MPO Year in Review – South Korean court hands down sentence to former UFC WW for role in attempted fight fixing

December 26, 2017

Former UFC Fighter Tae Hyun Bang was sentenced to 10 months for his part in a fight fixing scheme that took place at UFC Fight Night 79 in November 2015.

The scheme had Bang taking money from an organized group to throw a fight against Leo Kuntz.  Bang was a favorite in the fight but after a vast swing in odds, the UFC put both fighters on notice of any improprieties prior to the fight.

According to the Seoul Central District Court, Bang was given $92,160 in U.S. dollars for his role.  The brokers who gave him the money were given jail sentences as well.

According to the Court, match fixing damages the credibility of the sport and had a bad effect on the country’s credibility.  Bang took the bribe and then bet roughly half of the money he received on Kuntz.  He was to lose the first two rounds of their three-round bout.  Thus, ensuing victory for Kuntz.

Bang ended up winning the fight via split decision. He had claimed he had not known of any scheme to fix the fight but received death threats due to his win.

While the fight fixing issue did not receive a lot of headlines in North America, fight fixing is a serious issue and could debilitate the sport.  The UFC advertises odds and uses them all the time when setting up storylines for fights.  The need to ensure credibility of the sport is vital.  There has been no huge gambling issues since this incident but with fighters on the prelim cards making small purse amounts, the temptation to take money is out there.  The company must still keep an eye out for those that might influence fighters to fix a fight.

MPO Year in Review: Bellator NYC does not deliver

December 25, 2017

It was Bellator MMA’s big debut in New York City as it returned to PPV with the long-awaited grudge match between Chael Sonnen and Wanderlei Silva.  Scott Coker stated that the mid-200,000 (buys) would be respectable.

However, the PPV card disappointed with 95,000 buys.

The event also featured Fedor Emelianenko as he faced Matt Mitrione.

The PPV was split with fights, dubbed as “Bellator 180” airing on 2 different networks and featuring Ryan Bader against Phil Davis.  The MSG event drew 12,133 with a gate of $1,630,314.  The television portion aired on Spike TV and Country Music Television drawing a combined 901,000 viewers.

According to an ESPN story, Viacom’s investment in the event was “20 to 30 times more” than anything put into Coker’s previous “tent pole” events.  The investment came with expectations and based on the PPV numbers did not deliver.

Bellator’s first try at PPV garnered 100,000 buys in 2014.  While the box office did well, the PPV numbers had to be a disappointment considering the belief that the company’s formula of using former UFC stars to headline a Bellator event drew big numbers (e.g., Ortiz-Bonnar).  But, the company foray into PPV still has to be fine tuned as the first two tries have not been good.

MPO Year in Review – Alliance MMA sued by investors

December 24, 2017

Alliance MMA, the publicly traded MMA organization that launched in late 2016, was sued by shareholders citing violations of securities law for alleged misrepresentation of information.

A class action suit is sought and there were efforts by multiple companies to seek out aggrieved shareholders.  Two lawsuits were filed in New York although one was later dismissed under the belief that the lawsuit originally filed would serve as the lawsuit that potential plaintiffs could join as part of a class action.

The lawsuit arises out of an amendment made by the company which trades on the NASDAQ.  In an 8-K filing made by the company last month, it stated that financial statements previously made for the nine months ended September 30, 2016 included in the Company’s Form 10-Q, three months ending June 30, 2016 and six months ending June 30, 2016 could no longer be relied upon because of an error in recognizing as compensation transfers of common stock by an affiliate of the Company to “individuals who were at the time of transfer, or subsequently became, officers, directors or consultants of the Company.”

Alliance MMA CEO, Paul Danner addressed the lawsuit. It has retained a law firm that will likely bring a motion to dismiss the lawsuit.

Alliance MMA lawsuit by JASONCRUZ206 on Scribd

The basic issue was an apparent error with the transfer of stock and the need to indicate the issue.  This sparked the lawsuit.

Regardless of the lawsuit, a concern for shareholders is that the stock price has tumbled since its initial launch.  The 52-week high as of this writing is $3.99 with its low at $0.85.  At closing on Friday, December 22nd, it traded at $1.20 per share.  The stock price is down approximately 65% from its IPO price.

There is also the issue raised as to whether Alliance MMA overstated its operating margin.  Alliance MMA denies it did but there is some speculation.

The company continued growth this year acquiring several regional promotions for its stable.  We shall see what 2018 brings for the company.

MPO year in review – UFC takes out loan, cashes out Fertittas

December 23, 2017

In April, the UFC sought to raise $100 million in incremental loans to complete its buyout of the previous owners.  It appears that the UFC received those loans as the Fertittas cashed out the remaining shares they had left in the company in August.

KKR Capital was leading the effort in obtaining the loans for the company.  According to an investor presentation, with the $100 million loan, the UFC will be at 5.8 times whereas the first lien net leverage would be 4.8 times.

The UFC is marketing the company at $320M EBITDA which is an increase from an estimated $226M EBITDA from 2016 and $192M from 2015.  The numbers come from an investor presentation although there is skepticism about the vast jump from $226M to $320M.  Additionally, it is said that the company’s cuts once it took over in July has achieved cost savings of $10 million and it is projected to save $55 million by the end of 2017.

The UFC is seeking to raise $100 million in incremental loans to repay the previous owners (i.e. Frank and Lorenzo Fertitta and Flash Entertainment) in the case of a potential earnings-based payout according to a report from Reuters.

