In the latest 8-K filing with the Security and Exchange Commission yesterday, it was revealed that Vince McMahon entered into a variable prepaid forward contract with an unaffiliated bank covering approximately 3.5 million shares of the Company’s Class B common stock.
Variable prepaid forward contracts are investment strategies that allow a shareholder, in this case McMahon, to generate liquidity for a number of issues, including risk management purposes. The move was done to make sure WWE has enough liquidity to go through this whole coronavirus pandemic.
The variable prepaid forward contract is scheduled to settle on specified dates in March 2024, at which time the actual number of shares of the Company’s Class A common stock to be delivered by Mr. McMahon will be determined based on the price of the Company’s Class A common stock. Subject to certain conditions, Mr. McMahon can also elect to settle the variable prepaid forward contract in cash and thereby retain full ownership of the pledged shares.
Mr. McMahon entered into the variable prepaid forward contract to provide current liquidity while allowing him to maintain voting and ordinary dividend rights in the stock, as well as the ability to participate in future stock price appreciation, during the term of the contract and thereafter if Mr. McMahon settles the variable prepaid forward contract in cash.
The shares covered by the variable prepaid forward contract represent approximately 4.5% of the Company’s total outstanding shares of Class A and Class B common stock. The variable prepaid forward contract contains a 60-day lock-up restricting Mr. McMahon’s ability to sell or transfer additional shares of the Company’s common stock during such period without the Bank’s prior approval.