Sports teams are ridiculously expensive. They’ve always been expensive, but in the last 20 years things have gotten crazy. When Bob Castellini’s group purchased the Cincinnati Reds in 2006 the purchase price was $270M, for what turned out to be a 70% share of the team. Today the Cincinnati Reds are valued at $1.05B according to Forbes.
The Reds are one of the least valuable professional sports franchises among the big three professional sports. But if you wanted to buy them, assuming they were for sale, you’d need to spend over a billion dollars. There are only so many people, or even groups of people, who have that kind of money and interest in owning a sports franchise. With the explosion of valuations of teams the NFL, NBA, and now MLB are looking at alternatives for how and who they were willing to allow buy into teams.
The NFL began to explore changing the rules to increase the amount of debt prospective team owners would be allowed to take on as they struggled to find people that could actually afford to buy a team. The NBA began to look into the idea of allowing people to invest in teams as “minority owners” who could buy into a team without previously being a part of the ownership group.
It seems that Major League Baseball is doing something very similar to what the NBA explored. Bloomberg is reporting that there’s a plan in place, and already an investment firm in place that’s seeking out investors. There’s a minimum contribution of $1M, so maybe you need to tap into that 401k – but it’s certainly interesting to think that someone well-off, but not Jeff Bezos rich could own a piece of a professional sports team.
Obviously the teams would have to be willing to open up shares/stakes in order to be bought into. Which teams that makes the most sense for – that’s a question that’s far beyond my understanding. But one would think that small market teams that could use a little bit of extra money would certainly be open to it more so than say, the New York Yankees who seem like they can print money if and when they need it.
So to bring this all full circle – maybe start planning on investing your life savings in the Cincinnati Reds. Maybe they’ll be one of the teams that opens up this door for future investors and you can go hang out and maybe get all of the Graeter’s and Skyline your heart desires as a limited partner of the Reds at Great American Ballpark one of these days.
Great stuff Doug! If I sell everything I own and drain the bank account, I may qualify. I wonder if they would let me pitch a tent outside of the Reds HOF Museum?
They wouldn’t. There are city ordinances against that one.
Geez, Doug, what a dream crusher!
Actually, I believe the Green Bay Packers are a publicly owned team. I want to say I purchased a share of them years ago.
Although each Green Packer share is essentially worthless—there are no dividends, equity, or increase in value and can’t be sold—it at least represents that the organization is nonprofit. All profits go back into the team and the team’s charitable foundation which benefits the local communities.
Yes, but this is very different. You need at least $1M to buy in.
This doesn’t seem like anything that would affect any team in a meaningful way, to increase operating capital, payrolls, or anything else. Are we really to think that if they get 30 people to sign up this year that they’re going to go sign Gerrit Cole? What happens next year when payroll is due?
To me, this seems like they are creating ways for an ownership group to cash out equity in a team without having to sell it. Without knowing a defined structure for dividends, voting rights etc with a true shareholder structure, it really seems like they are trying to create a legal ponzi scheme that they can use the rapidly increasing team values to generate wealth. The person buying in with “only” $1M invested would probably never see any profit unless the team were sold. And what incentive would the ownership group have to sell if they can still cash out equity from time to time and the team valuation continues to rise? Maybe they are even trying to capitalize on the accrued equity expecting team values to decrease in the future.
I’m usually not too paranoid about stuff, but it seems pretty sketchy to me.
Well, you’ve got to realize that to buy into the fund you need at least $1M. There’s going to be a much larger pool of money buying in than that person, though. Maybe the group as a whole buys in at $75M. This isn’t exactly a “stocks are available to anyone” kind of thing like the stock market.
I do think there’s some funny business going on here, but I’ll also readily admit I don’t know enough about the workings going on here to say for sure. But it certainly feels weird.
I’m not going to start saving my allowance and paper route money to buy a share. That’s for sure.
Would future partners be expected to help out at charitable events, give aways, bring a cake into the office for Mr. Castellini’s birthday? Cause, I’m off work once it’s 5.
You tell ’em, doofus! Go Pack Go!!!
…to say nothing of the Annual Meeting of Shareholders at Lambeau Field, which I hope to attend one day, as I do hope to be an owner one day…next time a distribution comes around (after Super Bowl LIV, perhaps?).
When I read this headline, I was really hoping they meant they’d do something like this. I would totally buy a $200 share in the Cincinnati Reds. And that’s saying something, because I’m in full agreement with Chad and Doug on their recent comments about an entire generation of fans not knowing anything BUT mediocrity coming from their professional sports teams!
I’ll go in halfsies with ya Doug
Assuming your half is as large as mine I think we’re going to be a bit short.