Madison Square Garden Sports: Buying The Knicks And Getting The Rangers For Free

Even with an 8-8 record and a streak of missing the NBA playoffs for seven straight seasons, the New York Knicks could be a value play.

Madison Square Garden Sports Corp MSGS: The New York Knicks are owned by Madison Square Garden Sports, along with the NHL’s New York Rangers and minor league hockey and basketball teams.

Madison Square Garden Sports also owns esports assets with its ownership of Counter Logic Gaming, an esports organization for games like “League of Legends” and “Fortnite,” and Knicks Gaming, an NBA 2K League co-owned with Take-Two Interactive Software TTWO.

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Sports Valuation: The New York Knicks were recently valued at $5.42 billion by Sportico, ranking first among NBA teams.

Forbes gives a valuation of $1.65 billion to the New York Rangers, ranking the NHL team first in valuation.

Madison Square Garden Sports has a market capitalization of $4.3 billion and an enterprise value of $5.3 billion.

The key here could be finding the right value of the sports assets and taking out the value of the Madison Square Garden arena, which is owned by spinoff company Madison Square Entertainment Corp MSGE. Sportico assigns a $1 billion valuation to team-related business and real estate. 

Taking out the value of the arena still has the Knicks valued at $4.3 billion, even with the current market cap. With the valuation of the Rangers and esports assets, the company could be undervalued on a sum of the parts basis.

Activist Investor: The valuation of Madison Square Garden Sports could be what attracted activist investor and Egyptian billionaire Nassef Sawiris to take a stake in the company.

Sawiris owns a 6.3% stake in the company and has a deal in place to accumulate additional shares in March.

While Sawiris normally pushes for changes with his stakes, he will find that hard to do with the Dolan family controlling 70% of the voting power of Madison Square Garden Sports.

MSGS Price Action: Shares of Madison Square Garden Sports are down over 40% over the last year.

(Photo: Joaquin Chueca Cia/Flickr)