A trader works, as a screen displays a news conference by Federal Reserve Board Chairman Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024.
Brendan McDermid | Reuters
This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Wall Street retreats U.S. stocks lost ground on Monday and Treasury yields rose amid lingering concerns that the Federal Reserve may not cut rates as much as expected. The blue-chip Dow fell over 200 points. The S&P 500 also slumped after hitting a record high last week. The Nasdaq Composite also dropped 0.2%.
Oil’s supply crunch The oil market faces a supply crunch by the end of 2025 as the world is not replacing crude reserves fast enough, according to Occidental CEO Vicki Hollub. About 97% of the oil produced today was discovered in the 20th century, she told CNBC.
Palantir surges Shares of Palantir spiked 19%in extended trading after the company reported revenue that topped analysts’ estimates. In a letter to shareholders, Palantir CEO Alex Karp said demand for large language models in the U.S. “continues to be unrelenting.”
Red Sea tensions Higher shipping costs due to tensions in the Red Sea could hinder the global fight against inflation, said the Organisation for Economic Co-operation and Development. Clare Lombardelli, chief economist at the OECD, told CNBC that shipping-driven inflation pressures remain a risk rather than its base case.
[PRO] Banking allure The banking sector offers attractive opportunities despite an increase in volatility, according to fund manager Cole Smead. “It’s the banks that made bad decisions that are making [other] banks look attractive in pricing,” Smead told CNBC, who picked two bank stocks that are in play.
Investors are once again getting ahead of themselves on the Fed’s next move.
Markets were rattled after Federal Reserve Chair Jerome Powell reiterated the central bank is unlikely to rush to lower interest rates.
Wall Street has been parsing his hawkish comments, yet in essence what Powell said over the weekend was no different than what he shared at Wednesday’s press conference: that he wants to see more evidence that inflation is coming down to a sustainable level.
Still, the debate over the timing of rate cuts unsettled Fed watchers.
This sparked a sell-off spurred by higher bond yields. The yield on the 10-year Treasury spiked for a second day, trading around 4.163%. Typically, higher yields tend to indicate investors think the Fed will take longer to cut rates.
Fresh data out Monday also didn’t help. A new survey showed the U.S. services sector expand at a faster-than-expected clip in January.
This on top of the booming jobs report released Friday, fueled investor worries that rates may stay elevated for much longer.
Wall Street will now look ahead to the swath of Fed speakers this week. Perhaps they will shed more light on the path for rate cuts.
Vince McMahon attends a press conference to announce that WWE Wrestlemania 29 will be held at MetLife Stadium in 2013 at MetLife Stadium on February 16, 2012 in East Rutherford, New Jersey.
Michael N. Todaro | Getty Images
Vince McMahon, executive chairman of the board of TKO Group Holdings and founder of wrestling giant WWE, has resigned his positions at both companies, according to a WWE memo obtained by CNBC and confirmed by the company.
“Vince McMahon has tendered his resignation from his positions as TKO Executive Chairman and on the TKO Board of Directors. He will no longer have a role with TKO Group Holdings or WWE,” said Nick Khan, president of the WWE.
McMahon has denied the allegations. But he said in a statement late Friday that, “out of respect for the WWE Universe, the extraordinary TKO business and its board members and shareholders, partners and constituents, and all of the employees and Superstars who helped make WWE into the global leader it is today, I have decided to resign from my executive chairmanship and the TKO board of directors, effective immediately.”
The latest allegations against McMahon were in a lawsuit filed by Janel Grant — who alleges McMahon directed her to have sex with a WWE “superstar” and other men. Grant’s suit seeks to void a nondisclosure agreement Grant said she reached with McMahon in early 2022.
Grant’s suit in U.S. District Court in Connecticut says the billionaire McMahon agreed to pay her $3 million as part of that deal, but ended up only paying her $1 million in exchange for her silence about his conduct.
