Apparently hearing the words “All-time highs” has scared
investors into dumping stock worldwide, and some stocks have been hit harder
than others, WWE to name just one. But one person is clearly not crying over
the Dow going through 2 triple digits losing days in a row, that person is
billionaire, condemned racist and exiled former Los Angles Clipper’s owner
Donald Sterling.
The man
worth nearly $1.5 billion has recently been fined $2.5 million by the NBA and
forced to sell his Los Angeles Clippers after a recording of him saying racist
comments about African Americans was leaked to the press. In response to the
public’s outcry the NBA banned Sterling for life and forced him to sell the Los
Angeles Clippers. The funny part is Donald Sterling stands to make windfall by
selling the Clippers as a number of buyers have already appeared interested
including Magic Johnson and Larry Ellison. Many expect the Clippers to sell for
north of a billion, which means Sterling will profit nicely, considering he
bought the NBA team for a mere $20 million in the mid 1980’s.
Personally
I am not very interested in sports but as a man interested in Finance and
business I found the upcoming sale of the Clippers interesting because it threw
the prices of NBA teams and sports teams in general into question.
It has
become apparent that over the last 30 years the value of Sports teams has gone
up and up, reaching the point where now Sports teams have become large multi
hundred million and billion dollar companies in their own right. Prices for
teams have gotten so high that even the richest of the rich can no longer
afford to singlehandedly pay for them.
Mark
Cuban, the billionaire, outspoken owner of the Dallas Mavericks (another NBA
team) told CNN in an interview that he liked to invest in sports teams but
prices have gotten so high that he could no longer afford to buy them outright.
Cuban said that any offer to buy the Clipper’s or any other sports team for
that matter would have to come from a joint bid by a number of large investors
or Wall Street. When a man worth over $2 billion says he can no longer afford
sports teams it calls into question whether sports teams have gotten too large
to stay mostly in private hands.
I find
it strange that with all the money in sports there are very few sports team
that are actually publically traded. Off course there are a few Sports related
stocks out there, the Green Bay Packers an NFL football team are publicly
traded so is Madison Square Garden. But those are only two, and there dozens of
sports teams in the U.S alone.
But I
believe this might begin to change. With sports teams becoming large companies
in their own right and requiring large amounts of capital to operate, the world
of Sports might begin to drift closer and closer to Wall Street. This process
has already started with a number of Private Equity firms taking positions in
sports teams.
Last
year Joshua Harris and David Blitzer both business men who made their fortunes
in the Private Equity field bought the New Jersey Devils, for an unreported
sum. Both men announced that they will be managing the Hockey team like any
other business, by putting profits ahead of anything else.
As to
the Clippers, the estimated price of the team is somewhere around $575 million,
but with bids coming in the ultimate price paid will be considerably higher.
But what interests me is why sell Donald Sterling’s share to any group of
buyers at all? Why not sell those shares to the public through an IPO.
The
market for Sports is enormous and an NBA team going public would generate a lot
of hype and this might translate into a successful public offering. So far I have
not seen any news to support that the Clippers are going public but it is an interesting
though none the less.
In any
case with the value of sports teams going up and up and up it is not crazy to
think that in a few years many of them will begin to go public and when they do
it will create a whole new industry for investors to look into.
But obviously
many of you are interested in how to invest in sports right now and not in a
few years. If this is the case and you do not have hundreds of millions to buy
directly into a team, you have a few options. First it is possible to invest in
a private equity fund that specializes in sports, unfortunately these funds
often require you to invest minimum amount of up to $100,000. If that is not
for you there are number of sports stocks already out there.
The
most recognizable one is probably Madison Square Garden, which trades under the
ticker symbol MSG. The stock has not performed very well in 2014 with shares
down almost 13% this year, the company does trade at a premium to the rest of
the market with a P/E ratio of 24.6X. When it comes to whether or not to invest
in Madison Square Garden I might recommend against it considering the companies
past performance. But for investors looking for a sports stock to add to their
portfolios it is definitely an option.
Regardless,
as the value of sports teams goes up the chances that more and more will go
public increases, and who knows soon I might be writing a blog on whether or
not it is a good idea to invest in NHL, NBA, MLB, or NFL teams.
IN THE NEXT FEW MONTHS I WILL BE MAKING A WEBSITE FOR INVESTMENT WEEKLY WHICH WILL INCLUDE WEEKLY STOCK TIPS AND POTENTIAL OPPURTUNITIES IN THE MARKET AS WELL AS WEEKLY ARTICLES ABOUT MARKET EVENTS AND ANALYSIS OF VARIOUS INDUSTRIES
IF YOU HAVE IDEAS FOR THE NEW WEBSITE PLEASE COMMENT
ALSO COMMENT ABOUT WHAT YOU THINK OF THE BLOG AND ANY IMPROVEMENTS YOU WOULD LIKE TO SEE
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