legal wrath of the Securities and Exchange Commission regarding the
storyline sale of WWE Monday
Night Raw to Donald J. Trump.
What started out as a
typical wrestling publicity joke could have serious implications for two
companies.
World Wrestling
Entertainment, Inc. (WWE: 12.43, -0.4, -3.12%)
and General Electric Company (GE: 12.09, 0.1, 0.83%)
could be liable for a violation of securities law, after GE-owned USA Network
issued a fake press release that may have caused shares of WWE to fall 6%,
Tuesday afternoon.
The release announced
the sale of WWE’s popular Monday Night RAW wrestling show, which airs on
the USA Network, to billionaire investor Donald Trump. The details of the sale
were not provided and the release claimed, “the terms of the deal were not
disclosed.” However, WWE Chairman Vince McMahon was quoted as stating, “this was
an offer I couldn’t refuse.”
In the release, Trump
revealed that in his first act as new owner, he planned to air the show live and
commercial free on Monday, June 22, and he would be making a live appearance on
the program as the new owner.
The release was
distributed by the GE-owned USA Network via PR Newswire, a business and
corporate-relations newswire service. Upon circulation of the release, shares of
WWE, a publicly traded company, fell more than 7%, to $12.18 per share, after
opening at $13.13, Tuesday morning.
But the sale of the
franchise to Donald Trump never actually happened. Two days later came a second
announcement, saying the original release “referred to Monday Night RAW’s
storyline of a ‘sale’ of WWE’s RAW to Donald Trump.” However, the release said,
the companies “intended the release to be promotional for that ongoing story arc
on the series. There is no such actual 'sale.' We apologize for any
confusion.”
Meissner agrees there
is not much risk of an SEC investigation, since it doesn’t appear the company
intended to manipulate the stock price, but Randy Katz a securities lawyer with
Baker & Hostetler LLP in Orange County, Calif., thinks the SEC might
consider opening an investigation.
"It certainly is a
possibility," Katz said. "The world today versus a couple of years ago has less
tolerance for these types of issues. Theres a greater likelihood today, than if
this happened a few years ago."
Both attorneys think
WWE investors that sold the stock at a loss could have legal grounds to collect
damages, potentially from both WWE and GE, since USA Network issued the release,
but he couldn’t think of any legal precedent that could be
used.
“Off top of my head,
this is a unique set of facts,” Meissner said. “It sounds like poor judgment on
their part for them to do this—for either company of that size to undertake
something like this…it seems silly.”
USA Network did not
return calls for comment.
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