The Saudis just bought golf.
Not a golf tournament. Not even a golf league or a resort. But, like, golf. The whole enchilada.
They’ve pretty much bought mixed martial arts too. And pro wrestling. A chunk of Formula One. And they’ve spent hundreds of millions on football players, luring some over the hill names like Cristiano Ronaldo, but also current stars, to come play in Riyadh in front of crowds of hundreds, in teams filled out with bus drivers and insurance salesmen. Players nearing the end of their productive careers now have a decision to make – keep plugging away for their team in front of packed stadiums, or take the stupid money being waved at them to pretend they’re having fun in the Saudi League for a year.
There’s even talk in European football circles about including the champion team of the Saudi football league in future European Champions League competition. There’s also word that the Saudi-owned English Premier League team, Newcastle United, may be able to ‘borrow’ players from the Saudi league in future, because they’re owned by the same company. Saudis also bought control of Sheffield United FC not long ago.
Even the World Cup, one of the pinnacles of world sport, has been drifting towards the money. It was held in Qatar under dubious circumstances recently, and will be held in Saudi Arabia in 2034 after Australia quietly pulled out and backed the Saudi bid. Nothing shady to see there…
NOT JUST THE SAUDIS
But if you thought the buying up of all things sport was just a way of bonesaw republics to greenwash their global reputation, think again. The American billionaire class is competing with the Saudis for the biggest pieces of the global sports pie, and valuations are getting out of control, leading a lot of that money to look in non-traditional sporting areas.
Today, Mark Cuban reportedly did a deal with the Vegas-based Adelson family, whereby they’ll take a majority stake in his NBA team, the Dallas Mavericks, a team he bought for $285 million in 2005, for $3.5 billion – AND he gets to keep running the team and retain a decent sized stake, and they’ll help him set up an arena casino when Texas legalizes that business shortly.
For Cuban, he’s cashing out at what looks like the peak of NBA team valuation (the iconic football team Real Madrid was recently valued at the same level), but holds enough of a kicker that, should valuations continue to skyrocket, he’ll be able to make more down the line in a future sale.
The investment dollars aren’t stopping at teams. Entire leagues and national teams are being sold off for bonkers money.
The Canadian Soccer Association sold off, basically, every asset they had from TV rights to the national team to a group known as Canadian Soccer Business in return for that group starting a national league and sending back weak ass couch change. The CSA jumped the gun big time, because every other national team, league, and federation in the world seems to be auctioning off their TV and sponsorship rights now for way more than the northern body settled for. It’s a seller’s market because the demand is huge.
Global private equity firm CVC Capital Partners has paid $509 million for a 14.3% stake in the Six Nations rugby tournament, following similar investments in British and Irish domestic teams and leagues. It’s said to be buying into the South African national team, and recently lost out to Silver Lake in the race to invest in the New Zealand national team. CVC’s total investment in rugby union is close to a billion dollars so far.
In 2022, Clearlake Capital backed a £4.25 billion takeover of Chelsea Football Club, in the English Premier League, and went on a bananas spending spree that has likely put them offside with European football financial regulations.
Sixth Street agreed to a $360 million investment in Spain’s Real Madrid for various business activities at the club’s Bernabeu stadium, and acquired a 25% share of FC Barcelona’s LaLiga television rights. Silver Lake has also backed multi-championship giants Manchester City, which has also got in trouble over financial regulations, the NBA’s San Antonio Spurs, the off-season Soccer Champions Tour, and a team in the US National Womens Soccer League.
777 Partners bought Premier League club Everton FC for $550 million ( a bargain, considering), and has stakes in Italy’s Genoa, Spain’s Sevilla, Belgium’s Standard Liege, Brazil’s Vasco De Gama, Australia’s Melbourne Victory, and “has invested directly in sports rights, including the international commercial distribution rights for the Argentinian and Brazilian soccer leagues, the Chilean and Peruvian national soccer teams, and the top European women’s soccer leagues in the world.”
Speaking of, investments in women’s sports have also been gaining traction lately, with revenues expected to reach £1 billion by 2030, while the WNBA saw a 16% increase in viewership and nearly 100% increase in traffic on their website recently.
THAT’S A LOT
Indeed.
It used to be, in order to buy into American pro sports, you had to be super-rich, because US pro leagues were a closed shop. Often you couldn’t buy in unless the other owners approved of you as a fell0w owner, and revenue sharing of TV and merchandising money ensured those owners would make bank whether or not they spent any money on the field. The NBA’s LA Clippers infamously lost hard for decades, with the owner putting almost no money into the team, and that being fine by the other owners until he got senile enough to start talking like a literal plantation owner.
Recently, however, those closed shops have been opened up to minority stake holders, bringing a load more cash in the door while valuations are spiking. That’s allowed the billionaires to bring in more capital while selling off small stakes and retaining their majority stake license to print money. That, in turn, has allowed those already mega wealthy owners to buy more teams and even entire leagues, all over the world.
