Michael Jordan’s gambling penchant is almost as legendary as his game. But his move last Friday is the biggest financial gamble of his life — he bought an NBA franchise.
Like a lot of small market teams, the Charlotte Bobcats are losing money, with ticket sales and sponsorship revenue down in this economy. The Bobcats have been racking up debt under former owner Bob Johnson, and according to a great story by Henry Abbott at TrueHoop, Jordan now has the responsibility for those problems.
One source close to the process says that two things changed late in the game (to make Jordan’s deal come together). One is that some of the minority owners under Johnson agreed to stay on with Jordan in the lead role (which is reflected in David Stern announcing that a majority of the team had been transferred). And, most importantly, Jordan finally decided to put himself forward as the person who would pay the many bills as they arose. It’s unknown if he brought in any new owners at all. But what sources agree on is that Jordan vastly increased his own stake in the company, to the point that Stern is now calling him the “principal owner.”
Joel Litvin, NBA President, League and Basketball Operations says “we expect that this transaction will value the Charlotte Bobcats between $275-290 million.” The Wall Street Journal explains that much of the purchase involves Jordan taking on debt.
As Abbott points out, for the last few years Jordan has had a fun toy to play with. He got to make decisions — he was the final say on all things on all things basketball — without having to pay the price. That fell to Johnson. When a minority owner decided not to chip in for his share of the losses, Johnson had to cover it. Jordan is estimated to be worth roughly $400 million — that’s a lot of money, but you burn through it fast if the team is losing $40 million a year.
Jordan is gambling again. Gambling that he can make good basketball decisions that will put a winner on the court and draw more fans. So far his record as a front office executive is spotty — he’s been fired once, but this year the team is playoff bound and exceeding expectations. Building this team cheaply will not be easy as it has traded away a lot of draft picks for upcoming years.
Jordan also is gambling he can find more investors. Some people to sit by, get to bask in the Jordan aura, and fork over big checks to do it. Checks to cover the operating losses and debt that are going to take a few years to get rid of (at best). Making that sale is going to be a lot tougher than selling Hanes T-shirts.
But, do you really want to bet against Jordan pulling it off?