NBA owners have agreed on a framework allowing investment funds to own parts of franchises, according to two people with knowledge of the decision. The NBA’s Board of Governors has agreed that private equity and other types of institutional investors may own up to 20% equity in a single franchise, and funds may own stakes in a maximum of five teams.
No franchise can have more than 30% of its equity held by investment funds, no matter how many funds own a stake in the team, according to the people familiar with the owners’ decision. They asked not to be identified because they aren’t authorized to speak on behalf of the league. The NBA declined to comment through a spokesman. Sportico first reported owners were having discussions last week.
The decision to allow in institutional investors addresses a number of needs. For one, NBA team values are skyrocketing. Less than seven years after Steve Ballmer stunned the sports world by paying $2 billion for the Los Angeles Clippers, almost half of the league’s teams are now worth that, and three teams are worth more than $5 billion, according to Sportico’s recent NBA valuations. Those numbers mean it is increasingly difficult for limited partners to find buyers wealthy enough and willing enough to own part of a team controlled by someone else. Adding institutional funds should support franchise values by providing a larger pool of long-term buyers with little ego for controlling a big-league franchise.
Speaking at a SporticoLive event on Tuesday, Roberts said that while players share in the passion for the game, and in the responsibility of growing the NBA’s multi-billion-dollar enterprise, “what we don’t share is having an equity stake in the teams.” “We’ve got a collective bargaining agreement that says we can’t [own stakes], and hopefully down the road we’ll make some changes,” she said. “The players will be the last to suggest that we want to see the game’s value, or teams’ values, in any way diminish, but it sure would be nice to be able to go to the party.”
The league is also making changes to make it easier to attract minority investors. Last year it greenlit Dyal Homecourt to raise money for a fund that could invest in multiple teams. Now it’s discussing an expansion of that program, where other institutional investors could gain the same right. “If [private equity investment] happens,” Roberts said, “I will have players complain bitterly that, ‘Wow, we helped create this wealth, we helped create this value, and some private equity guy can come in and I can’t?’”
One suggestion: Instead of giving equity to players themselves, give it to the union. That wouldn’t necessarily result in checks to individual athletes, but it would give the NBPA more resources to support players and their communities. Another suggestion: a structure similar to employee stock options, which are common in other some businesses. “There’s a way, in other words, for players to enjoy equity in these teams that may be non-traditional,” Roberts said. “It may be a little different from the way we do it on the private side, but I still think there’s an opportunity for us to talk about, think about and ultimately resolve what I believe to be an inequity in the system.”
Ryan Saunders will remain coach of the woeful Minnesota Timberwolves, at least until he gets an opportunity to coach a stretch with star Karl-Anthony Towns in the regular lineup. “I haven’t even talked to (basketball president Gersson Rosas) about that — he hasn’t brought it up, but you’re asking me, and it’s probably hard to tell a guy that you aren’t doing the job when your best guy isn’t playing,” Wolves owner Glen Taylor said Saturday from his home in Mankato.