Bill Foley, who made his money with Fidelity National Financial, started the NHL’s Vegas Golden Knights, then bought into French football’s FC Lorient, then bought the Premier League’s Bournemouth FC. He’s bought a minor hockey team, an indoor football team, and recently won the bid for a franchise to operate an upcoming New Zealand expansion football team in Australia’s football A-League.
Auto parts magnate Shahid Khan owns the Jacksonville Jaguars NFL team, as well as Fulham FC in the Premier League, and All Elite Wrestling, the world’s second largest professional wrestling promotion. Fenway Sports owns the Boston Red Sox, Liverpool FC, and the New England Patriots, as well as arenas, a racing team, and minor league teams.
All of this has started a good rush for whatever else can be acquired for less than billions. Private equity is actively exploring early investment opportunities in emerging sports like esports, surfing, pickleball, and drone racing, while a new US-based cricket league has brought in over $100 million in investment this past year.
WHY IS THIS HAPPENING?
Put simply, because television is dead, cable TV is in its death throes, and streaming, though it is admittedly huge right now, is battling social media for eyeballs and stretched too thin – even if you know what you want to stream, sometimes tracking down where you can actually find it is a job in itself.
But sports? Sports is still appointment viwing. I might not bother tracking down the time and channel I’ll find the next episode of Fuck Island, but if my football team is playing in Europe, I’ll set an alarm and call in sick.
This is why the Saudis are so keen to overpay for shiny sporting assets. It’s why Premier League teams are worth multiples more than their profit margins would indicate. It’s why billionaires are staking claims with price tags that make little sense. They’re not buying what’s profitable now, they’re buying what’s profitable next.
Women’s sports are getting a massive increase in both investment AND viewership right now, because if you can’t afford the stuff in the penthouse, the ground floor options make a lot of sense. Women’s sport is basically a startup at this moment in time. The audience isn’t there yet, but the bet is it will be (and the trends suggest that’s true), and a lot of money will be spent in the coming decade ensuring those investments aren’t for nothing.
IT’S ALL ABOUT THE ADVERTISERS
How many ads did you skip on the PVR, Youtube, or social today? Dozens? Of course you did, because traaidtional ads suck. They’re an intrusion. They make you angry because they have to poke you in the chest to be noticed.
Not so a logo on a helmet, or a pitch hoarding, or on the name of the stadium, or on a jersey. Those in-line ads work in sports and our reaction is appreciation that those companies are funding the thing we enjoy. That doesn’t happen for episode 5, season 3 of The Crown.
WELL, MAYBE NOT ALL ABOUT THE ADVERTISERS
Let’s be honest, it’s also about dick swinging. If you can name a billionaire, it’s because they want to be named. Mark Cuban doesn’t NEED to do 16 s4easons of Shark Tank, but he likes being a known quantity. Elon Musk would be far less wealthy if he hadn’t conjured an audience of aspiring nerds who will send him money if he waves in their general direction once in a while and suggests he might have room on the last spaceship off the planet when the air catches on fire.
For some in the sports investment world, buying a huge team is the next logical step after you’ve filled the basement with Babe Ruth signed baseballs and the garage with James Bond vehicles and your bed with swimsuit models. Why buy the rookie card when you can buy the rookies themselves?
So how much of this is vanity and how much is good business?
In a recent podcast, financial influencer and NYU prof Scott Galloway talked about his desire to own Scottish football team, Glasgow Rangers, reasoning that valuations are nuts and getting nuttier and, with his dad having grown up loving the team, it’d be a personal glory to own it.
I disagree with Galloway that Rangers would be a good investment, playing as they do in a league where the title is a two-team race every season. For mine, there’s no path to growth in that kind of investment,unless you could convince someone to let those teams play in the Premier League.
Rangers sells out every weekend, qualifies for the Euro Champions League or thereabouts every year, and can’t lift much higher than their present league position, so where’s the value?
But value is often in the eye of the beholder. Galloway is on point in one respect, in that large scale major sports team investment is about BOTH vanity and valuation, and those are at once both features AND bugs.
WHY YOU’D BUY A GIANT TEAM;
1: Valuation. You might not make your money on the profit and loss side of a large sports investment, because being successful in sports usually requires spending more money than you bring in just to stay ahead of the next knucklehead owner. But because those large teams are hard to buy into, the exclusivity drives the valuation on an exit to levelks where profitability no an annual basis isn’t important.
2: Vanity. Being able to tell people you own an NFL team is quite the dick swing, let’s be honest.
WHY YOU WOULDN’T BUY A GIANT TEAM;
1: Valuation. Right now, anyone selling their stake in a large sports team is charging you an insane premium to be part of a small club behind a 500-foot-high velvet rope that you’re going to run a loss on until you sell it.
