Johnny Bball wrote:Personally, I'm team math and logic.
Anyone can choose to answer this simple sample question if they like.... you buy shares of a team for $1.50 at the start. Your $1.50 shares are now valued at $2.94. You can offer to anyone to sell a share anywhere from $1.50 to $2.94 without technically losing a single dollar, because your deal is buying every share for $1.50 average price at every tier in the sale, vs the current value. But "ALL through the process" you can't find money and financing, or sell stakes, even by offering what is basically instant free money (or double the collateral if you like) and "are having trouble getting the money"?
Riiiiiiight? Something isn't right.
Did you read the OP link by any chance? I know you posted immediately trying to summarize it, but it feels like you actually didn't read it. All quotes below are directly from the article
You buy a share for $1.50. But it isn't any share. As the article mentions, normal shares go for 1.50. However, shares without control go for significantly less. They only go for a huge discount:
The easiest way to explain this dilemma is that limited partners typically receive a 30-40% discount on their investment because LP stakes don’t have any control or liquidity
{This is why Taylor was sued, his minority investors wanted out at 1.50 so much they even sued and lost.}
Suddenly your simple math problem starts looking pretty complicated, and the margin for selling at a gain is much smaller.
And lets also remember there is 4% annual escalation, as per the OP article again.
4% price escalator in the original agreement, meaning not only did these LPs not get their money out at a $1.5 billion valuation in 2021, but they are now earning just 4% annually on that locked up money
So now we are at not 1.50 a share but after 3 years we are at 1.68 a share. {I did an even 3 years, but if anyone wants to make that monthly and figure the months by all means correct it and let me know. At a certain point laziness is needed.}
So, what are the full market shares that have control worth? Personally I would feel safer using Forbes 2.50 a share price or Sportico's 2.80 price instead of 2.97, which feels a little aggressive imo as the most favorable to the Lore/Arod/Mystery financiers tbd. {Happy to give links if google is down elsewhere}
Using the most conservative numbers of 2.5 and a 40% discount those minority shares would be worth... 1.50 and would be a loss to buy. Using the 2.97 value you want, and still 40%, they are worth 1.78, and there is a chance to gain 10 cents a share. After lawyer fees (no way this deal isn't having lawyers, lol). Using the mid point Sportico value you get to 1.68 and the shares are perfectly break even.
This is at the 40% discount, while at 30% discount you get better math for Lore and Arod: $2.08, $1.96, and $1.75, so profitable at all 3 suggested valuations depending upon how high your transaction costs are.
All of which shows the actual margin and profit from selling the shares they don't yet even own doesn't appear to be as substantial as the initial cutesy math suggested..
Put another way, if this was such a slam dunk, why has the reporting all been about the struggle to find partners? Carlyle dropped out versus trying to make it work by the NBA rules, and any new owner needs to not just get NBA approval, but deal with the restrictions that come with that.
Again, the article makes it sound like the idea of selling at a profit wasn't happening (or at least was significantly reduced):
Sources with direct knowledge of the financing process told me Rodriguez and Lore had Dyal Capital Partners ready to go as a backup plan. The terms weren’t as good — Rodriguez was reportedly trying to sell shares at a higher price than the 2021 valuation and pocket the difference — but Dyal already owns several minority equity stakes across the NBA and was seen as a safe backup plan because the firm is already a pre-approved NBA investment partner.
And this is with Dyal itself limited to just 20% ownership (or 11% more than Arod could muster when he was supposed to reach 20% by now). The potentially new owners needed to both sell off enough to afford the team *and* keep enough that the NBA approved an ownership group that, if spread too thin and financially too cash poor, would be problematic.
I think the last one would be the real kicker as a Lore at 27%, Arod at 9%, Dyal at 20% and maybe Schmidt at 24% might do more than raise eyebrows. It looks much safer if we saw more reporting that Lore was ready to put more money in of his own, but I haven't seen that.
And then all this is before the put option. Which is linked to directly in the OP article, and gives Taylor (and any remaining original investors) the right to sell the remaining 20% even if Lore Arod didn't want to buy it. I haven't heard this discussed much, but to actually get the NBA to approve you might think the NBA might ask a few questions like where is the next couple of hundred million coming from that you would need to be legally able to buy.
And if you are wondering what happens if the Put option fails and Lore and Arod cannot find that money in time, well, then they are in debt. At 12% interest. On hundreds of millions. All while also not having enough money. It is a pretty scary scenario. Hopefully either they have tons of money, or the sale fails, or someone like Schmidt comes in and saves the day and becomes the new actual general partner, because the simple sell something for 2.50 and get even richer doesn't look like the simple math to me.