In addition to McMahon, 78, the complaint names as defendants WWE and John Laurinaitis, the company’s former head of talent relations and general manager.
The complaint comes six months after federal law enforcement agents executed a search warrant on McMahon and served him with a grand jury subpoena as part of an investigation into McMahon’s payment of millions of dollars to multiple women, among them Grant, after allegations of sexual misconduct.
McMahon, who resigned from WWE leadership posts in mid-2022 amid an internal company investigation, only to return as its leader in early 2023, last March paid WWE $17.4 million to cover costs of a probe of those payouts by a law firm retained by the company.
An image of Warren Buffett at the Berkshire Hathaway Shopping Day, May 5, 2023.
Yun Li | CNBC
Shrewd business legend Warren Buffett has a whimsical side, buying companies whose products he personally enjoys like Dairy Queen and See’s Candies. Now count plush toy phenomenon Squishmallows.
Squishmallows made its Berkshire Hathaway annual meeting debut this year in Omaha, Nebraska, with shareholders snapping up 10,000 snuggly dolls in the span of hours, including ones modeled after the “Oracle of Omaha” and his longtime business partner Charlie Munger. Berkshire inherited Squishmallows parent Jazwares through its acquisition of Alleghany in the fourth quarter of 2022.
Jazwares founder and president, Judd and Laura Zebersky, now report to and are in regular communication with Greg Abel, Berkshire’s vice chairman for non-insurance operations and Buffett’s successor. The South Florida-based couple, who are lawyers-turned-toy-entrepreneurs, said they are excited to be under the Berkshire umbrella and enjoy having the autonomy to run their own business.
“It’s an amazing structure. We’re thrilled to be part of it,” Laura Zebersky said in an interview. “It’s better than we could have ever anticipated and being around the greatest leaders in the world is phenomenal, and being able to explore the synergies is also something we are interested in.”
The 92-year-old Buffett sang Abel’s praises recently, saying he’s taken on most of the responsibilities. Abel has been overseeing a major portion of Berkshire’s sprawling empire, including energy, railroad and retail.
While Buffett only got into Jazwares indirectly through Alleghany, he has shown the willingness to invest in far smaller businesses that don’t have the heft to move the needle in terms of Berkshire’s massive earnings and revenue. Often Buffett admires the business’ management and expects it to continue to grow and remain profitable.
A whopping 100 million Squishmallow units — with prices ranging from $5 to $30 — were sold last year alone. Laura Zebersky said the pandemic turbocharged Squishmallows’ growth. Endorsements from celebrities from Kim Kardashian to Lady Gaga on TikTok also helped.
“The idea of having something that was nurturing, cozy, cuddly, it was affordable and accessible. Instant gratification,” Zebersky said. “We really touch on all walks and areas. So it’s been really interesting to see that it’s not just kids, it’s adults. Our demographic is very wide and broad and it’s very unusual in our business to have that.”
In April 2020, Jazwares bought toymaker Kellytoy, which created the Squishmallow brand in 2017.
Not a flash in the pan
In order to sustain the success of Squishmallows, Jazwares is conscious about oversaturation and tends to be very selective about partnerships, Zebersky said. The plush toy brand has driven 40% of Jazwares’ entire revenue for the past two years.
“We’re on year six of the brand … it’s not a flash in the pan,” Zebersky said. “It’s growing smartly and sustainably. We make sure we limit the amount of production. We make sure that there’s something different for each channel of retail, that there’s collectability, that there’s unique styles, unique sizes.”
Squishmallows recently announced a partnership with McDonald’s Happy Meal, which will roll across 70 different countries throughout 2023.
Last month, Jazwares participated in VidCon in California, an annual convention for content creators and online brands. The company featured a pit stuffed with a sea of Squishmallows for visitors to jump into.
“We don’t do traditional marketing. We are where our fans are. And a great example of that is VidCon, the largest gathering of influencers,” Zebersky said.
