Billionaire WWE Chief Vince McMahon has taken a nearly $200 million hit to his net worth this week as shares in the wrestling-entertainment company have tumbled 15% from a record high of $31.98 set earlier this month.  At least one publication is blaming FORBES, saying the article Michael Solomon and I wrote and released online yesterday prompted a renewed selloff of shares. Indeed WWE lost 4% Wednesday afternoon after we reported that the company’s largest outside shareholder, Intrepid Capital Management, had sold its 10% stake on concerns the rollout of the WWE Network might not be as successful as some investors expect. Volume was 2.6 million shares, more than double the average.  Our article probably just added to concerns already building after WWE shares tripled over six months, drawing in momentum investors to a stock with a relatively small public float (Vince owns 52% of the shares and insiders and large institutions together control nearly three-quarters of the stock). It helps that 4 million shares were sold short, setting off a scramble to cover short positions as the price rose.  Don’t worry — I’m still a billionaire. (Photo credit: Wikipedia)  Analyst Daniel Moore with CJS Securities in White Plains doesn’t think anything significant has changed at WWE, however.  “The stock has gone straight up for a while and this is a perfectly reasonable pullback,” Moore told me. He set a $26 price target in a report issued Tuesday, noting that 2014 earnings are a “black box” given the uncertain spending WWE must make on its WWE Network and the number of subscribers it signs up.  WWE will announce a subscriber count on April 7, the day after WrestleMania XXX in New Orleans. The company says it needs 1 million subscribers at $9.99 a month to break even and would positively coin money at 2 million, with $50 million a year dropping to pretax earnings. WWE has earned $30 million to $40 million in recent years but reported just $2.7 million in net income last year amid heavy charges to its film and television businesses.  The fact is, WWE is a speculative bet on Vince McMahon’s ability to leap from one lucrative business — promoting wrestling matches on live and pay-per-view television — to a far more profitable business selling that entertainment over the Internet, a la Netflix Netflix, for $120 a year. Until investors can see the results of his latest venture, it’s all guesswork. But note that Intrepid only sold out after doubling its money, and after the initial reason it bought shares — higher expected revenue from its TV contracts — was fully priced into the stock.  Moore thinks there’s a good chance WWE will negotiate a 150-200% increase in TV revenue, dropping $75 million to $100 million to earnings before interest, depreciation and taxes. The WWE Network is a bigger gamble, but Moore notes WWE has gotten 1.8 million “likes” for its network so far and the WWE App has been downloaded 10 million times. If the company can get 3 million subscribers, driving EBITDA to nearly $300 million, he says, it’s a $40 stock.
WWE shares fall from a record high as investors reassess a stock that tripled in less than 6 months.