press release revealed that the annual value of all of WWE's key television distribution agreements increased by approximately $92 million, which includes an increase of approximately $57 million for the U.S. market."
Thus, contrary to the defendants' previous statements concerning WWE's ability to double the value of its television license agreement, the actual value increase was only approximately 50 percent, according to the suit.
Swanson claims when the WWE revealed the truth about the value of its new distribution deal, the stock price of WWE fell to $11.27 per share on May 16, a decline of 43 percent from the previous closing price of $19.93 per share.
The WWE made false and misleading statements and caused Swanson and the class members harm, according to the suit.
Swanson claims the defendants violated Section 10(b) of the Exchange Act, SEC Rule 10b-5 and Section 20(a) of the Exchange Act.
Swanson is seeking class certification and compensatory damages. He is being represented by Nancy A. Kulesa, Shannon L. Hopkins, Sebastian Tonatore and Stephanie Bartone of Levi & Korsinsky LLP.
The case is assigned to District Judge Janet C. Hall.
U.S. District Court for the District of Connecticut case number: 3:14-cv-01228
From Legal Newsline: Kyla Asbury can be reached at email@example.com.