2: Vanity. When your team is doing great, tens of thousands adore you, but when your team is doing awful, there’s a big target on your back. And some teams are so big, that anything less than winning the league is considered ‘awful.’
WHAT THE HELL DO YOU KNOW ABOUT ALL THIS?
Hey man, I’m just a journalist doing his thing, a bit of a sports fan and OH YEAH I BOUGHT INTO A UK FOOTBALL TEAM.
Yes, I’m actually considered a ‘fit and proper person to own a football team’. Coming out of Covid, I found a little non-league team that had been run in a financially responsible way, 8 kms southwest of Manchester United’s iconic Old Trafford, with a century-plus history, an inexpensive lease on its council-owned ground, a top notch management team and (this is key) a smart, motivated, knowledgeable board that didn’t mind me coming in for the ride.
It wasn’t an automatic yes. They didn’t have their hand out, begging. They asked what I’d bring to the table. I said ‘investors’.
We recently closed the clubs first UKP 1.5 million raise.
Buying into a Premier League team is not an easy thing because that’s where the glory is, but European football usually has a promotion/relegation system, which means it’s the opposite of a closed shop and that’s where the opportunity lies for a smaller investor. You could spend UKP 5 billion buying Manchester United, and if they lose more than they win, they can be relegated down a division, and that can keep going on ad infinitum, with the value of the club dropping like a stone at every level until there’s nothing left.
Conversely, run a small club down in the fifth, sixth, or twelfth tier reasonably well, and you can eventually climb your way into the Premier League, with the giant valuations that come with that.
My team is at the fifth tier. Premier League side Luton Town FC was at the same level 9 seasons ago, but worked their way up to the top flight of football. It can be done, even if your ground is built on top of your neighbours.
RYAN REYNOLDS IS AN INNOVATOR
Everyone is seemingly aware that Canadian actor Ryan Reynolds and US counterpart Rob McElhenney bought into Welsh non-league club Wrexham FC a few seasons back. That, and the ensuing HBO series, started a level of interest in small lower level clubs that is now at fever pitch.
Until this past season, when they got promoted, Wrexham were at the same level as the team I have a stake in, Altrincham FC.
Not at the same level fanbase-wise. Or budget-wise. Or stadium-wise.
But the same level of football.
While they could put millions into the playing budget and attract TikTok as a shirt sponsor, and had TV crews following them around all year, we had infrastructure to fix, and basic things to build, and shirts with the logo of a nearby scrap metal company (J.Davidsons, for all your scrap metal needs, bless em).
Reynolds is smart – he knew his involvement would ultimately increase the value of his club, so the only way he could possibly lose is if the team somehow got worse with all the millions being thrown in.
Oddly, this happens more often than you’d think.
But Reynolds has parlayed that story into a massive public relations win, and a recent bid for the NHL’s Otttawa Senators (that he lost, to the surprise of everyone).
At the other end of the wealth spectrum, our lot at Altrincham were a part time team until recently. We had good players but most of them had day jobs putting up scaffolding on buildings and making lattes and selling houses. They needed a new pitch and a training ground and to switch to full-time if they were going to compete. A sponsors lounge was needed, and a Fan Zone to get folks to the game and spending money earlier, and a business club to better connect with the local business community, and a shop to sell merch on the high street. We needed a scoreboard, and that amazing management team were in hot demand, so they had to be paid properly if we were going to keep them. We needed a CEO so the board could focus on strategy over operations, which is a big change. And then there were the stadium maintenance issues, which came to the forefront when some knob reported us to the council and got the ground capacity shrunk while we dealt with it all.
And then there were the player raids from the bigger clubs. We’d find hidden gems, help them be at their best, and then big teams would say, “I’ll be having that,” and we’d need to go do it all over again.
All of these things have been seen to now. Ground fixed. Budget increased. Council happy. The Fan Zone doesn’t suck. And the team is in the playoff spots, as things stand, at the time of writing.
6-1 win over Solihull Moors on the weekend, w00t!
At the business end of all that, our valuation on the investment is way up. Some valuations rise because a rising tide lifts all boats. Others rise based on where you get your team to climb to in relation to everyone else. We’re in that latter category.
When I came in, I wrote in the match programme that the ambition was to just be better every year. Move up four places a season. Stay sustainable. Small wins. Don’t get lured by short term gambles. After all, there was a century-plus of history to protect before we worry about anything else. We’ve stuck to that ideology and it’s working for us.
But progress as a sports investor can mean ultimately waving your team goodbye. Mark Cuban doesn’t WANT to let go of the Mavs, so he’s structured his deal so he can make all the money and still play around with the steering wheel. That’s a rare position to be in. For most of us, success means tagging out to someone with deeper pockets, eventually.
