“It will not be possible to quickly resolve the optimization issue in the new structure”

New sports mega-holding TKO Group. Shares of the group, which united the two most popular fighting promotions – UFC and WWE – fell throughout the first week after being listed on the stock exchange, Forbes writes. Kommersant FM sports commentator Vladimir Osipov examined how serious the problems were with the promotion, which was supposed to become the most successful in the world of sports.

The new company entered the stock market with fanfare in mid-September. Its shares began trading on the New York Stock Exchange, and on the first day of trading, the capitalization of the new structure exceeded $24 billion.

It would seem that here it is – a new gold mine in the world of sports. But TKO Group Holdings securities fell in price from $106 to $82 per share. At the same time, there are no fewer fans of either wrestling or mixed martial arts. So what happened?

There are several reasons for falls. Firstly, not everyone liked the appearance of a wrestling promotion in martial arts, which is more reminiscent of a theatrical performance, and the new company faced the problem of selling advertising.

Secondly, the company’s big fight show left one of the most popular TV channels, Fox. And finally, the most important thing is that when large companies merge, shares on the stock market often fall, since not only capitals are combined, but also debts, explained Kommersant FM economic observer Oleg Bogdanov:

“When one company buys another, that’s usually when the stock starts to decline. This is an automatic process, because not only a certain shareholder value is absorbed, so to speak, but also the debt at the moment. In the case of the UFC, this amount is quite large – about $3 billion.”

But Dana White, who raised the UFC to unrealistic heights, was always considered a business genius, and after the merger of promotions, he immediately began to restore order in the structure of WWE, which deals with wrestling, commentator and MMA expert Alexander Sadokov told Kommersant FM:

“There have been quite large-scale purges of the ranks of wrestlers under contract with WWE. We took this swamp seriously.

Let’s just say that they apparently decided to shake things up and demonstrate some new approach.”

Most likely, it will not be possible to quickly resolve the issue of optimization in the new structure, but financial control will definitely do its job.

TKO Group’s main problem is its debt, which exceeds $3 billion, which must be paid off in 2026. At the current interest rate of 5.5%, which the Fed stubbornly holds, even servicing such debt becomes a heavy burden for a new company.

But even at this rate, if you believe the numbers, the company has prospects, says Oleg Bogdanov:

“Net profit is approximately $200 million per year. And, in fact, there are no problems, but only under one condition – if the pace of development of the company is high, both revenue and net profit begin to grow at the same pace as in the last three years – by 15-17%. Then they will calmly cope with such a large debt.”

True, we should not forget about competitors. For example, there are now rumors that another company in the world of martial arts – PFL – is going to buy the famous Bellator promotion. We are talking about a $500 million deal.

And Dana White, who previously did not pay attention to such stories, now spoke on the topic of a possible merger with some hysteria. He stated that buying Bellator is one of the worst business decisions.

One can understand White, because if another mixed martial arts monster appears on the market, his company may face a problem more serious than its $3 billion debt.

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