NEW YORK (Legal Newsline) – The securities class action law firm Labaton Sucharow has asked a federal judge to let it lead litigation against World Wrestling Entertainment over a failed relationship with Saudi Arabia.
On Oct. 6, the prominent firm also asked New York judge Jed Rakoff to certify a class of investors that lost money when WWE’s stock took a hit. The motion follows an Aug. 6 ruling in which Rakoff refused to dismiss the case.
“Here, Labaton Sucharow has investigated and vigorously pursued the class’ claims in the action and will continue to do so,” the firm wrote. “Labaton Sucharow has consistently demonstrated its ability to litigate securities cases, has extensive knowledge of the applicable securities laws, and has proven its willingness to commit substantial time and resources to representing the class.”
The class would include all persons and entities that purchased WWE stock from Feb. 7, 2019-Feb. 5, 2020. Labaton also asked that its client, the Pension System of the City of Kansas City, Missouri, be named lead plaintiff.
Rakoff wrote earlier this year that the allegations raise eyebrows about WWE CEO Vince McMahon’s sale of 10% of his stock.
The WWE has called arguments blaming it for a stock drop “scattershot,” but Rakoff ruled they were adequately pled.
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 deteriorated further 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.
Rakoff’s 32-page decision will allow the case to progress into discovery. He wrote plaintiffs have adequately alleged McMahon’s sale of shares constitutes insider trading.
“The (complaint) alleges that McMahon sold 3,204,427 shares of WWE stock during the class period for proceeds of more than $261 million, a very significant sum,” Rakoff wrote.
“Although this constituted only 10% of his shares, this sale was unusual in light of McMahon’s past trading practices. McMahon’s March 27, 2019, sale was also suspiciously timed, as it occurred only a few days before the OSN Agreement ended and a month before the issuance of lower-than-expected income projections for the second quarter of 2019, which resulted in a drop in WWE’s stock price.”