Three years ago, I could get a board of directors spot for a five-figure investment. Today, with new money coming in, my piece is now so small that I’m relegated to an advisory role. No complaints at all, when I came in the club was valued at UKP 600k. The last raise was nearly 5x that, and with that raise having been completed and infrastructure improvements to the club, and progress on the playing side, as well as the ramped up interest in the number of folks looking to buy in – I’d be shocked if we’re not at a 10x lift now. If all continues to go well, at some point, someone will make me an offer for my shares that I can’t refuse, and it’ll be a sad, if very profitable, day.
But whoever pays UKP 5 billion for Manchester United won’t be in that same category. Sure, they’ll jump out of their helicopter and wave to the fans, and they’ll eat good steak in the boardroom and hold aloft any trophies they win.. but when they come 4th in the league one too many times, the chants of ‘sack the board’ and ‘sell the club’ will be loud. When they can’t go to games because of the risk of crowd trouble, they won’t feel so wealthy.
At the top end of the sport, growth can only happen in valuation terms. Man Utd already sell out games, and they get TV money based on the deal the whole league does, and sponsorship dollars flow regardless of where they are in the league, so the best that can be hoped for is they either win the league forever (which won’t happen – there can only be one winner every season, which means everyone else is more likely to get relegated than take home a title), or sell the club at a profit with only so much reputational damage being done in the process.
But those of us who bought in small and did the work to grow, the worst we get is being called a wanker on the Facebook fan forum by someone who thinks the pies should be a pound cheaper.
They shouldn’t be, by the way. Good pies, those.
SO HOW DO I INVEST IN SPORTS?
Put simply, make some calls.
Call the team you like and ask if they’re seeking investment. Call the admin teams of small sports and leagues and ask if they’re looking for help. You’ll be surprised how many are happy to talk.
All those private equity companies I mentioned earlier take money from wealthy folks and promise to extract a big return for them, so if you have enough dough for them to pick up the phone, call them. The downside of that is, your sole connection with the team will be on paper. You won’t be on board calls, you won’t be going through scouting reports, and you won’t get a say in what this seasons playing kit looks like.
At the smaller end, there are always small teams doing crowdfunding raises, but most of those are bullshit. From insanely high valuations that mean you’re not buying enough of a stake to be meaningful (looking at you, South Shields and Dorking Wanderers) to pretendsy equity raises where you’re not purchasing real shares but ‘memberships’, it’s not always easy to spot clubs that are genuinely offering you a decent ownership deal.
HOW I DID IT
When I was looking for somewhere to buy into, not a single club said they didn’t want my money. They all had loans outstanding and losses to cover and unpaid taxes, and if I wanted a part of that, they’d welcome me in with open arms and, “by the way, you got any friends?” None of that seemed appealing. You don’t want to be the ‘money mark’.
I bought into Alty because they were offering real shares for a fair value, and had a good plan for what the money would go towards. And because they were an involved board with a solid plan doing real work to lift up the club. And because they didn’t break my arm saying yes.
Today, if I wanted to do the exact same thing, I’d need to lower my sights to tier 6 or 7 because there’s a lot more interest and things are more competitive.
Teams at that level might draw a few hundred people instead of a few thousand, and they might be loaning a lot of the players that show up on the weekend because they have no budget, and they may be relying on Warwick from down the street to fix the lights when the electricity blows, and old Cynthia who has run the tea kiosk since the 70’s and likes to close early because she has to pick up her grandkids, and a third of the home games might get postponed because the penalty area doesn’t drain.
But that may be your level. And it also may just be a spectacular time.
I recently had a good long look at a lower level club called Grays Athletic, that I have some distant family connection to and which desperately needs money but is hellbent on not letting anyone accrue a meaningful stake. I’ve found others that offer a decent valuation, but there’s one person running the show who ‘knows what he’s doing’ and doesn’t want someone thinking they can tell him what to do just because they bought in.
At the higher levels, valuation is the ticket.
At the lower levels, people are the thing. Find your level, find your people, wait for the right situation and get involved.
100k to invest? Level 5.
30k to invest? Level 6.
$6k to invest? Level 7.
Less? Show up and sell tea at half time.
IF YOU’RE NOT A BILLIONAIRE, WHY WOULD YOU DO IT?
I didn’t invest in Altrincham to make money. In fact, I was resigned to never seeing that dough again, but figured watching my team on a stream on Saturday morning in Canada with my soccer mad kid would be a return enough. If you can make money while doing that, well, that’s the stuff of dreams, isn’t it?
— Chris Parry
FULL DISCLOSURE: I also started a pro wrestling promotion because who doesn’t want to be entirely undateable? That’s a whole other article, but if any of this has sparked your interest and you want to join the journey on either of those two fronts, chris@equity.guru.