I was writing a newsletter about the New York Yankees selling a piece of the team to private equity, but then an even bigger bomb dropped unexpectedly.
Just 18 months after Mark Walter purchased a controlling stake in the Los Angeles Lakers at a $10 billion valuation, Walter has agreed to sell the team to Joshua Kushner and Bob Iger for a record-breaking $12 billion — the highest price ever paid for a professional sports team in North America or anywhere else.
The obvious question is why Walter would do this, and pretty much everyone is going to tell you it is because of money. On paper, Walter will make $2 billion in less than two years. Who is going to turn that down? Of course, the only problem with that thought process is that it doesn’t explain the full story. Not only did Walter not own 100% of the team — the Buss family still owned ~15%, he had other investors, etc. — but selling the team less than two years after the initial purchase eliminates the entire reason you buy a sports team in the first place. In other words, since the tax benefits accrue over 15 years, Walter is sacrificing billions of dollars in potential tax savings by selling the team instead of holding it.
So what else is going on? Well, the real story involves an FBI investigation, a right-of-first-refusal option acquired back in 2021, a potential NBA expansion team in Las Vegas, a new investment fund interested in buying historic assets as a hedge against artificial intelligence, and a deal that came together in just 72 hours.
Let’s dive in.
P.S. Today’s newsletter is longer than normal, but I wanted to be super comprehensive and include a bunch of details you won’t read anywhere else.
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