Billionaire Bill Gates has experience in this area: The Microsoft co-founder, now worth about $100 billion, has recently turned down bids for the business group that owns the Seattle Mariners.
The Bill & Melinda Gates Foundation, Gates’ charitable giving operation, earlier this year paid $500 million for a stake in the California Angels, giving the longtime baseball franchise its first major hedge against the threat of an owner who might use it as a springboard to other sports franchises.
In another effort to avoid potential pitfalls, the Dodgers, if the sale goes through, may structure the transaction using a trust, reportedly with Cemex, an infrastructure company. Cemex already owns 35 percent of the Chicago Cubs and has nearly 30 percent of the Kansas City Royals, which paid Cemex more than $900 million for a share in 2014. Such arrangements are known as “repurchases,” and they can mitigate the first-year impact of losing a wealthy owner’s funds.
“The unpredictability and volatility of the changes in the market price of a franchise and in a market’s demand for a franchise can be disastrous for an owner who mistakenly plans on investing in another sports franchise or into other ventures,” said Calvin Darden, a certified financial planner and trustee of the Baseball Hall of Fame. “They’re crazy to hang onto their franchise for too long. Even if they have just thought about building another franchise, they should have completed the transaction by selling the franchise to the highest bidder the day they sold the former franchise.”
For the owner of an existing sports team, such as the Chicago Cubs, ownerlessness can be difficult and disruptive.
“As with any business, each business needs a strong owner,” Darden said. “Your employees are part of your business and have to feel like they’re all working for the same owner. You can’t separate business from family. This is the hardest aspect of owning a sports franchise to find a solution to.”
The 76ers, who employ basketball’s top owner, Joshua Harris, are two years into a new deal that guarantees he’ll own the team for 25 years and a 15 percent stake in Comcast SportsNet Philadelphia. If he wants to exit, he must do so after the team’s decision to decide where it will be played in 2021-22. His daughter, Rebecca Harris (pictured, above), is the controlling owner.
Having a controlling owner in place for a team with local roots puts pressure on other parts of the operation to cooperate in forming a winning team, or at least keep the team competitive. And having full ownership of a sports organization can provide financial muscle — and understanding of markets — to pursue investors, and still earn tax write-offs.
“But you are still putting your own money and your own emotion on the line,” Darden said. “People are trying to read more into those decisions because they don’t want you to withdraw.”
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