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WWE says lawsuit is a 'strained attempt' to place blame for stock drop

LEGAL NEWSLINE

Thursday, November 28, 2024

WWE says lawsuit is a 'strained attempt' to place blame for stock drop

Federal Court
Fate

NEW YORK (Legal Newsline) – The World Wrestling Entertainment wants a federal judge to toss claims its relationship with Saudi Arabia hurt stockholders.

The WWE filed its motion to dismiss a class action lawsuit on June 26, a month after Judge Jed Rakoff allowed Labaton Sucharow to take the lead role in representing the plaintiffs.

“This is an impermissible fraud-by-hindsight case focused on WWE’s efforts to enter into a business arrangement that ultimately did not come to fruition,” the motion to dismiss says.

“The (lawsuit) represents a strained attempt by Plaintiff to assert securities fraud claims based upon rank speculation, innuendo, uninformed and unreliable internet postings and statements by persons unconnected to Defendants or the subject business dealings.”

Multiple cases were filed earlier this year against the WWE. They allege WWE officers failed to tell investors about difficulties with negotiations with Saudi Arabia and the Orbit Showcase Network (OSN).

The WWE called the Saudi-controlled direct broadcast satellite provider serving the Middle East and North Africa regions a key part of its financial future. However, the suits allege the Saudi deals were in jeopardy when company officials joined fans in criticizing that country’s human rights record.

Things came to a head with the murder of journalist Jamal Khashoggi on Oct. 2, 2018, believed to be directed by the Saudi government. A decision to hold a WWE live event in Saudi Arabia a month later was widely panned. This upset the Saudis, the complaint said.

WWE revealed on Oct. 31, 2019, that the media rights deal had been delayed and the Saudi government owed the company tens of millions of dollars. Several wrestlers were stranded by the Saudis when WWE cut the live broadcasting feed of an event in the country.

When the WWE revealed it failed to secure the Saudi broadcasting deal, stocks dropped on Feb. 6 to a low of $40.24 per share.

Senior executives sold off stock in what the complaints alleged was insider trading. Vince McMahon sold more than 3.2 million shares for $261 million on March 27, 2019.

The WWE says despite the deal falling through, its financial performance ended up in the range of where it predicted it would be.

“The Company prominently and repeatedly disclosed the risks associated with not being able to enter into, extend, or renew media rights deals, and the uncertainties associated with international markets,” the motion to dismiss says.

“These risks were adequately disclosed in meaningful cautionary statements, and the allegedly omitted information did not render the statements materially misleading or amount to concealed risks.

“Plaintiff also stretches to include every downward movement of the Company’s stock as based on the alleged fraud.”

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