🐺 Owner Diagnosed with Seller's Remorse

T-Wolves owner calls “take-backs” ahead of sale

Ahh don’t you remember the good ol’ days when your word meant something? What about the even better days when signed contracts meant even more? Yeah, we do too. However, last Thursday one of the most bizarre turn of events between Minnesota Timberwolves (NBA) and Lynx (WNBA) owner Glen Taylor and future majority owners Alex Rodriguez (former baseball MVP and World Series champion, aka A-Rod) and Marc Lore. Taylor abruptly called off the planned sale to A-Rod and Lore after claiming they failed to meet a deadline to buy an equity stake in the teams. Let’s dive into the details of this “sale”. What was the reasoning behind Taylor’s flip-flopping? Where do A-Rod and Lore go from here? Could this start a trend for future sports team sales? Let’s get after it…

What’s the background of this “sale”?

• History Lesson: Glen Taylor (age: 82), is the founder and owner of Taylor Corporation, a privately held printing and electronics company (yes, he’s a billionaire). He bought the T-Wolves in 1994 for $88M. He went ahead to purchase the team to keep them in his native Minnesota after the previous owners attempted to move the team to New Orleans.

• For the last few years, Taylor has been scoping the market looking for interested buyers to take over his teams.

  • In 2020, Memphis Grizzlies investor Daniel E. Straus was reportedly in advanced talks to buy the team, but that eventually fell apart.

  • In 2021, A-Rod and Lore came into the picture after losing their bid for the New York Mets. Taylor liked what they brought to the table and agreed to sell them the teams after valuing them at $1.5B.

• Since A-Rod (est. net worth $500M) and Lore (est. net worth $3.3B) don’t have the kind of “fuck you” money, like new NBA owners in Mat Ishbia (Phoenix Suns) or Miriam Adelson (Dallas Mavericks), they ended up proceeding with a pretty abnormal payment plan:

• It started with A-Rod and Lore purchasing 20% of the T-Wolves in July 2021. The agreement then included three more future payments:

  • Payment #1: Buy 20% piece (completed in 2023).

  • Payment #2: Buy 40% chunk (this was the payment that “wasn’t made” and would have granted majority control of the team).

  • Payment #3: Buy the final 20% (for 100% ownership).

• Each option needed to be exercised by the end of the calendar year, with a closing of 60-90 days later (that 90-day closing period was on March 27, 2024 😰).

Alright, that sounds pretty straightforward, so what’s the big deal?

• This has transpired into one of the biggest “he said, he said” situations within the NBA in the last few years.

  • Taylor made it known A-Rod and Lore consistently missed deadlines and obligations detailed in the contract, which lead to him flip-flopping and deciding against selling the teams.

  • A-Rod and Lore disagreed with Taylor’s side of the story and said they checked all the boxes and have the money. They also say the contract stipulates that they are entitled to a 90-day extension so the NBA can go through its approval process.

    • However, reports came out within the last month that A-Rod and Lore were playing Private Equity roulette as The Carlyle Group (and their $300M pledge) had to pull out of the deal because they could not meet NBA requirements — which then lead them to pivot to Dyal Capital to help make up the difference.

• To make matters even worse, this might not be about deadlines, contracts, payment plans, etc. This could be the case of an old owner who is going through the common disease of…Seller’s Remorse.

Why would Taylor have Seller’s Remorse?

• The valuation of the franchise has skyrocketed since A-Rod and Lore joined the ownership group. According to Forbes, Taylor could sell the team today for north of $2.5B. The reasoning for this? It’s pretty simple actually…

  • The T-Wolves are a legit contender to win the NBA Finals.

    • In 2021, the team was coming off of a 23-win season and had one playoff appearance in 17 years.

    • Now, they have reached the 50-win mark faster than any team in franchise history and are currently sitting in 3rd place in the fierce Western Conference.

  • They have one of the best young American stars in the game leading their team in Anthony Edwards — he’s an extremely marketable player and under contract for another 4 years.

