Vince McMahon’s Stone Cold Legal Stunner

WWE Monday Night Raw In Las Vegas
Vince McMahon abruptly retired from WWE six months ago following revelations that he paid women nearly $15 million to hush up sexual misconduct allegations. Now, he’s back in characteristically provocative form. Photo: Ethan Miller/Getty Images
Eriq Gardner
January 16, 2023

Is there a wrestling term for Vince McMahon’s shocking, yet not at all surprising, return to the WWE? After all, it was only six months ago that McMahon, now 77, abruptly retired from the pro wrestling outfit following revelations that he paid women nearly $15 million to hush up sexual misconduct allegations. Now he’s back in characteristically provocative form, the master showman with a history of writing himself into the script. 

McMahon’s reappearance has consequences, of course. Those payments, which McMahon made without informing his board, are still being investigated by the U.S. Attorney’s Office and the S.E.C. The WWE, which still enjoys strong TV and streaming ratings, is soliciting multi-billion dollar acquisition offers. And now McMahon also has to deal with a new shareholder lawsuit in the Delaware Court of Chancery over his power move to amend the company’s bylaws, fire a third of the board, and reinstate himself as executive chairman. 

Nobody on the WWE board thought McMahon’s heel turn was a good idea, and I’ve learned that two factions emerged when the directors held several emergency meetings around Christmas: a few hardliners who were dead set against McMahon’s return, full stop, and those who just didn’t want that distraction now. The latter group made a concerted push to get McMahon to at least wait a few months until the WWE’s annual shareholder meeting. 

When that didn’t work, the board informed McMahon in a Dec. 27 letter that they welcomed his input but that it wouldn’t be prudent for him to formally return amid the government probes. The letter also included some barely veiled threats, alluding to secrets about McMahon that could put the company at risk if discovered, and a reference to a shareholder demand that the WWE sue McMahon. Attached to the letter was a settlement agreement. The company would waive any legal claim against Vince if he repaid expenses incurred to investigate him ($19.4 million, according to the WWE’s third quarter earnings report) and also agreed not to assume an officer or director role until the investigations concluded.

McMahon wasn’t deterred. Instead, he reacted with a fury that will surely go down in Chancery lore. He swiftly ousted three hardliners from the board (JoEllen Lyons Dillon, Jeffrey Speed and Alan Wexler) in favor of two loyalists who had previously left the company (George Barrios and Michelle Wilson). He also unilaterally amended the company’s bylaws so the board could not adopt a poison pill that diluted his voting power—preventing them from moving forward with any sale or media rights deal without his say. Rather than fight him, two more directors resigned, including Man Jit Singh, who had led a special committee investigating him. Even McMahon’s own daughter, Stephanie McMahon, the company’s co-C.E.O., didn’t stick around. That left Nick Khan—a former CAA dealmaker and the company’s other chief executive—remaining with Stephanie’s husband, Paul Levesque (the former wrestler known as “Triple H” who now acts as chief content officer), plus a half-dozen suddenly chastened directors. 

Within days came a press release announcing that McMahon had unanimously been elected chairman of the board. In other words, he body slammed his opponents into submission. The board is his to rule with an iron fist. Or is it?

The Undisputed* Champion

The WWE has a dual-class share structure that allows McMahon to control the company even if he doesn’t hold a majority economic interest. Specifically, he controls 81 percent of its voting power despite owning just 39 percent of the equity. That’s not totally unusual—media players including The New York Times Co. (the Sulzbergers), Alphabet (Larry Page and Sergey Brin), Snap (Evan Spiegel), and Meta (Mark Zuckberg) maintain the same system.