The payouts of $175M and $75M are due in the event of EBITDA milestones.  According to the Reuters report, the first payout could be due in the latter part of 2017.

KKR Capital, which took over from Goldman Sachs in January as the lead financier, is leading the process for this new loan.  Federal regulators took issue with Goldman Sachs due to its add-backs in projecting the company’s EBITDA.  KKR is not subject to the federal leverage lending guidance.

According to an investor presentation, with the addition of the $100 million loan, the UFC will be at 5.8 times (debt leverage) whereas the first lien net leverage will be 4.8 times.

The UFC is marketing the company at $320M EBITDA which is an increase from an estimated $226M EBITDA from 2016 and $192M from 2015.  The numbers come from an investor presentation although there is skepticism about the vast jump from $226M to $320M.  Additionally, it is said that the company’s cuts once it took over in July has achieved cost savings of $10 million and it is projected to save $55 million by the end of 2017.

In August 2017, Forbes reported that the Fertittas sold their remaining stake in the company. They received roughly a 26% premium over last year’s transaction.  The company acquired for $4.2 Billion dollars in July 2016 was valued at $5 Billion over a year later.

MPO Year in Review – Good sues vitamin maker after failed USADA test

December 22, 2017

UFC Fighter Lyman Good sued vitamin maker and the store that sold it as a result of having a USADA test being flagged.  Good was suspended by USADA and pulled from UFC 205 in his native New York.

Via our post in October:

The target supplement is Anavite according to the lawsuit which was filed in New York by his attorney, David Fish.

Good was suspended for violating the UFC Anti-Doping Policy after he failed a random test.  As part of the process, he learned that the drug that may have caused the failed test was Anavite.

Good is requesting restitution, damages, injunctive and other equitable relief.  Good believes that Gaspari Nutrition misbranded the products as “dietary supplements” to defraud consumers into the believing it had superior “dietary supplements.”

Vitamin Shoppe was sued for (among other things) breach of warranty for selling the products “despite assurances of product quality and control.”  The store claims to have safety measures to ensure that the products its sells are of quality.  Good claims that it has failed to provide such safeguards based on the product he purchased from the store.

Upon learning of the flagged USADA test, Good had provided USADA with unopened packages of Anavite to examine at a lab regarding the contents.  The results confirmed Andro in the product.  Andro is a banned substance per the UFC Anti-Doping Policy and considered a steroid.  Thus, Good has sued the supplement maker, its owners and the store that sold the product.  The lawsuit indicates the harmful effects of steroids and the fact that Andro is such a substance

This is a first of its kind lawsuit under the UFC Anti-Doping Policy and perhaps MMA.  Good can show he was damaged due to the fact that he relied on the representation of the label that Anavite did not contain Andro as it was not on its label as a content and was listed as a “Dietary Supplement.”  He is making a claim against Vitamin Shoppe since it claims to have superior knowledge of these products and should have investigated this product.  The defendants will likely claim a tainted product and that overall, its products do not contain the banned substance.  Moreover, it will claim that there are no damages incurred by Good despite serving a six month sentence.

In products liability cases (lawsuits where the claim is that a product is defective), there is a higher standard on the manufacturer or seller to ensure that the user is not harmed.  In this instance, one could argue Good was not harmed in the sense of physical injury.  He was harmed since he had to ensure he did not ingest a banned substance per the UFC Anti-Doping Policy.  This will make a very interesting case as it continues.  MMA Payout will continue to follow.

The lawsuit remains in its infancy stages although we might expect a motion to dismiss the case by the defendants and/or a denial of the allegations.  One would think that this lawsuit will be watched by other fighters that may have flagged tests due to using an over the counter supplement that was “misbranded.”

MPO Year in Review – The UFC Athlete Retreat

December 21, 2017

MMA Payout begins its annual year in review with the UFC Retreat held in Las Vegas in May.  Over 300 fighters descended on Vegas to attend.  What seemed like a good way to introduce the new ownership to its fighters, the Performance Institute and new sponsors turned into a little more than expected with several story lines coming out of the weekend.

There was the confrontation involving UFC lightweight Kajan Johnson with Reebok representatives about the fighter pay related to the clothing deal.  Johnson indicated he lost about 80% of his fighter pay due to the loss of sponsors. The discussion lasted 90 minutes and according to a report from MMA Junkie, the following proposals were discussed by fighters included bringing back sponsor banners, more transparency about the financials surrounding the UFC’s sponsorship deal with Reebok and hire a UFC rep to leverage local sponsors.

Reebok indicated that it would look for more collaborative solutions with the deal although the payouts have not changed since the discussion.  Reebok did involve athletes more into the design of cloths and introduced a new line at UFC 217.

Kobe Bryant spoke at the Fighter Retreat and Leslie Smith asked about the importance of the player’s association in the NBA:

It was an obvious poke at the bear with MMA fighter’s fledgling attempts to unionize or create an association.

There was also the confrontation between Angela Magana and Cristiane “Cyborg” Justino.  The Las Vegas Police was summoned but no charges came out of the incident.

As a result of the incident, Justino lost a sponsorship.

Finally, there was the claim that a Budweiser representative was intoxicated when he spoke to the fighters.

The UFC retreat seemed like a good idea in theory and perhaps we only received the outrageous news from the weekend. Will we see another one next year? Possibly, but getting fighters together is risky considering the hatred between some fighters.  Maybe everyone could just Skype into these meetings.

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