Pretty much every sports league now takes on institutional money. Private equity. Sovereign wealth funds. Even university endowments. It doesn’t matter where the money comes from as long as the check clears. After all, these leagues don’t really have a choice. With the worst teams in the country’s smallest markets now worth several billion dollars, only a small pool of individuals can buy teams. That group then gets even smaller when you consider big-market teams like the Cowboys, Lakers, Knicks, and Yankees, all of which are now valued at more than $10 billion.
These investors are supposed to be minority partners. The NBA, for instance, only allows private equity firms to buy up to 20% of an individual team. Private equity funds can own minority stakes in eight different teams at a time, but a single team can’t sell more than 30% to private equity overall. The NFL, MLB, and NHL all have similar rules, and firms like Arctos, Sixth Street, and Blue Owl have already raised billions of dollars and acquired stakes in more than a dozen teams.
This arrangement is seen as a win-win. Existing owners get billions of dollars in cash today without selling the entire team or losing control. Private equity funds lock up money in a scarce asset with a long track record of price appreciation, and as more institutional money comes into the fold, team-specific valuations keep getting pushed higher, which is ultimately good for everyone involved. It’s just simple math. The higher the price paid, the more money everyone makes.
But what happens when owners don’t follow the rules? Or even worse, what if the rules were intentionally designed in a way that they can be manipulated?
Given Mark Walter’s recent liquidity crisis, many have criticized Adam Silver’s vetting process over the last few days. But when you dig into the details, Walter might just be the tip of the iceberg. The real problem goes much deeper.
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