A still-developing body of law determines what controlling shareholders can and can’t do alone, as evidenced by several recent high-profile power struggles. Perhaps most famously, Shari Redstone fought in 2018 with a CBS board led by Leslie Moonves after her father Sumner exited the picture and she pursued a CBS merger with Viacom. The two traded blows in Chancery with dueling interpretations of bylaws and Delaware corporate law, and ultimately, she came out on top, in part because Moonves became embroiled in a sexual misconduct scandal. There was also the case of Steve Wynn, who at 76 had to resign as chairman and C.E.O. of Wynn Resorts upon revelations of payments to hush allegations of sexual misconduct. Nevertheless, as controlling shareholder, Wynn continued to wield his outsized influence on the company board until his ex-wife, ​​Elaine Wynn, got the terms of an old divorce settlement changed so that she could vote her shares as she was once prevented to do. In that instance, Wynn lost his grip on the company’s board.

The McMahon saga appears to be a worthy sequel to the Redstone and Wynn situations, perhaps with a whiff of Succession too. The WWE board may have tapped out, but a pair of shareholder lawsuits, consolidated on Friday, contend that the company’s charter and Delaware law don’t allow McMahon to wrest power away from the board as he did. A motion for a preliminary injunction should arrive in the next few days. These shareholders, backed by several law firms, aim to unwind McMahon’s maneuvers and unshackle the board. That said, even if Vince took improper shortcuts in retaking the throne, he, as controlling shareholder, likely will get his way anyway. There’s no ex-wife this time.

The bigger concern may be how this all impacts the WWE sale, what should be a crowning moment for the company. What do potential buyers think of the ongoing involvement of a guy who secretly paid millions in hush money? How might those civil cases, including anything coming from government regulators, interfere with the sale process? And finally, what exactly does Vince McMahon want?

Royal Rumble

When McMahon announced his comeback, some analysts floated the theory that he could be reasserting himself to stop the WWE sale. CNBC’s David Faber reported last week that potential buyers had doubts about whether McMahon truly wanted to sell. Conversely, I’ve heard speculation that Stephanie and her husband didn’t want to sell, and that’s precisely why he came back and she left.

For what it’s worth, those who I’ve spoken to at the WWE believe McMahon does want to sell, and that there’s a reason Vince couldn’t wait until the shareholder meeting. In case there were any doubts about his intentions, the WWE announced late last week that it has tapped The Raine Group as its financial advisor and Kirkland & Ellis as its legal counsel. Yes, under McMahon’s watch, the WWE has firmly hung up a “For Sale” sign.

While the M&A environment doesn’t figure to be hot this year, a potential transaction is driven by several factors. WWE continues to be a proven draw to a demographically diverse and youthful audience. The wrestling outfit’s major rights deals with Fox and NBCUniversal both expire next year and so WWE was already planning on negotiating this year. New deals must come. A broadcaster or streamer might find it more economical to own the company instead of leasing rights. Plus, this is a merger that doesn’t figure to trigger much antitrust concern from the Biden administration. A sale could come together as soon as three months from now, a WWE source tells me.

As for who might be buying, the hot rumor last week that the Saudis had the upper hand appears to be unfounded. (Indeed, to assuage nervous talent, company leaders have spent extra hours shooting that one down.) Disney remains a possibility given that Bob Iger has a history of making splashy I.P. acquisitions, although the culture fit of a family-friendly giant with a sexually-charged wrestling outfit appears to be a poor one. (Plus, Iger is unlikely to pull this kind of trigger with Nelson Peltz mounting a proxy battle.) Comcast’s NBCU is the betting favorite given the history between the two companies and the prospect that WWE could be used to help Peacock in streaming. Some also believe Endeavor may be a bidder given synergy with the UFC, although that would probably be a heavy debt lift for Ari Emanuel’s company. Don’t count out John Malone’s Liberty Media, which acquired Formula One in a savvy, underrated deal five years ago. It doesn’t hurt that Liberty has afforded its acquisitions great independence in operations. Finally, as far as true wildcards go, there’s the smaller competitor, AEW (All Elite Wrestling), owned by the same Shahid Khan family that owns the NFL’s Jacksonville Jaguars. That organization might not be able to offer as much money, but fiduciary duties notwithstanding, the Khan family could attempt to offer McMahon an ongoing role in their company’s leadership. It’s possible, after all, to go far by playing to this man’s vanity.