Posted in: Sports, TV, WWE | Tagged: Vince McMahon, wrestling, wwe

WWE to Record Vince McMahon Hush Money Payments as Expenses

On Friday, right after the stock markets closed, Vince McMahon announced his retirement as Chairman and CEO of WWE. The news followed weeks of scandal that began when the Wall Street Journal reported the WWE Board was investigating hush money payments reportedly made by McMahon to women over sexual misconduct allegations. Further reports alleged even more payments, including one to a former wrestler. McMahon was initially defiant, appearing multiple times on WWE television seemingly just to demonstrate his popularity with the audience. But something obviously changed last week, leading to McMahon suddenly retiring and Stephanie McMahon taking over as Chairwoman and co-CEO with Nick Khan. Additionally, Triple H was named this morning as new head of creative in WWE, a role that Vince McMahon previously filled.

You can read the relevant portion of the filing here:

The Company has made a preliminary determination that certain payments that Vince McMahon agreed to make during the period from 2006 through 2022 (including amounts paid and payable in the future), and that were not recorded in the WWE consolidated financial statements, should have been recorded as expenses in the quarters in which those agreements were made (the "Unrecorded Expenses"). As of the date hereof, the Company has identified Unrecorded Expenses totaling approximately $14.6 million. All payments underlying the Unrecorded Expenses were or will be paid by Vince McMahon personally. While the Company continues to evaluate the impact on previously reported financial statements, the Company has preliminarily determined that, while the amount of Unrecorded Expenses was not material in any individual period in which the Unrecorded Expenses arose, the aggregate amount of Unrecorded Expenses would be material if recorded entirely in the second quarter of 2022. Accordingly, the Company currently anticipates that it will revise its previously issued financial statements to record the Unrecorded Expenses in the applicable periods for the years ended December 31, 2019, 2020 and 2021, as well as the first quarter of 2022, when it issues its financial statements for the second quarter of 2022. The Company is working with the goal of issuing such financial statements by August 9, 2022, but there is no assurance that it will be able to meet this deadline. In light of the Unrecorded Expenses and related facts, the Company expects to conclude that its internal control over financial reporting was not effective as a result of one or more material weaknesses. The Company continues to evaluate the appropriate accounting treatment for the Unrecorded Expenses, as well as its internal control over financial reporting, and its ultimate conclusions on these topics may differ from what the Company currently anticipates.

As previously announced, a special committee of independent members of the Board is conducting an investigation into alleged misconduct by Vince McMahon, which investigation remains ongoing.

The Company has also received, and may receive in the future, regulatory, investigative and enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters.

Additionally, in the forward-looking statements portion of the filing, while naming risks that could affect the accuracy of financial projections, the filing lists the following as potential risks:

(xxviii) through his beneficial ownership of a substantial majority of our Class B common stock, our controlling stockholder, Vince McMahon, exercises control over our affairs, and his interests may conflict with the holders of our Class A common stock;

That portion of the statement will likely lead to questions about how much control McMahon will continue to exercise over WWE despite his retirement. Typically, the board isn't involved directly in the day-to-day operations of the company, but as the filing notes, McMahon does ultimately control the board through his Class B stock, which is a class of stock that can only be legally held by Vince and Linda McMahon and their descendants. Since McMahon holds the majority of those shares, he can effectively control every voting decision by the board entirely on his own. When a McMahon family member sells Class B stock, it is automatically converted to Class A.

You can read the section on forward-looking statements here:

