$25 million of stock prepared for re-sale in 'major minus' to WWF
"a great working relationship" set to end after 6 weeks?
A 'distinguished' shareholder (Invemed Catalyst Fund) is preparing to re-sell their 3.5% common share holdings in WWF after just a few weeks.
WWF - "The selling stockholder [Invemed Catalyst Fund] purchased its shares of our Class A common stock at a price of $13.25 per share in a private sale from The Vincent K. McMahon Irrevocable Trust on August 30, 2001. We are registering the resale of these shares pursuant to a registration rights agreement we entered into with the selling stockholder on August 30, 2001."Less than two months ago (Aug. 23, 2001) - "World Wrestling Federation Entertainment, Inc. announced... that the Invemed Catalyst Fund, L.P., a Delaware limited partnership, has agreed to purchase approximately 1.9 million shares of Class A common stock in a private transaction with Vincent K. McMahon, Chairman of World Wrestling Federation Entertainment, Inc. The shares were priced at $13.25 per share for a total value of $25.0 million."McMahon received $13.25 a share for the stake, a premium to WWF's closing price of $12 that week.
Prior to this transaction, Invemed Catalyst Fund owned around 696,000 shares of WWF Class A common stock.
As a consequence of the two investments Invemed Catalyst Fund owned 3.5% of the total outstanding common shares of WWF and Michael B. Solomon, Managing Principal of Gladwyne Partners, LLC, a general partner of the Invemed Catalyst Fund, was appointed to the Board of WWF.
``The opportunity to have such a distinguished fund as Invemed Catalyst Fund as one of our largest shareholders is unquestionably a major plus for the Company,'' said Linda E. McMahon, Chief Executive Officer. ``I would like to welcome Mike to our Board and look forward to what promises to be a great working relationship,'' added Ms. McMahon.Now, less than 2 months later, "a great working relationship' seems set to end as Invemed signals its intention to sell all its 2,582,773 shares for around $25 million. By reverse logic, "unquestionably a major minus."
Details
Number of Shares
Shares Owned Prior Being Registered
Selling Stockholder to the Offering for Sale
------------------- ------------------ ----------------Invemed Catalyst 2,582,773 2,582,773
Fund, L.P.
"The selling stockholder purchased its shares of our Class A common stock at a price of $13.25 per share in a private sale from The Vincent K. McMahon Irrevocable Trust on August 30, 2001. We are registering the resale of these shares pursuant to a registration rights agreement we entered into with the selling stockholder on August 30, 2001. "
Extracts from Official WWF statement to the Securities Exchange Commission.
The official WWF statement to the SEC appear here. It provides a range of interesting information relating to -
The extent of the McMahons ownership - The WWF has two types of stock, Class A and Class B. Class A stock carries with it one vote per share, and is the type the WWF offers to the public. Class B carries ten votes per share, and the majority of it is owned by Vince McMahon. The result is that Vince controls 96% of the voting power in the company.
The WWF television contracts are also outlined in the filing.
- The 5 hours of programming per week agreement with Viacom Inc. lasts through the the TV season ending September 2005. This covers Raw and Excess on TNN and Heat on MTV.
- Smackdown is set to broadcast on UPN through the 2002/2003 television season.
- Tough Enough airs on the MTV Network through 2002
- Their PPV contract with In Demand expires in 2004.
Risk factors in the report include -
- Regarding DirecTV "In this regard, we have recently reached an impasse in negotiations with DirecTV, which carried our pay-per-view events until October 2001. We anticipate the negative impact of the termination of our relationship with DirecTV on our income before taxes to be approximately $1.0 to $1.3 million per month. "
"THE FAILURE TO CONTINUE TO DEVELOP CREATIVE AND ENTERTAINING PROGRAMS AND EVENTS WOULD LIKELY LEAD TO A DECLINE IN THE POPULARITY OF OUR BRAND OF ENTERTAINMENT.
THE FAILURE TO RETAIN OR CONTINUE TO RECRUIT KEY PERFORMERS COULD LEAD TO A DECLINE IN THE APPEAL OF OUR STORY LINES AND THE POPULARITY OF OUR BRAND OF ENTERTAINMENT.
Our success depends, in large part, upon our ability to recruit, train and retain athletic performers who have the physical presence, acting ability and charisma to portray characters in our live events and televised programming. We cannot assure you that we will be able to continue to identify, train and retain these performers in the future. Additionally, we cannot assure you that we will be able to retain our current performers when their contracts expire. Our failure to attract and retain key performers, or a serious or untimely injury to, or the death of, any of our key performers, would likely lead to a decline in the appeal of our story lines and the popularity of our brand of entertainment, which would adversely affect our ability to generate revenues.
