30 May 2009
1180 comments

End of the Hype: When Pro Sports becomes a Liability

It was reported last week that Charlotte Bobcats owner Robert Johnson was looking to sell the team. This move surprised the SPEC’s. Most Pro-Sports Owners never sell their team. Too much pride, adoration, buzz, even in the face of annual losses.

However, the Bobcats were never profitable during Johnson’s ownership. Forbes magazine values the team at $284 million. Robert Johnson purchased the team for $300 million + in 2003. The Bobcats are currently ranked 29th out of 30 NBA teams as far as valuation. The team reported a $4.9 million dollar loss for the most recent fiscal year.

It is believed that approximately 2 to 3 years ago, Johnson made capital call requests to his limited partners of which it is believed none of them would abide.  Johnson therefore had to pony up more of his own money to cover team losses. This move also increased Johnson’s ownership percentage in the team.

Nine (9) years of losses have finally become too much for the Billionaire. The new taxpayer funded arena could not remove any losses. If there is one thing about wealthy people we know is that they do not like to loose money. “The Rich Man’s Toy” as Johnson once called Pro-Sports teams, is now become an attractive nuisance (Legal Jargon).

Ironically, Robert Johnson will probably not have trouble finding a buyer. People are always willing to purchase Pro-Sports teams. The only obstacle he may encounter is in the asking price. He will probably attempt to be made whole from his initial investment, but in this environment, any price above $290 million is steep for an NBA team anyhow. Remember, Charlotte’s largest industry, banking, has its two largest institutions running off of TARP money. That is the perception anyhow.

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