In the wake of sexual abuse allegations against Vince McMahon, the former longtime chief of WWE, shares in TKO Group Holdings, the parent company of WWE, slipped on Monday as investors assessed the potential downside. The stock fell 4.4% on nearly twice its normal trading volume, closing at $82.73. This drop came as a result of a lawsuit filed against McMahon and former WWE talent chief John Laurinaitis by former employee Janel Grant, who made graphic allegations of sex trafficking, battery, and rape.

One prominent Wall Street firm highlighted the "brand and legal risk" that TKO faces due to the lawsuit. The firm's report flagged concerns over the potential impact on TKO's reputation and legal implications. McMahon, who had previously disclosed paying over $12 million to resolve other sexual misconduct complaints, has denied the specific claims made by Grant.

While addressing reporters after WWE's Royal Rumble event, Chief Content Officer Paul Levesque, also known as "Triple H," appeared to downplay the controversy. Despite acknowledging the negative impact, Levesque chose to focus on the positives, including a long-term Netflix deal, Dwayne Johnson's appointment to TKO's board of directors, and a successful sellout crowd at the Royal Rumble event.

When asked about Grant's legal complaint, Levesque stated that he had not read it. However, when questioned about measures being taken to protect WWE employees from abuse by their managers, Levesque affirmed that it was an important topic for the company.

Wall Street analyst Robert Fishman of research firm MoffettNathanson assigned a "neutral" rating to TKO's shares after initiating coverage. Fishman noted McMahon's significant role in shaping WWE and his status as TKO's largest individual shareholder. The lawsuit was seen as posing "incremental brand and legal risks" for TKO. Fishman also highlighted McMahon's potential need to mount a legal defense, which could impact TKO's stock if further equity sales were required.

Moreover, the company acknowledged the potential liability associated with McMahon's return and his board membership. In a recent SEC filing, TKO warned that McMahon's presence on the board could lead to negative publicity and further scrutiny, potentially impacting the company's financials and operations.

Criticism was also raised by Dave Meltzer, publisher of the Wrestling Observer Newsletter, who condemned Levesque's comments at the Royal Rumble event. Meltzer pointed out that Levesque is married to Stephanie McMahon, Vince McMahon's daughter, and noted the gravity of the sexual abuse allegations against Vince McMahon.

As TKO Group Holdings continues to grapple with the fallout from these allegations, investors remain cautious about its future trajectory, with shares slipping as the company faces potential legal and reputational risks.