Saudi Investment in MMA Competitor Sends Endeavor, WWE Stock on Wild Ride
Shares of WWE and Endeavor Group steadied Friday after two days of sharp declines brought on by news of a $100 million minority investment by Saudi Arabia’s Public Investment Fund in the Professional Fighters League, a mixed martial arts competitor for WWE and Endeavor’s UFC.
World Wrestling Entertainment shares fell more than 12% in Thursday’s session, after giving up nearly 5% on Wednesday when word of the Saudi investment leaked. The stock edged back up 2% in Friday morning trading, to $98.55, still up about 42% since the start of the year.
Ari Emanuel’s Endeavor Group shed nearly 10% between Wednesday and Thursday, and edged up less than 2% Friday morning to $22.25. The stock is down about 2% since the start of the year.
Endeavor is buying WWE in a $21.4 billion deal that will combine the two leagues to create TKO Group Holdings. The deal is expected to close by the end of the month.
The market’s reaction reflects the disruption that the Saudi-backed LIV Golf venture presented to the PGA Tour, Morgan Stanley analyst Benjamin Swinburne wrote in a note to clients. The golf leagues devolved into lawsuits as players attempted to move between them, and the contention only ended with the two organizations agreeing to combine in June.
Morgan Stanley analyst Benjamin Swinburne said he sees the share price declines “as a compelling opportunity,” for investors, according to an excerpt posted on TheFly.com. He noted that UFC is the world’s most popular MMA league and competition is “not new.”
Moreover, the investment in the rival league will not impact UFC or WWE financials “anytime soon” he wrote, adding that it is also is unlikely to have any impact on WWE’s upcoming renewals.
Morgan Stanley kept an “Overweight,” or “Buy” rating and a $30 price target on Endeavor shares, suggesting that the stock is expected to rise 24% before the end of the year.
Guggenheim analysts were also rather sanguine on the Saudi investment news, stating that the new league is not seen as “a game changer” relative to the UFC’s mixed martial arts dominance.
The investment is not material enough to allow PFL to compete in depth of champions across weight classes with the UFC or start developing a monetization ecosystem to sustainably compete against the UFC, the analyst wrote in a note to investors, according to TheFly.com.
Guggenheim said it views PFL as “the minor leagues” and remains bullish on the pending combination of WWE and Endeavor.
Endeavor remains the firm’s “best idea” for investors. The firm has a Buy rating on both stocks.
Bank of America, on the other hand, was a little more cautious about the new competitor. The analyst said the Saudi investment introduces a new overhang for both Endeavor and the product of the UFC/WWE merger, according to TheFly.com.
But the bank said it continues to view Endeavor as “a collection of highly compelling assets that each, individually, have exposure to favorable secular tailwinds,” and kept a “Buy” rating and $32 price target on the shares.
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