Valuations for professional sports teams continue to rise. A rule that allows private equity companies to own minority stakes in National Basketball Association (NBA) teams continues to be a big story for the sport and is giving investors a way to invest in several NBA teams.
What Happened: The Atlanta Hawks were recently valued at $2 billion thanks to a minority stake from Dyal HomeCourt Partners, a unit of Blue Owl Capital OWL.
The Hawks were bought in 2015 by Tony Ressler for $730 million. According to Sportpromedia, Hawks minority partners were asked by Ressler if they wanted to sell their stakes to a new investor. The new stake come as ownership is working on a $5 billion real estate development next to the team’s arena.
Dyal HomeCourt Partners now owns stakes in the Hawks, Phoenix Suns and Sacramento Kings.
The NBA changed its policy recently to allow private equity investment in teams. Private equity investors can own up to 20% in a single team and can own stakes in up to five teams, according to the report.
Arctos Sports Partners was the first private equity investor to take on the new policy, with a 5% stake in the Golden State Warriors. Arctos raised their stake in the Warriors to 13% recently, according to Sportico, using the same $5.5 billion valuation from its previous investment.
Fans of the Atlanta Hawks now have a way to become partial team owners via OWL shares. NBA fans could also consider the company as a way to get exposure to the growth of team valuations and potential media deals. Blue Owl Capital offers ownership in three NBA teams and if it has its way, additional team ownership opportunities will be included in the management team’s future portfolio.
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Why It’s Important: The valuation assigned to the Hawks in the recent sale is at a higher amount than two major sports publications have placed on the team.
The Hawks were recently valued by Sportico at $1.83 billion, up 19% from its previous valuation ranking. Forbes valued the Hawks at $1.68 billion in its latest NBA team valuations. The Hawks were valued at 1.09x their Sportico valuation and 1.19x their Forbes valuation.
The New York Knicks, which are owned by Madison Square Garden Sports MSGS, rank as the highest valued team by Sportico and Forbes, with assigned valuations of $5.8 billion and $6.1 billion, respectively.
Using 1.09x and 1.19x multiples and the two respective valuations for the Knicks brings a premium valuation of the team of $6.32 billion to $7.26 billion.
Taking out the valuation of the Madison Square Garden Arena, which is owned by Madison Square Garden Entertainment MSGE bring a valuation range for the Knicks at $5.92 billion to $6.86 billion.
MSGS is currently trading at a market capitalization of $4.22 billion and an enterprise value of $5.29 billion, which could suggest the market is not valuing the Knicks stake and other assets fairly.
The NHL’s New York Rangers, which are also owned by Madison Square Garden Sports, were recently valued at $2 billion, or $1.7 billion without the team’s arena.
MSGS could see interest from investors in 2022 as a play on a sum-of-the-parts valuation. The stock could also have upside if a private equity investor like Blue Owl Capital decided to take a stake in the Knicks.
Price Action: OWL shares have traded between $9.68 and $17.89 over the last 52 weeks.
MSGS shares have traded between $152.42 and $207.09 over the last 52 weeks.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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