September 5, 2019

An NBA investment fund could make hoop dreams come true

The NBA is considering the creation of an investment fund for NBA teams that could stabilize team market values.

The NBA is considering the creation of an investment fund to buy minority ownership interests across multiple NBA teams, which could stabilize team market values.

How does this work?

NBA franchise valuations are skyrocketing: The Brooklyn Nets just sold for a record $2.3B. That may sound like a good thing, but crazy-high valuations pose challenges for owners who want to get out of the game. 

It’s not uncommon for an owner to put a holding for sale and then yank it back when they can’t get the terms they’re looking for… kind of like your uncle and that house in Boca Raton.

An investment fund made of small equity stakes in a team portfolio opens the playing field — er, court — to more investors. Instead of plunking down $2B for a team, an investor might pay $100m for a 5% interest. 

So, are the Raptors available for pre-order?

The NBA hasn’t outlined terms yet, but there should be plennnnnty to discuss at the Sept. 20 owners meeting in New York. 

Like: Would anyone be interested in selling into a portfolio like this? And: Would they be OK with others selling into a portfolio like this?

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