Thick necks on the block as wrestling body plans to float

Devotees of Stone Cold Austin, The Blue Meanie and Hardcore Holly - huge men famed for their thick necks and lurid costumes - are soon to be offered a piece of the action. They will be able to buy shares in the World Wrestling Federation, which brings SmackDown! and Raw is War to millions of television viewers in 150 countries.

The plan for an initial public offering of shares in the WWF is the latest evidence of rapid growth in the value of sporting events. Sport has become one of the most valuable categories of television programming. That has been a boon for the WWF, despite detractors who argue that it hardly counts as a sport, given the obviously staged nature of the fights.

As far as investors are concerned, the revenues and profits of the enterprise are the important thing. Who cares about sporting integrity when the WWF generates annual pretax profits of $56 million (€51.96 million) on revenues of $251 million, when WWF merchandising annually brings in $81.5 million, and when wwf.com is the fourth most popular sports website in the US, attracting 100 million page views a month?

The owner of this colourful enterprise is the Connecticut-based McMahon family, four generations of which have been putting on wrestling events for the US public. The McMahons may be eager to cash in on the thriving stock market and WWF's popularity, but will not relinquish control of their business.

Full details of the offering, being led by investment bank, Bear Stearns, are not available but the WWF is hoping to raise up to $175 million from the sale of a minority stake. The proceeds will be used to fund the expansion of the company's Internet operations, the development of new TV programming, and possible acquisitions of complementary businesses.

Investors who have previously bought shares in the Boston Celtics of basketball, the Cleveland Indians of baseball and the various listed auto racing stocks will be familiar with the WWF formula.

"Investors look for businesses that generate a lot of cash, that have great brand equity and that do not need a significant amount of capital to be put back in the business. Many sports organisations offer that," says Mr David Rose, an analyst with Jeffrey & Co, the Los Angeles-based investment bank.

Mr Andrew Craig, chief executive of Championship Auto Racing Teams, the motor racing circuit that enjoyed a highly successful IPO last year, says sports companies have an advantage over conventional businesses planning IPOs. "I think being a sports stock does bring a certain amount of notoriety," he says. "It is easier to generate interest among prospective investors because we have a story to tell which is different and unusual."

The WWF differs from other sports investments in its explicit reliance on entertainment, rather than sporting competition, to attract viewers. The IPO prospectus makes no attempt to disguise the WWF's true character, explaining that its 110 contracted wrestlers are "athletic performers" prized for their "acting ability". It talks of developing "soap operalike storylines employing the same techniques used by many successful dramatic television series".

It is the "good-versus-evil" or "settling-the-score" themes employed in WWF bouts that draw the television audiences. Raw is War was the top-rated cable television programme in the US for 19 consecutive weeks in the first half of this year. The WWF's regular Monday night show occupies 26 of the top 30 rankings of most watched cable shows. Pay-per-view specials also do well, attracting record sales at a price of $34.95 per subscription.

But sports investments are not a guaranteed winner for investors. Shares in quoted sports companies can be illiquid because the owners tend to hold on to majority stakes. Mr Rose says that this can make it hard for investors to sell the shares at an adequate price when a sport runs into trouble.

He also says investors should ponder whether wrestling is a sport that has reached its peak. "It had significant popularity three to four years ago . . . but I don't see a massive amount of growth in this business."

Television audiences can be fickle, and while traditional sports can call on deep-rooted loyalties, pro wrestling could be vulnerable if viewers tire of the manufactured mayhem.

WWF also does not have pro wrestling all to itself. The Time Warner-owned World Championship Wrestling organisation remains a threat to its dominance. The sport is also prone to lawsuits - perhaps because it is based on fighting.

The WWF prospectus carries details of a court action being brought by the family of Owen Hart, a wrestler who died in an accident during a WWF event in May. In what is a standard warning in such cases, the WWF admits this could have "a material adverse effect" on its finances. It also faces several other lawsuits from wrestlers contesting ownership of the "characters" they portrayed in the WWF.

But the WWF, which owns a Las Vegas hotel and plans to create a $25 million themed restaurant in Times Square, New York, is confident of defeating any threat to its hegemony. After all, it has on its side the Undertaker - height, 6ft 10in, weight - 328lbs (23 1/2 stone); home - Death Valley; and favourite finishing move - Tombstone Piledriver.