A Truly Scarce Asset in Algorithmic America
To basketball fans, it probably feels like déjà vu...
On August 12, reports came out that the Los Angeles Lakers will be sold for $12.5 billion... making it the most valuable U.S. sports team in history.
But the last time the Lakers changed hands was only 10 months ago.
That deal closed in October for $10 billion. And that made the Lakers the highest-valued U.S. sports team at the time, too.
So why the quick turnaround? It has to do with Mark Walter, CEO of global investment firm Guggenheim Partners...
Walter was the one who bought the Lakers from the Buss family last year. (They had owned the team since 1979.) But Walter has since come under fire. The Department of Justice is investigating his loan book. According to Bloomberg, he's now selling the Lakers as part of a larger effort to clean up his balance sheets.
If the NBA's board of governors approves the deal, control of the Lakers will pass to a new pair of investment-world elites... former Disney CEO Bob Iger and venture-capital investor Josh Kushner.
This buyout is the latest in a larger economic trend. Sports-team values have gone sky-high. And as I'll explain today, it's happening because two forces are aligning in the market...
A New Phase for Sports Franchises
The team-ownership model is changing.
Traditionally, sports teams were bought by billionaires who kept them as trophy assets. Teams were status symbols... And the wealthy would pass ownership down through the family for generations.
But a new kind of buyer has flooded into this space: private equity.
Last December, the NBA changed its rules to allow investment firms to buy equity in up to eight franchises – a jump from the previous limit of five.
At the same time, AI has revealed something important about major-league sports teams: They're scarce assets.
The drama and excitement of a pro sports event cannot be replicated by technology. As Sportico recently reported, that's a rare quality in a world where AI is recreating all kinds of content. And it has made sports teams look like a reliable way to make money.
These two factors have propelled team values to surprising heights. Take a look at the biggest sports-team sales since 1989...
If approved, the new Lakers sale will be the latest in this trend. And it shows just how strong the tailwinds in pro sports are today. Because of his financial problems, Walter probably had little negotiating power – yet he still made a 25% profit in 10 months.
Only some teams offer publicly traded equity... but we can see the trend in the public markets, too. Just consider the Atlanta Braves (BATRA)...
The Braves have been a professional baseball team since 1871. That's the longest uninterrupted streak of any sports franchise in North America. And notably, they're one of only a handful of major league franchises trading on a stock exchange.
Today, BATRA is hovering near all-time highs. Take a look...
BATRA has soared 35% year to date. And with sports franchises trending upward, this stock has room to run.
The Lakers and the Braves are both telling the same story...
The value of big-league teams is rocketing higher because sports are among the few things left that technology can't replace. That scarcity is valuable. It gives sports-team owners a lot of pricing power.
Sports teams are still status symbols... But now, they're becoming investment vehicles for the wealthy.
Expect more teams to turn into acquisition targets from here. We're likely at the start, not the end, of private capital flooding into sports.
Good investing,
Sean Michael Cummings
Further Reading
Using pooled wealth to buy a pro sports team is a growing trend... that we've seen firsthand. One current Stansberry Research analyst's massive hedge-fund win helped a billionaire buy a Major League Baseball team just a few years ago.
While AI can't replicate sports, it can emulate voices and images, making it easy for scammers to convincingly impersonate people you know. In the AI age, you need to know how to protect yourself from "deepfakes" and fraud.
Market Notes
HIGHS AND LOWS
NEW HIGHS OF NOTE LAST WEEK
Merck (MRK)... pharmaceuticals
Charles Schwab (SCHW)... financial services
Bank of Montreal (BMO)... financial services
Omnicom (OMC)... corporate communications
Robert Half (RHI)... staffing and consulting
ManpowerGroup (MAN)... workforce solutions
Aramark (ARMK)... uniforms
Expedia (EXPE)... online travel agency
Live Nation Entertainment (LYV)... concerts and events
Imax (IMAX)... movie theaters
Expeditors International of Washington (EXPD)... logistics
Kronos Worldwide (KRO)... chemical manufacturer
Valero Energy (VLO)... oil and gas
Marathon Petroleum (MPC)... oil and gas
Phillips 66 (PSX)... oil and gas
NEW LOWS OF NOTE LAST WEEK
AGCO (AGCO)... agricultural equipment
Rollins (ROL)... pest control services