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WWF: IPO SmackDown!

It has been a 20-year overnight success story: the World Wrestling Federation (WWFE) . The founder and CEO (and basically supreme leader) Vince McMahon seems like a blowhard. But don't let this fool you. He is one of the savviest business leaders in the country.

Taking control of his dad's wrestling business, McMahon has created an entertainment empire. In 1999, the WWF produced 200 events -- over broadcast cable and pay-per-view. These events have become like rock concerts. Recently, it took less than 24 hours to sell-out three events (one was less than 41 minutes).

The company went public last year at $17 per share and climbed to $25-1/4 on its first day of trading (the high is $34). Now, the stock is trading at a lowly $15. I think it is worth a look.

The company is a money machine. In the last quarter, the company generated sales of $88 million and profits of $21 million, up 65 percent and 63 percent from the same period last year respectively. Besides generating revenues from advertising and sponsorships, the WWF gets healthy revenues from branded merchandise (videos, CDs, toys, t-shirts, etc). The company even has several magazines.

However, the brash style of the company has alienated sponsors. For example, Coca-Cola, Mars, AT&T and the USA Army left. But there are many more sponsors that want to tap into the rich demographic that WWF has. Then again, the audience is mostly male -- who are either young adults or teens. And this is a tough demographic for advertisers to reach, but it is a lucrative demographic.

With the money from the IPO, WWF has the resources to expand the business. One obvious direction is to spread wrestling overseas.

But, of course, the most interesting growth component is online. The WWF site has shown impressive results, with 157 million page views in October. In fact, the site is the fourth most visited sports site (compared to ESPN, CBS SportsLine and CNNsi).

Keep in mind that the WWF is the biggest pay-per-view company in the world. While subscription services have not performed well on the Web, this could be different for the WWF.

Lately, the WWF has been signing online deals. One example is with Exactis.com (XACT) . The permission-based marketing company will handle the online e-mail campaign for the WWF. Since late July, subscribers to the mail list has gone from 300,000 to 600,000, of which more than 20 percent of the subscribers click-back to the WWF site on a weekly basis.

The recent fall of the stock seems like an opportunity. With the general Net stocks falling, the WWF could be an interesting way to play dot coms -- but having a buffer on the downside that is supported by hefty revenues and profits.