Squishmallows is one of Jazwares’ fully owned intellectual property, but the company also sells products with licensed partnerships with Disney, WWE, Pokemon, etc.
World Wrestling Entertainment Inc. Chairman Vince McMahon appears in the ring during the WWE Monday Night Raw show at the Thomas & Mack Center August 24, 2009 in Las Vegas, Nevada.
Ethan Miller | Getty Images
Vince McMahon’s World Wrestling Entertainment is in advanced talks to be sold to Ari Emanuel’s Endeavor Group, the parent company of UFC, according to people familiar with the matter.
A deal could be announced as soon as Monday. UFC and WWE are expected to form a new publicly traded company as part of the agreement, according to the people, who declined to be named due to the confidential nature of the discussions.
Endeavor is slated to own 51% of the new combat sports and entertainment company, while WWE shareholders would get 49%, according to the people. The Endeavor deal gives WWE an enterprise value of $9.3 billion, they said.
Emanuel, a media executive, is expected to act as chief executive of both Endeavor and the new company. McMahon, likewise, is expected to be executive chairman, while Endeavor President Mark Shapiro will also work in the same role at the new company. Dana White will remain as president of UFC, while WWE CEO Nick Khan will serve as president of the wrestling business.
The development comes during the same weekend WWE hosts its flagship live event, WrestleMania, in California. The company has spent the past several months looking for a buyer. McMahon returned to the company as chairman in January to oversee the process. Shares of WWE are up more than 33% so far this year, giving it a market value of more than $6.79 billion.
The deal will effectively end WWE’s decades-old status as a family-run business. McMahon’s father founded WWE in its original incarnation during the middle of the 20th century, and McMahon is the controlling shareholder in the company. McMahon bought the company from his father in 1982. Since then, the company has grown into a global phenomenon, spawing stars suck as Hulk Hogan, Dwayne “The Rock” Johnson, Dave Bautista and John Cena.
McMahon, 77, retired from the company in July following a string of revelations that he paid several women millions of dollars over the years to keep them quiet about alleged affairs and misconduct. His daughter, Stephanie McMahon, became co-CEO alongside Khan. Paul Levesque, who’s both Stephanie McMahon’s husband and the wrestler known as Triple H, took over creative duties from Vince McMahon.
When Vince McMahon came back in January, Stephanie McMahon stepped down and Khan fully assumed the CEO role. The elder McMahon recently locked in a two-year employment contract, according to a securities filing.
Khan in recent weeks has been making the media rounds to discuss the potential sale. He told CNBC’s Morgan Brennan on Thursday that it’s been a robust sale process, drawing many interested buyers.
WWE brings with it a robust media and live events business, along with its decades worth of intellectual property. The company generated $1.29 billion in revenue last year, driven mainly by its $1 billion media unit.
UFC has paid off for Endeavor. Last year, the MMA league helped Endeavor’s sports business make $1.3 billion in revenue. Endeavor’s market cap stood at about $10.53 billion as of Friday’s close. The Endeavor-WWE deal values UFC at more than $12 billion.
WWE, at least at a glance, would also fit well with the cultures at Endeavor and UFC. McMahon has a brash public persona, making him an apparently good match for Emanuel and White, who are also known for their outsized personalities.
White, like McMahon, is no stranger to scandal, either. Earlier this year, video emerged showing the UFC boss slapping his wife during a public argument at a New Year’s Eve party in Mexico. White apologized.
Disclosure: Peacock, the streaming service owned by CNBC parent NBCUniversal, carries WWE events such as WrestleMania.
