14.11.16

Conor McGregor & UFC Ownership: The Legal Issues

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Following his historical fight at UFC 205, Conor McGregor made two announcements. The first was that he was expecting a child with his long-term partner and the second was that he wanted a piece of the business.

This is what McGregor had to say at the post-fight press conference:

"They've got to come talk to me now because no one's came and talked to me since the sale has happened, as a businessman. I've been approached as 'Hello' and that type of stuff, but i've earned something. Who owns the company now? People have shares. Celebrities Conan O'Brien, and others, own the UFC now. Where's my share? Where's my equity? If i'm the one that's bringing this, they've got to come talk to me now. I've got both belts, family on the way If you want me to stick around, if you want me to keep doing this, let's talk. But I want ownership now. I want the equal share. I want what I deserve, what I've earned."

This isn't the first time that McGregor has grown tired of his contract. He was also looking beyond his role, as just a fighter, back in Spring when he announced his early retirement.

McGregor also commented that he had outgrown his previous contract and understood what his brand worth meant to the company. He stated that he was looking for a deal that set himself up for the foreseeable future. He did not see himself as merely one of the roster but he wanted to be "on board for real" and "all in on this proper ... a stake in the company."

Who owns the UFC?

The UFC is a private company and not publicly traded - this means that a group of people own a percentage by investing in the company. At this stage, there are no plans to trade the company publicly.

In July 2016, UFC was sold by the Fertitta brothers for $4billion to a talent agency called WWE-IMG which represented the largest deal in the history of professional sports. Quite the achievement when you consider that the brothers bought UFC in 2000 for $2million. Years of increased advertising, social media marketing and brand engagement have led to the company's current price tag and although the company has changed hands, the Fertitta brothers still have a "passing interest" in the company with long term president, Dana White, also staying put with a larger role behind the scenes (he is rumoured to own 9%).

In late September, the company announced that some of it's investors (and this is likely to have irked McGregor, further) are major celebrities and superstars. UFC President, Dana White, stated that:

"Expanding our ownership group to include this caliber of talent and entrepreneurs is a strong indicator of the UFC's fast-growing global presence ... Our new investors bring an incredible depth of knowledge and experience to help us continue to elevate this brand and capitalise on its entertainment and sports crossover."

The new celebrity owners of the UFC include: Ben Affleck, Michael Bay, Tom Brady, Rob Dyrdek, Guy Fieri, Abel "The Weeknd" Tesfaye, Calvin Harris, Anthony Kiedis, Jimmy Kimmell, Robert Kraft, Adam Levine, Li Na, LL Cool J, Cam Newton, Conan O'Brien, Trey Parker, Tyler Perry, Maria Sharapova, Sylvester Stallone, Mark Wahlberg and Serena & Venus Williams.

How do you get shares in a private company? 

A company will usually issue shares to raise funds or to achieve a business objective such as taking on an employee as an employee shareholder (remember, fighters are on the books as contractors and not employees). However, it is not as simple as just issuing shares and taking McGregor on board - the allotment of shares will be a private arrangement between the company and those who invest in it. Before issuing shares, the company directors will usually have to seek authorisation from the other investors before proceeding and ensure that any decision made complies with any potential pre-emption rights agreements - that is that new shares will be offered to existing shareholders first of all.
Legal advice should always be sought before entering into any agreements to ensure that the decision and the procedure followed is lawful and in accordance with the company's duties as directors, as well as it's articles of association.

Of course another way to acquire shares is through a share transfer - that is when a shareholder sells his or her shares to another. Given that ownership of the UFC has only recently changed hands and new investors have just been brought on board, it is unlikely that McGregor will acquire ownership through a share transfer, anytime soon.

Will issuing new shares affect existing shareholders? 

The shares that an investor holds usually carry certain rights (those can be found in the Articles of Association) such as voting rights - for example one common share = one vote. Shareholders will not lose the rights that are set out but the issue of additional shares (and of course a new investor like McGregor) is likely to reduce the overall percentage ownership of the company - this effectively reduces the degree of control a shareholder may have over the company.

McGregor mentioned shares and equity - what's the difference? 

When McGregor states 'equity', he means the stock (stock is divided into shares) and shares in the company and therefore owning a piece of it. The equity in the company is therefore represented by the actual shares owned. By acquiring shares in the UFC, McGregor will obtain corporate rights and buy into a long-term strategy of maximising his wealth from the capital gains or dividends that arise from the shares/stocks - essentially he is counting on the value of UFC to increase over time, as it has currently been doing so and he is looking to profit from that, in the long term.

It is not difficult to see why McGregor is frustrated and one can even share some sympathy for him, especially given the comments regarding celebrity investment "elevating the brand" and crossing over sports and entertainment. If anyone has elevated the UFC to the arena that it is in today, it is Conor McGregor. McGregor is now the UFC's biggest draw, having taken over from Ronda Rousey, breaking viewing records time and time again. As a brand, McGregor attracts global attention with a fanbase worldwide and truly is an entertaining figure as well as a sportsman. Is it only a matter of time before his wish comes true?

For more legal issues affecting UFC fighters, click here.

IMPORTANT: This post is not intended to be a legal briefing, it is not intended to be a statement of the law and no action should be taken in reliance on it without specific legal advice.


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