NEW YORK – TKO Group Holdings, Inc. (NYSE:TKO) disclosed on Wednesday that a court has declined preliminary approval of a proposed $335 million settlement in class-action lawsuits involving the company and its subsidiary, TKO Operating Company, LLC. The suits allege violations of the Sherman Act by the company's former UFC athletes.
The consolidated lawsuits, initially filed between December 2014 and March 2015 and later unified in June 2015 under the caption Le et al. v. Zuffa, LLC, along with a subsequent 2021 case known as Johnson et al. v. Zuffa, LLC, were set to be resolved by the multimillion-dollar settlement. However, on Monday, the court denied the motion for preliminary approval without stating the reasons, postponing a potential resolution.
A status conference has been scheduled for August 19, 2024, with a new tentative trial date for the Le case on October 28, 2024. Meanwhile, TKO Group Holdings is considering its options, including a possible appeal. The company has also initiated separate settlement talks for the Le and Johnson cases, with plaintiffs' counsel showing readiness to negotiate.
The Johnson case is still pending a motion to dismiss, and no trial date has been established. The company has stated that the information from the 8-K report is not to be considered "filed" for purposes of liabilities or incorporated by reference in any other filings, except as explicitly referenced.
The news follows TKO Group Holdings' recent disclosure in their annual report, acknowledging various risks and uncertainties that could impact the company's future results. The company has emphasized that forward-looking statements in the report are not guarantees and are subject to change.
In other recent news, TKO Group Holdings has been navigating through a series of developments. The company reported record-breaking attendance and revenue figures for its UFC and WWE events in the first quarter of 2024. TKO Group also merged its UFC and WWE Live Events teams into a single unit, the TKO Live Events Strategy Team, to strengthen its position in the live events market.
On the legal front, the company is in the midst of settlement talks with the Ultimate Fighting Championship (UFC) and its fighters, following a federal judge's rejection of a proposed settlement. Analyst firm Citi maintains a Buy rating on TKO despite these legal developments and has initiated a 90-day positive catalyst watch, suggesting a possibility for a new settlement before the trial date.
Several analyst firms have updated their perspectives on TKO Group. Roth/MKM maintained a Buy rating and increased the price target to $130 amid the ongoing class action lawsuits involving UFC. Redburn-Atlantic initiated a 'Buy' rating on TKO stock, highlighting the increasing value of sports rights. TD Cowen upgraded TKO's stock rating from 'Hold' to 'Buy' with a new price target set at $127, following strong first-quarter earnings. These are recent developments in the company's journey.
InvestingPro Insights
In light of TKO Group Holdings' current legal challenges, investors might be weighing the implications on the company's financial health and market performance. According to InvestingPro data, TKO Group Holdings has a market capitalization of $18.57 billion and has experienced significant revenue growth of 68.28% in the last twelve months as of Q1 2024. This robust top-line growth is echoed in the quarterly figures, with revenue surging by 105.3% in Q1 2024. Despite these growth metrics, the company's P/E ratio remains negative at -39.52, reflecting the market's concerns over profitability.
InvestingPro Tips suggest a mixed outlook. On the one hand, analysts expect net income and sales to grow this year, which could signal a turnaround in profitability. On the other hand, the company is trading at high valuation multiples relative to EBIT and EBITDA, indicating that its stock price may already reflect anticipated growth. Notably, TKO Group Holdings has shown a strong return over the last three months, with a 15.92% price total return, and is trading near its 52-week high, at 95.51% of the peak price. Investors should note that TKO Group Holdings does not pay a dividend, which could influence investment decisions for income-focused portfolios.
For those seeking more in-depth analysis, there are additional InvestingPro Tips available, which can provide further guidance on the potential investment opportunities and risks associated with TKO Group Holdings. Interested parties can explore these tips and more detailed metrics on the InvestingPro platform.
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