Shares of TKO Group Holdings (NYSE: TKO) jumped 7.5% on Wednesday after the parent company of Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE) reached a settlement for two outstanding class action lawsuits against the company.
A small price to pay for TKO Group
In a Securities and Exchange Commission (SEC) filing this afternoon, TKO Group says it reached an agreement to settle all claims related to two class action lawsuits in exchange for $335 million in tax-deductible periodic payments over a predetermined (but still undisclosed) period of time.
Over 1,200 fighters were represented by the lawsuits, which were brought by two former fighters alleging that UFC used a monopoly over the mixed martial arts (MMA) market to suppress fighters' wages. If the $335 million payment seems steep, know it could have been worse; the two suits were initially seeking total damages ranging from $894 million to $1.6 billion.
What's next for TKO Group investors?
The agreement isn't a done deal yet; TKO Group still needs to submit a long-form agreement for the court's approval.
But in a tweet following the news, the Mixed Martial Arts Fighters Association also said it was "pleased with the settlement and will disclose more" through additional court filings in the next 45 to 60 days.
In the end, while TKO Group would have likely preferred to win the cases outright, this settlement effectively removes the threat of an even larger court judgment hanging over the company. With shares down around 20% over the past year, it's no surprise to see the stock rebounding in response today.
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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends TKO Group Holdings. The Motley Fool has a disclosure policy.