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain statements that are forward-looking and are not based on historical facts. Statements in this Current Report on Form 8-K, or in oral statements made from time to time by our representatives, regarding the impact of the management changes, including the departure of Vince McMahon from the Company and the appointment of Stephanie McMahon and Nick Khan as Co-Chief Executive Officers; our expected financial results for the quarter ended June 30, 2022, including our conclusions regarding the appropriate accounting treatment for the Unrecorded Expenses and our internal control over financial reporting; the scope, duration and findings of the ongoing investigation of Vince McMahon's conduct by the special committee of independent members of the Board; and regulatory, investigative or enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters, including the conduct of Vince McMahon and the Company's disclosures and internal control over financial reporting. In addition, when used in this Current Report on Form 8-K or in oral statements made from time to time by our representatives, the words "may," "will," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect," "outlook," "target," "goal" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These statements relate to our future plans, objectives, expectations and intentions and are not historical facts and accordingly involve known and unknown risks and uncertainties and other factors that may cause the actual results or the performance by us to be materially different from future results or performance expressed or implied by such forward-looking statements. The forward-looking statements in this press release are subject to uncertainties relating to the management changes, including the departure of Vince McMahon from the Company and the appointment of Stephanie McMahon and Nick Khan as Co-Chief Executive Officers; our expected financial results for the quarter ended June 30, 2022, including our conclusions regarding the appropriate accounting treatment for the Unrecorded Expenses and our internal control over financial reporting; the scope, duration and findings of the ongoing investigation of Vince McMahon's conduct by the special committee of independent members of the Board; regulatory, investigative or enforcement inquiries, subpoenas or demands arising from, related to, or in connection with these matters, including the conduct of Vince McMahon and the Company's disclosures and internal control over financial reporting; and reputational harm to the Company with its stockholders, customers, talent and partners, which may have adverse financial and operational impacts, among other factors. The following additional factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Current Report on Form 8-K: (i) risks relating to the ongoing coronavirus (COVID-19) pandemic may continue to negatively affect world economies as well as our industry, business and results of operations; (ii) risks relating to entering, maintaining and renewing major distribution agreements; (iii) risks relating to a rapidly evolving and highly competitive media landscape; (iv) risks relating to WWE Network; (v) risks related to the computer systems, content delivery and online operations of WWE and our business partners; (vi) risks relating to privacy norms and regulations; (vii) our need to continue to develop creative and entertaining programs and events; (viii) our need to retain or continue to recruit key performers; (ix) the risk of a decline in the popularity of our brand of sports entertainment, including as a result of changes in the social and political climate; (x) risks related to the resignation of Vince McMahon; (xi) possible adverse changes in the regulatory atmosphere and related private sector initiatives; (xii) the highly competitive, rapidly changing and increasingly fragmented nature of the markets in which we operate and/or our inability to compete effectively, especially against competitors with greater financial resources or marketplace presence; (xiii) uncertainties associated with international markets including possible disruptions and reputational risks; (xiv) our difficulty or inability to promote and conduct our live events and/or other businesses if we do not comply with applicable regulations; (xv) our dependence on our intellectual property rights, our need to protect those rights, and the risks of our infringement of others' intellectual property rights; (xvi) risks relating to the complexity of our rights agreements across distribution mechanisms and geographical areas; (xvii) the risk of substantial liability in the event of accidents or injuries occurring during our physically demanding events; (xviii) exposure to risks relating to large public events as well as travel to and from such events; (xix) a variety of risks as we expand into new or complementary businesses and/or make strategic investments and/or acquisitions; (xx) risks relating to our accounts receivable; (xxi) risks related to our new leased corporate headquarter and media production facilities; (xxii) risks related to litigation and other actions, investigations or proceedings; (xxiii) a change in tax laws in key jurisdictions could materially increase our tax expense; (xxiv) risks inherent in our feature film business; (xxv) risks relating to a possible decline in general economic conditions and disruption in financial markets, including any resulting from COVID-19; (xxvi) risks relating to our indebtedness, including our convertible notes; (xxvii) our potential failure to meet market expectations for our financial performance; (xxviii) through his beneficial ownership of a substantial majority of our Class B common stock, our controlling stockholder, Vince McMahon, exercises control over our affairs, and his interests may conflict with the holders of our Class A common stock; (xxix) risks associated with our share repurchase program; (xxx) a substantial number of shares are eligible for sale by Vince McMahon and members of his family or trusts established for their benefit, and the sale, or the perception of possible sales, of those shares could lower our stock price; and (xxxi) risks related to the volatility of our Class A common stock. Forward-looking statements made by WWE speak only as of the date made, are subject to change without any obligation on the part of WWE to update or revise them, and undue reliance should not be placed on these statements. For more information about risks and uncertainties associated with WWE's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of WWE's SEC filings, including, but not limited to, our annual report on Form 10-K and quarterly reports on Form 10-Q.

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