IPOs are big success for sports teams

Professional sports is one of America’s longest-running pastimes. But public investment in professional sports teams is less than expected. Still, there are many reasons why going public could make sense for a professional sports team and be an attractive investment for investors.

Professional sports teams have been going public on and off for decades.

You might be surprised to know how many professional sports teams have gone or are currently publicly traded. In the past, these include:

• This season’s NBA champions, the Boston Celtics, went public in 1986, just months after winning the NBA Finals. that season, but was taken private in 2002 (failed to win the title that year).
• In the 1990s, MLB’s Cleveland Indians (now the Guardians) and NHL’s Florida Panthers each went public (listed on the Nasdaq) for several years.

Currently, investors can invest in six different sports organizations:

1. The Atlanta Braves (BATRA & BATRK) are listed on Nasdaq.
2. The New York Knicks and New York Rangers, through their parent company, Madison Square Garden Sports Corporation (MSGS).
3. The same can be said for the Toronto Blue Jays (MLB), Maple Leafs (NHL) and Raptors (NBA) via Rogers Communications Inc. (RCI).
4. You can also invest in soccer clubs (soccer to Americans) – Manchester United (MANU) is listed in the US, while others like Juventus are listed overseas.
5. F1 fans can invest in the sport’s parent company, Liberty Media (FWONA & FWONK), on the Nasdaq.
6. Similarly, TKO Group (TKO) owns UFC and WWE Wrestling.

It may be interesting to know that the combined market capitalization of these companies is approximately $75 billion (chart below), of which 70% is publicly traded (green bars), according to FactSet.

Figure 1: Sports team market capitalizations vary widely, just like the stocks they trade.

Surprise! You May Already Own a Sports Team Through an ETF

Many teams are already included in major indexes. For example:

• The Braves are competing in the Russell 2000.
• The Knicks and Rangers are in the S&P 600.
• F1 is in the Russell 1000.
• UFC and WWE are included in the S&P 400.

That means if you own exchange-traded funds (ETFs), especially those that contain mostly small- or mid-cap stocks, you may already be a minority shareholder in the team.

Importantly, inclusion in an index also means that these listed stocks are highly liquid.

Sports teams have become good stocks to own in recent years

Of course, the most important question for any investor is whether the stock is a good investment.

In recent years, sports teams have become valuable stocks to own (though we all know that past performance is no guarantee of future profits).

Using the S&P 400 Mid-Cap Index as a benchmark (chart below, purple line), we can see that most U.S.-listed sports team stocks have outperformed their peers over the past few years, with UFC and WWE (TKO) standing out.

Figure 2: Sports stocks have outperformed other mid-cap stocks

Many of the teams are still not public.

While the majority of the team is privately owned, there is a long valuation record between the actual deals and Forbes estimates. Morning Star A study of sales over the past 20 years found that the average value of sports teams has been increasing. at least That’s twice as fast as the S&P 500 (chart below) – three times as fast in the NBA and five times as fast in MLS.

Figure 3: Sports Team Values ​​Have Outperformed the S&P 500 Over the Last 20 Years

Another advantage of the public markets

Public equity markets connect investors and entrepreneurs, providing companies with cash to fuel new ventures and growth, while providing dividends and growth to investors.

The public stock market benefits sports teams in the same way that it benefits companies with IPOs. Specifically:

• IPOs are a source of funding: According to the NIU paper, an IPO could help with recruiting for the team. Star Free Agent Or they could boost revenue by investing in new facilities for fans. Taxpayers have been less willing to foot the bill for stadiums in recent years. 40% Of the costs covered, half Share their covers in the 90s.
• Stable Liquidity: Trading on an exchange solves many of the problems that typically come with buying and selling professional sports teams, which is sometimes a lengthy and public process.
• Equities attract new long-term investors: Publicly listed companies are more accessible to mutual funds and individual investors, with dozens of Trillion Both represent a new, broader and often long-term investor base. As teams become increasingly expensive, the pool of potential buyers expands who can afford to pay what could be billions of dollars to buy a team.
• Published price Lower capital costs: With continuous buying and selling bids on the exchange, investors can more accurately value sports teams and have liquidity whenever they decide to invest, which has been proven to reduce the cost of capital.
• Encourage long-term performanceBuilding a competitive team for the long term benefits investors, stock prices and fans, according to a study from the College of William and Mary. League Office They would likely already have this long-term vision, making them a prime candidate for an IPO. The success of this strategy has already been demonstrated with the commercial side of F1 going public and the individual teams being owned separately.

Sports teams could be good for investor portfolios, too

Sports teams are a little different than traditional businesses, but for some similar reasons. why It might make sense to add a sports team to your portfolio.

• Live sports is becoming an increasingly valuable commodityLast year, 56 The percentage of live sports among the 100 most-watched television broadcasts is on the rise. As a result, sports media rights deals continue to grow. The NBA recently signed an 11-year sports media rights deal. $76 billion $7 billion a year is 2.5x The annual fee for the most recent deal rose from $20 million to $20 million. Annual sports broadcasting rights deals and new streaming rights deals have doubled over the past decade. $30 billion One year.
• It is also recession-proof. According to a Morningstar report, long-term media rights contracts are paid out regardless of the economic cycle, reducing downside risk to an economic downturn. Attendance It has proven recession-proof.
• They bring diversification. Reported by Sportico Sports teams are different from other assets;No correlationUsing ” in combination with other assets provides important diversification, with some teams also having exposure to venues and merchandise in addition to the media rights for the team itself.
• It’s fun! With most investments, the only time it’s “fun” is when the price goes up. But with sports teams, if you’re a fan of the team, it gives you the opportunity to own shares in your favorite team.

Going public is a win-win for owners, investors and the league

Many other companies also trade on exchanges. For team owners, exchanges can provide liquidity, facilitate ownership transfers, and make the value of their franchises more transparent through price discovery. They can also increase the buyer pool from a smaller set of potential buyers. Billionaire Few 1 billion people.

Currently, investors have limited options if they want to invest in sports teams, but given the potential benefits of going public, it might make sense for more teams to follow in the footsteps of the Atlanta Braves and Formula One and list on the Nasdaq.

Nasdaq U.S. economist Michael Normile contributed to this article.