NEW YORK (Legal Newsline) – Class action lawyers and World Wrestling Entertainment have reached a $39 million agreement to end litigation over a failed relationship with Saudi Arabia.
Lawyers at Labaton Sucharow notified New York federal judge Jed Rakoff of the settlement on Dec. 23. They filed a motion for preliminary approval, two months after asking Rakoff to certify a class of investors who owned WWE stock from Feb. 7, 2019-Feb. 5, 2020.
Rakoff wrote last year that the allegations raise eyebrows about WWE CEO Vince McMahon’s sale of 10% of his stock.
“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.”
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.
Lawyers will specify the fees they are seeking later in the approval process.