THE LOSS OF THE CREATIVE SERVICES OF VINCENT MCMAHON COULD ADVERSELY AFFECT OUR ABILITY TO CREATE POPULAR CHARACTERS AND CREATIVE STORY LINES.
For the foreseeable future, we will depend heavily on the vision and services of Vincent McMahon. In addition to serving as Chairman of our board of directors, Mr. McMahon leads the creative team that develops the story lines and the characters for our televised programming and live events. Mr. McMahon is also an important member of the cast of performers. The loss of Mr. McMahon due to retirement, disability or death could have a material adverse affect on our ability to create popular characters and creative story lines. We do not carry key man life insurance on Mr. McMahon sufficient to cover the loss of his services.
THE FAILURE TO MAINTAIN OR RENEW KEY AGREEMENTS COULD ADVERSELY AFFECT OUR ABILITY TO DISTRIBUTE OUR TELEVISION AND PAY-PER-VIEW PROGRAMMING......
THE MARKETS IN WHICH WE OPERATE ARE HIGHLY COMPETITIVE, AND WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY, ESPECIALLY AGAINST COMPETITORS WITH GREATER FINANCIAL RESOURCES OR MARKETPLACE PRESENCE......
Our failure to compete effectively could result in a significant loss of viewers, venues, distribution channels or performers and fewer entertainment and advertising dollars spent on our form of sports entertainment, any of which could have a material adverse effect on our operating results, financial condition and prospects.
BECAUSE WE DEPEND UPON OUR INTELLECTUAL PROPERTY RIGHTS, OUR INABILITY TO PROTECT THOSE RIGHTS, OR OUR INFRINGEMENT OF OTHERS' INTELLECTUAL PROPERTY RIGHTS, COULD NEGATIVELY IMPACT OUR ABILITY TO COMPETE.......
In April 2000, the WWF - World Wide Fund for Nature (the "Fund"), a non-profit environmental conservation organization, instituted legal proceedings against us in the English High Court seeking injunctive relief and unspecified damages for alleged breaches of an agreement between the Fund and us. The Fund alleges that our use of the initials "WWF" in various contexts, including (i) the wwf.com and wwfshopzone.com internet domain names and in the contents of various of our websites; and (ii) our "scratch" logo, violate the agreement between the Fund and us. In January 2001, the Fund filed for summary judgment on its claims, and on August 10, 2001, the trial judge granted the Fund's motion for summary judgment, holding that we breached the agreement by using the website address and scratch logo and that a trial is not warranted on these issues. The judge issued a form of written injunction on October 1, 2001, granted us leave to appeal and stayed the order pending our appeal. We believe this decision is erroneous, and we are vigorously pursuing our appeal. An unfavorable outcome of this suit may have a material adverse effect on our financial condition, results of operations or prospects.
A CONTINUING DECLINE IN GENERAL ECONOMIC CONDITIONS OR A DECLINE IN THE POPULARITY OF OUR BRAND OF SPORTS ENTERTAINMENT COULD ADVERSELY IMPACT OUR BUSINESS.
Our operations are affected by general economic conditions and consumer tastes, and therefore our future success is unpredictable. The demand for entertainment and leisure activities tends to be highly sensitive to consumers' disposable incomes, and thus a continuing decline in general economic conditions could result in our fans or potential fans having less discretionary income to spend on our live and televised entertainment and branded merchandise, which could have an adverse effect on our business or operating results.
The continued popularity of our brand of entertainment is important to our results of operations and the long-term value of our brand. Public tastes are unpredictable and subject to change and may be affected by changes in the country's political and social climate. A change in public tastes may adversely affect our future success.
OUR INSURANCE MAY NOT BE ADEQUATE TO COVER LIABILITIES RESULTING FROM ACCIDENTS OR INJURIES.
We hold approximately 200 live events each year primarily in the United States and Canada. This schedule exposes our performers and our employees who are involved in the production of those events to the risk of travel and performance-related accidents, the consequences of which may not be fully covered by insurance. The physical nature of our events exposes our performers to the risk of serious injury or death. Although we have general liability insurance and umbrella insurance policies, and although our performers, as independent contractors, generally have health, disability and life insurance, we cannot assure you that the consequences of any accident or injury will be fully covered by insurance. Our liability resulting from any accident or injury not covered by our insurance could have a material adverse effect on our operating results and financial condition.
WE MAY BE PROHIBITED FROM PROMOTING AND CONDUCTING OUR LIVE EVENTS IF WE DO NOT COMPLY WITH APPLICABLE REGULATIONS.