Investors hoping the recent leadership shakeup at WWE would be a knock-out may instead find themselves getting body slammed, Wolfe Research warned. Analyst Peter Supino downgraded the stock to peer perform from outperform. Supino also removed his price target of $111 per share. That target was 30% above Monday’s closing price of $84.95. Stephanie McMahon resigned earlier this month from her role as co-CEO and chairwoman following the unanimous election of her father, Vince, as company’s executive chairman. She came to the role from a leave of absence after her father retired following sexual abuse allegations. “Stephanie McMahon’s resignation and the Board’s formal resistance to Vince’s return indicate serious stress,” Supino said in a Monday note to clients. Before coming into the co-CEO role, Stephanie left her position as chief brand officer to focus on family. Supino said the resignation bolsters his perception of instability at the company, especially when paired with the return of prior board members who resigned in 2020. He said Stephanie sounded fully committed to the role before her father’s return, so her resignation could signal a rebuke of Vince or that she wanted to free her equity stake from employment binds. If the latter is the case, Supino said it’s hard to gauge whether that should make an investors optimistic or pessimistic on the stock’s future performance. He said it also raises the question of why Vince needed to return at all, wondering if it would give “a shot in the arm” to the 2025 TV rights renewal process. His return also comes amid talk of a potential sale . There’s also risk associated with Vince’s return, he said, pointing to the potential for a ratings collapse due to fans disapproving of him. Supino said Vince’s return could also aid competitors AEW and UFC as the companies try to poach talent. WWE did not immediately respond to CNBC’s request for comment. — CNBC’s Michael Bloom contributed to this report.
World Wrestling Entertainment Inc. Chairman Vince McMahon is introduced during the WWE Monday Night Raw show at the Thomas & Mack Center August 24, 2009 in Las Vegas, Nevada.
Ethan Miller | Getty Images
Vince McMahon has returned to the World Wrestling Entertainment board of directors to facilitate potential sale talks ahead of the company’s media rights renewal.
Owning IP allows streaming services to exclusively offer content without the annoyance of winning licensing rights in an auction every few years. WWE also has value to offer in merchandising and theme park businesses.
WWE has hired JPMorgan to help the company advise on a potential sale, according to people familiar with the matter. JPMorgan declined to comment. A WWE spokesman couldn’t immediately be reached for comment.
If a deal occurs, it would likely occur in the next three to six months, said the people, who asked not to be named because the discussions are private. WWE plans to talk to potential buyers before it makes a decision on TV rights renewal agreements.
McMahon’s return should help a sale process go smoothly, though there could still be hiccups.
The former CEO and chair is 77 years old and the controlling shareholder of WWE. He stepped down after an investigation found that he had paid nearly $15 million to four women over 16 years to quell claims of alleged sexual misconduct and infidelity. Returning to the board will give potential buyers confidence he’s supportive of the details of any transaction.
“My return will allow WWE, as well as any transaction counterparties, to engage in these processes knowing they will have the support of the controlling shareholder,” McMahon said in a statement Thursday.
Mansoor (bottom) competes with Mustafa Ali during the World Wrestling Entertainment (WWE) Crown Jewel pay-per-view in the Saudi capital Riyadh on October 21, 2021.
Fayez Nureldine | AFP | Getty Images
Whether a buyer would be comfortable with McMahon taking a more hands-on role at the company is unknown. But WWE is McMahon’s life work. It’s possible a sale may only happen with at least some strings attached.
WWE has a market capitalization of more than $6 billion after rising nearly 17% percent on Friday, buoyed by heightened sale speculation.
There are three categories of likely buyers for WWE — the legacy media companies, the streamers and the entertainment holding companies. Here’s who might be interested.
Comcast, which owns NBCUniversal, is a potential fit as a buyer for WWE. McMahon’s company already has an exclusive streaming deal with Comcast’s streaming service, Peacock, and a cable TV deal with NBCUniversal’s USA Network. Comcast has a market capitalization of more than $160 billion and can easily afford the company — especially with a $9 billion (or more) check coming as soon as January 2024 from Disney for a 33% stake in Hulu.
Comcast can lock up WWE in perpetuity without having to pay upcoming rights renewal increases and can use the company’s IP for theme parks, movies and other spinoff series.
