Lots of people dream about owning a sports franchise, but the lucky ones belong to a very exclusive club. For the rest of us, there are opportunities for fractional ownership of sports teams by investing in the corporate parents that own those teams.
While professional sports may appear to be lucrative, because of the huge player contracts that routinely make the news, the reality is that many teams consistently lose money. Last year, 22 of 30 NBA teams were in the red and lost a collective $300 million. That's just one of several reasons why the league was locked out for the first few months of this season while a new contract agreement was negotiated. (For more, read The History Behind Labor Strikes In Pro Sports.)
TUTORIAL: Investing 101
Now that both the NFL and NBA have ended their lockouts, the big business of football and basketball are almost back to normal. If you don't have a bank account the size of Dallas Mavericks owner Mark Cuban, here are some other ways you can literally get into the game.
Corporate Ownerhips and Affiliations
Several major companies have stakes in professional sports teams, or the companies have an affiliation with the owner. Buying shares in these companies won't get you box seats, free tickets or other perks:
- Miami Heat – The Heat's owner is Mickey Arison, CEO of Carnival Corporation, the world's largest cruise ship operator.
- Seattle Mariners – The Mariners' owner is Nintendo of America, one of the world's largest videogame manufacturers.
- Chicago Cubs – The Cubs are owned by a family trust established by TD Ameritrade founder Joe Ricketts.
- Toronto Blue Jays – The Jays' owner is the Rogers Blue Jays Baseball Partnership, a division of Rogers Communications.
- New York Knicks & New York Rangers – Both teams are owned by Madison Square Garden, Inc., a spin-off of Cablevision.
- Atlanta Braves – The Braves are owned by Liberty Capital Group, a division of Liberty Media Corporation.
- Philadelphia Flyers – The Flyers' owner is Comcast-Spectacor, a Philadelphia-based sports and entertainment firm.
Another well-known corporate owner was the Walt Disney Company, but it sold its stakes in the Anaheim Ducks and Los Angeles Angels. (For other owners, read America's Richest Sports Team Owners.)
Exchange Traded Funds (ETF)
Another option is to invest in ETFs that have small percentage of investments in companies with sports team exposure. Here are a few to consider:
- EWJ – iShares MSCI Japan Index Fund
- FXD – First Trust Consumer Discretionary AlphaDEX Fund
- IAI – iShares Dow Jones U.S. Broker Dealers Index Fund
- IST – SPDR S&P International Telecommunications Sector ETF
- PEJ – PowerShares ETF Trust Dynamic Leisure & Entertainment Portfolio
- PBS – PowerShares ETF Trust Dynamic Media Portfolio
Green Bay Packers
The Packers, named after Curly Lambeau's employer, the Indian Packing Company, is the only professional sports team that actually sells stock directly to the public. When the franchise floundered in the early 1900s, local businessmen nicknamed the "Hungry Five" formed the nonprofit Green Bay Football Corporation and raised $2,500. Before this year, stock sales occurred in 1923, 1935, 1950 and 1997. There are 112,158 shareholders holding a total of 4,750,937 shares of stock, and the articles of incorporation prevent any individual from owning more than 200,000 shares.
On Dec. 6, 2011, the Packers offered an additional 250,000 shares at a price of $250 each, in order to raise $62.5 million to help pay for Lambeau Field renovations. In the first 11 minutes, 1600 shares were claimed by investors for a take of $400,000. There are no dividends and no capital appreciation, so the best you can hope for is to recover your original investment. Moreover, you are subject to the same NFL rules as other team owners regarding ethical conduct and betting on games.
Fans of the team in the nation's smallest market are buying the stock as a show of pride, team support and bragging rights. They also get a few perks, such as special stadium tours and access to rookie practices. If all the stock sells out before Feb. 29, 2012, the team reserves the right to issue more stock and extend the date. (For more on pro sports, check out Who's Cashing In On Pro Sports Revenue?)
For those who aren't super-rich, but still want to own part of a team, one way to get a foot in the door is with a minor league team. Venture capitalists and institutional investors have been putting together financing deals for ownership groups that focus on teams in small markets. National Sports Services, a sports consulting firm, reports that well-run independent and minor league teams yield an annual return of 5% to 10%. That level of positive cash flow has pushed up the value of these teams, with selling prices averaging four times the purchase price after at least five years in operation.
The independent teams aren't burdened by the rules and obligations of league affiliations. Many of them have upgraded their facilities to better compete with the big leagues. The lowest entry prices are available for struggling hockey teams as attendance falls off and their debt mounts. While there is significant risk in such investments, many teams have been turned around and become very profitable.
The Bottom Line
The pitfalls of professional sports ownership are all too obvious in the continuing saga of the Los Angeles Dodgers. The original Boys of Summer from Brooklyn, the Dodgers became a pivotal asset in the divorce battle between owners Frank and Jamie McCourt. One of the most valuable franchises in all of sports quickly found itself unable to meet payroll, as the team teetered on the verge of bankruptcy.
With Albert Pujols slated to receive over a quarter million dollars over the next 10 years from the Angels, deep pockets are clearly needed to sign the best of the best. For those who can't afford to write a check that big, you can always buy a share in the Packers and pretend your living room is the owner's box.
(For some other large contracts, read Top 7 Pro Athlete Contracts.)