  • Valuations have increased throughout the league with 1) more popularity within the sport post-pandemic 2) the new media rights deal coming up in 2025 which should inject more cash into owners pockets (see Table 2) and 3) the likelihood of team expansion within the next few years (hello, Seattle and Las Vegas!).

• Since valuations have increased so dramatically within the last couple of years, it’s safe to say A-Rod and Lore agreed to terms at a perfect time and have since purchased the teams at a bargain (and no billionaire wants to feel like they just got punked out of a deal 🫢).

So, where could this all lead?

• Welcome to the waiting game. The fact of the matter is we have no idea what could come of this. It’s Taylor vs. A-Rod/Lore. It will ultimately be up to the NBA to proceed with mediation and arbitration to decide on an outcome in the next few months. But…

• Being able to afford a franchise is the first step. As the NBA looks through this case, there’s something to keep in mind: did A-Rod and Lore have the necessary finances to purchase and run the teams? If so, why were they scrambling last minute to find more investment? If the answers to those questions don’t favor A-Rod and Lore, the NBA could easily side with Taylor’s claims. As of now, the two can remain as limited partners and keep their 36% ownership stake…but obviously that’s not what they signed up for.

• Taylor needs to hire a new financial advisor. Even if the NBA ends up throwing Taylor a lifeline, we have to wonder why he thought assembling a payment plan over the course of 3 years would be a good idea when the purchase price of the team was already locked in. Did he think the value of teams wouldn’t increase over the course of that time frame? Especially when the last 2 payments were one year away from a new media rights deal — this is Investments 101. It’s safe to say, we won’t see anything like this in future team sales. Frankly, the NBA should make him sell the team for putting together this dumb deal.

• Relationships are everything. In the world of sports, these owners are apart of an extremely small and tight-knit fraternity. There are only 32 NBA owners and all of them know the next 50-100 rich AF groups who would die to get their hands on a team. So when we see a flip-flop move pulled by Taylor, those “next-up” owners might show some hesitation to work with a guy like him.

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Quick Hitters

• 🏀 Ughh didn’t it feel like March Madness just started? Remember those “units” we spoke about a couple weeks ago? We know you do 😉. Well, despite only five of its teams receiving bids, the ACC will earn roughly $34M, according to Sportico’s calculations, from its success in this year’s men’s basketball tournament. This will be more than any other conference. The ACC earned 17 units for the 17 games that its teams will play prior to the final, followed closely by the SEC with 16 units. It’s due to the Cinderella success of #11 seed NC State making it to the Final Four as well as Elite Eight showings from Duke and Clemson. They didn’t even need their #1 seed UNC to do well!

• 🏍️ Liberty Media couldn’t handle having just one motor-sport (Formula 1) under their investment portfolio. On Monday they went ahead and made an acquisition of Dorna Sports, the exclusive commercial rights holder to MotoGP, widely viewed as the world’s top motorcycle racing series. The deal places an equity value of $3.8B on the operation Liberty Media is acquiring. MotoGP will be 86% held by Liberty Media, with MotoGP management retaining the rest. MotoGP generated $522M in revenue last year and $192M in adjusted earnings.

• 🏎️ Speaking of F1…Clark County, NV recently released a report detailing some of the fiscal impacts from last November’s debut of the Las Vegas Grand Prix. The county said the race generated $77M in tax revenues for state and local governments, net visitor spending of $501M, and an average spend of more than $4,100 per incoming fan, a number more than 3x the comparable figure for all Vegas visitors 🤯 (you can count Vegas as a permanent F1 destination from now on!).

• ⛹🏻‍♀️ The legend of Caitlin Clark continues! Last night, Iowa got revenge from last year’s National Championship by beating LSU to move on to the Final Four. This is a massive win for the NCAA and ESPN as the Hawkeyes have delivered the most-watched games of women’s March Madness reported thus far, including an audience of 4.9M for their second-round victory over West Virginia, and 3.2M viewers for the opening win over Holy Cross (those numbers will be sky-high once the reporting comes in from last night!).