Returning CEO Bob Iger may want to make a splashy acquisition as he retakes the throne at Disney. WWE fits Disney in the same ways that it fits Comcast. It would bolster Disney’s streaming ambitions (perhaps ESPN+), it would support the linear network business, and it would add some heft to merchandizing and theme park businesses.
Disney CEO, Bob Iger attends the European film premiere of ‘Star Wars: The Rise of Skywalker’ at Cineworld Leicester Square on 18 December, 2019 in London, England.
Netflix has long shied away from sports and other live events, but it’s recently become open to the idea of owning a league outright or taking an ownership stake. Owning a sports league would give Netflix the ability to create video games and spinoff series without friction. Netflix found success in its Formula 1 “Drive to Survive” documentary series, giving co-CEO Reed Hastings faith that certain sports properties will resonate with Netflix’s huge global audience. But Netflix doesn’t own Formula 1, limiting its future options.
Acquiring WWE or another sports league would be a path toward offering live entertainment without renting content — similar to Zaslav’s thinking.
Emanuel bought UFC to increase the scope of the talent agency’s business to live events. WME-IMG, now just a part of Endeavor, represents many UFC athletes — as well as WWE superstars. The UFC deal has been a success for Endeavor, which paid about seven times 2016’s $600 million revenue in 2016. UFC generated more than $1 billion in revenue in 2022.
Ari Emanuel speaks onstage during the 2017 LACMA Art + Film Gala Honoring Mark Bradford and George Lucas presented by Gucci at LACMA on November 4, 2017 in Los Angeles, California.
Stefanie Keenan | Getty Images Entertainment | Getty Images
Endeavor’s enterprise value of just about $11 billion makes WWE a huge swing for the company. The company’s relatively small balance sheet would likely prevent Endeavor from winning a bidding war against media giants. But McMahon’s outsized personality may fit with the brash Emanuel and UFC President Dana White.
Selling to a third party would also allow WWE to increase rights renewals every few years. That may or may not be a positive for the long-term future of the company as the media distribution ecosystem changes.
While Endeavor owns UFC, Liberty’s Formula One Group owns Formula 1. John Malone, Liberty’s controlling shareholder, and CEO Greg Maffei, along with Formula 1 CEO Stefano Domenicali, have figured out how to globally market the car racing league, including cracking American culture after decades of obscurity.
Malone and Maffei have extensive track records at maximizing media valuations and acquiring media assets for less than $10 billion, including Formula 1, Sirius XM and Pandora. The global success of Formula 1 could provide a roadmap for a future WWE strategy.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
WATCH: Jim Cramer gives his take on how Disney could perform this year
Michael Rubin’s sports platform company Fanatics is divesting its 60% stake in NFT company Candy Digital, according to an internal email obtained by CNBC.
Fanatics, who previously held the majority share of Candy Digital, will be selling its interest to an investor group led by Galaxy Digital, the crypto merchant bank led by Mike Novogratz, which was the other original founding shareholder, according to the email.
Fanatics declined to comment.
Candy Digital was founded in June 2021 in the middle of the sports NFT boom, competing with companies like Dapper Labs in the digital sports collectible space. One of its first efforts came out of a multiyear licensing agreement with MLB to produce nonfungible tokens, which included an exclusive Lou Gehrig NFT. It also released digital collectibles with Netflix‘s Stranger Things, WWE, and several Nascar teams.
However, akin to the broader NFT market, sports NFTs also saw a decline amid the ‘crypto winter’ that has seen the value of nearly all digital assets plummet. Dapper Labs, the company behind NBA Top Shot and NFL All Day digital trading platforms that ranked No. 9 on last year’s CNBC Disruptor 50 list, laid off 22% of its company in November.
Candy Digital had raised a $100 million Series A round in October 2021, valuing it at $1.5 billion at the time. Investors in that round included SoftBank‘s Vision Fund 2, Insight Partners, and Pro Football Hall of Famer Peyton Manning, according to previous CNBC reporting.