In various states in the United States and some Canadian provinces, athletic commissions and other applicable regulatory agencies require us to obtain promoters' licenses, performers' licenses, medical licenses and/or event permits in order for us to promote and conduct our live events. In the event that we fail to comply with the regulations of a particular jurisdiction, we may be prohibited from promoting and conducting our live events in that jurisdiction. The inability to present our live events over an extended period of time or in a number of jurisdictions would lead to a decline in the various revenue streams generated from our live events, which could have an adverse effect on our business or operating results.
WE COULD INCUR SUBSTANTIAL LIABILITIES IF PENDING MATERIAL LITIGATION IS RESOLVED UNFAVORABLY.
We are currently a party to civil litigation which, if concluded adversely to our interests, could have a material adverse effect on our operating results and financial condition or could require us to conduct certain aspects of our business differently. These material legal proceedings are more fully described in documents incorporated into this prospectus by reference. For example, pending litigation includes the claim by the World Wide Fund for Nature mentioned above.
WE WILL FACE A VARIETY OF RISKS AS WE EXPAND INTO NEW AND COMPLEMENTARY BUSINESSES.
Over the last 20 years, our core operations have consisted of marketing, promoting and distributing our live and televised entertainment and our branded merchandise. Our current strategic objectives include not only further developing and enhancing our existing business but also entering into new or complementary businesses, such as the creation of new forms of entertainment and brands, the development of new television programming and the development of branded location-based entertainment businesses, such as WWF New York, which we acquired in early 2000. In February 2001, we launched the XFL, a start-up professional football league which ceased operations after one season. The following risks are associated with expanding into new or complementary businesses by acquisition, strategic alliance, investment, licensing or other arrangements:
- potential diversion of management's attention and resources from our existing business and an inability to recruit or develop the necessary management resources to manage new businesses;
- unanticipated liabilities or contingencies from new or complementary businesses or ventures;
- reduced earnings due to increased amortization and depreciation, increased interest costs and additional costs related to the integration of acquisitions;
- potential reallocations of resources due to the growing complexity of our business and strategy;
- competition from companies then engaged in the new or complementary businesses that we are entering;
- possible additional regulatory requirements and compliance costs;
- dilution of our stockholders' percentage ownership and/or an increase of our leverage when issuing equity or convertible debt securities or incurring debt; and
- potential unavailability on acceptable terms, or at all, of additional financing necessary for expansion.
THROUGH HIS BENEFICIAL OWNERSHIP OF A SUBSTANTIAL MAJORITY OF OUR CLASS B COMMON STOCK, MR. MCMAHON CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR AFFAIRS, AND HIS INTERESTS MAY CONFLICT WITH THE HOLDERS OF OUR CLASS A COMMON STOCK.We have two classes of common stock -- Class A, which carries one vote per
share, and Class B, which carries ten votes per share. A substantial majority of
the issued and outstanding shares of Class B common stock is owned by Vincent
McMahon directly or as the trustee of a trust for the benefit of his children.
As a result, Mr. McMahon controls approximately 96% of the voting power of the
issued and outstanding shares of our common stock as of October 26, 2001.
Accordingly, he is able to control the outcome of substantially all actions
requiring stockholder approval, including the election of our directors, the
adoption of amendments to our certificate of incorporation and approval of
mergers or sales of substantially all of our assets. The interests of Mr.
McMahon may conflict with the interests of the holders of our Class A common
stock. In addition, the voting power of Mr. McMahon through his ownership of our
Class B common stock could discourage others from initiating potential mergers,
takeovers or other change of control transactions. As a result, the market price
of our Class A common stock could decline.A SUBSTANTIAL NUMBER OF SHARES WILL BE ELIGIBLE FOR FUTURE SALE BY MR. MCMAHON, AND THE SALE OF THOSE SHARES COULD LOWER OUR STOCK PRICE.
We cannot predict the effect, if any, that future sales of shares of our
Class B common stock (which, upon distribution to anyone other than Mr. McMahon,
Mrs. McMahon, any descendant of either of them, any entity which is owned and
controlled by any combination of such persons or any trust, all the
beneficiaries of which are any combination of such persons, shall automatically
convert on a one-for-one basis into shares of Class A common stock) or the
availability of those shares for future sale will have on the market price of
our Class A common stock. Sales of substantial amounts of our Class B common
stock, or the perception that such sales could occur, may lower the prevailing
market price of our Class A common stock. These factors could also make it more
difficult for us to raise funds through future offerings of our Class A common
stock."
full doc.
http://hoovnews.tenkwizard.com/filing.php?repo=tenk&ipage=1521107&doc=1&total=&back=1&g=&attach=onback to main page