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Analysis of the WWE and UFC merger

Updated: Sep 23, 2023



Endeavor, the parent company of UFC, merged the world’s most popular mixed martial arts (MMA) league brand with that of newly acquired WWE to officially launch the publicly traded media conglomerate TKO Group Holdings.
The story of WWE seeds back to 70 years of being owned and operated by the McMahon family. Established in 1952 as the Capitol Wrestling Corporation (CWC) and later rebranded as the World Wrestling Federation (WWF) before adopting the WWE name in 2002, it has become the foremost brand in sports entertainment. WWE is known for its unique blend of scripted drama, athleticism, and larger-than-life personalities.
On the other hand founded in 1993, The Ultimate Fighting Championship (UFC) is a globally renowned mixed martial arts (MMA) organization known for its intense and highly competitive combat sports events. , featuring a wide range of fighting disciplines, including boxing, Brazilian jiu-jitsu, wrestling, Muay Thai, and more

Now naturally these 2 organisations are based on the basic foundation of wrestling hence aligning the interest of the current owner Endeavor to acquire WWE. Endeavor acquired UFC for $4.1 billion in 2016. At the time, the industry snickered that Endeavor CEO Ari Emanuel overpaid for UFC in his zeal to expand Endeavor beyond its roots as a talent agency into a full-blown media company. Six years later, WWE’s internal struggles opened the door for Endeavor to engineer the merger of UFC and WWE into a separate company, TKO. The newly created fight club is valued at $21.4 billion, with UFC accounting for $12.1 billion of that valuation.

The formation of TKO as a separate stock is designed to attract investors who only want to put money into a sports-focused venture rather than bet on the fortunes of the entirety of Endeavor, whose holdings now range from the Professional Bull Riders league to WME to New York Fashion Week and other art, fashion and lifestyle event franchises. Endeavor has been a publicly traded stock since April 2021. Through some deft financial choreography, it controls the management of TKO through its 51% ownership stake in the new company. The remaining 49% of TKO shares were distributed to existing WWE shareholders in the transaction that closed Sept. 12.

Now the TKO stock started strong after announcing the acquisition of WWE but later plummeted down.
TKO stock on the NYSE as of 22nd September 2023

TKO stock on the NYSE as of 22nd September 2023


The reason for this huge plummet of more than 12% in 5 days came after WWE Smackdown left Fox Network for USA Network In a Massive 5-Year Deal. Further, WWE has now released major superstars from their contracts, disengaging fans from following the sport.

We can check the reaction of the market using market efficiency theory,

The initial market reaction was good but with SmackDown leaving Fox and going to Comcast’s basic cable fixture USA Network for a five-year deal in a contract reportedly worth $1.4 billion, according to The Wall Street Journal, it has plummeted down. That’s a jump of 40% over the five-year deal WWE had with Fox. Despite that healthy premium, investors weren’t impressed and hammered down shares of WWE’s parent, TKO Group Holdings, as much as 16% Thursday on much higher than average volume. Shares recovered somewhat during the trading day but were stuck under $90 a share after closing yesterday at $100.88. The stock closed Thursday at $84.60, down 16%.


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