It is unclear what Fanatics received for its stake in the company, but Rubin wrote “Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics – a favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.”
Rubin cited several factors for Fanatics’ divesture in the email, which he wrote was a “rather straightforward and easy decision for us to make for several reasons.”
“Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business,” Rubin wrote. “Aside from physical collectibles (trading cards) driving 99% of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors.”
In January 2022, Fanatics acquired Topps trading cards for roughly $500 million after also acquiring the rights to produce MLB trading cards, severing a nearly 70-year partnership between Topps and baseball’s top league.
Fanatics raised $700 million in fresh capital in December, aiming to use that new money to focus on potential merger and acquisition opportunities across its collectibles, betting and gaming businesses. It also pushed the company’s valuation to $31 billion.
The company, which started as an e-commerce platform selling team merchandise to sports fans, has looked to expand across the entire sports ecosystem. The company is also weighing an initial public offering, and Rubin recently met with more than 90 internet, retail and gaming analysts from various Wall Street firms, where he spoke of Fanatics’ growth plans, according to previous CNBC reporting.
Fanatics, a three-time CNBC Disruptor 50 company, was ranked No. 21 on last year’s list.
Here’s the full email Rubin sent to Fanatics staff on Wednesday:
Team Fanatics –
Happy New Year. I hope everyone had a chance to recharge and spend quality time with family and friends during the holidays, and that your 2023 is off to a great start.
As we’re getting back into the swing of things, I wanted to share some news with all of you. Effective immediately, Fanatics has divested our approximately 60% stake in Candy Digital. We have sold our interest in the NFT company to an investor group led by Galaxy Digital, the other original founding shareholder. When we looked at all the factors on the table, this was a rather straightforward and easy decision for us to make for several reasons.
Business Model – NFTs will most likely emerge as an integrated product/feature and not as a standalone business: Over the past year, it has become clear that NFTs are unlikely to be sustainable or profitable as a standalone business. Aside from physical collectibles (trading cards) driving 99% of the business, we believe digital products will have more value and utility when connected to physical collectibles to create the best experience for collectors. To that end, we already hold a broader and more significant set of NFT and digital collectibles rights within our Fanatics Collectibles business that came with our trading cards rights (NFL, MLB, NBA and more), which we are seamlessly integrating with the world-class physical collectibles rights we currently have. Ultimately, our goal is to grow the number of sports collectors. Connectivity between physical and digital collectibles will be the most powerful way to create an emotional resonance and enduring success for NFTs and their collectors.
Investor Relationships: Taking this immediate action not only makes sense for the strategic direction of Fanatics, but also allows us to maintain the integrity of the relationships with our investors. The investors in Candy bought into the vision not because of NFTs or Candy itself, but because of our track record at Fanatics. This proven track record is a result of your hard work and our alignment on the mission to build the leading global digital sports platform. Therefore, it was imperative to us to protect their investment as the market and financial environment changed. Divesting our ownership stake at this time allowed us to ensure investors were able to recoup most of their investment via cash or additional shares in Fanatics – a favorable outcome for investors, especially in an imploding NFT market that has seen precipitous drops in both transaction volumes and prices for standalone NFTs.
Cultural Integration: Similar to how quickly we mobilize when the right strategic acquisition or partnership presents itself, we move even quicker when we realize things aren’t working. One of our core values – One Fanatics…Win As A Team – is integral to our success and only works when we can leverage the collective intelligence and expertise of all of our teams and colleagues. Unfortunately, we never achieved full integration of Candy within the Fanatics environment or culture due to shareholders with competing objectives and goals. Our culture of building, growing and winning as a team is what makes this company special, and we were not willing to compromise on this front.
We are 100% confident that this was the best long-term decision for Fanatics and our partners and we look forward to growing our digital and trading cards business together under Fanatics Collectibles with the incredible rights we have across the NFL, MLB, NBA, NCAA, WWE, UFC, F1, UEFA, Disney and more.
