Among NBA owners, Joe Tsai is doing very well. His net worth has jumped by 50 percent since he agreed to buy into the Nets back in October 2017. He’s now worth $13.4 billion, according to the Bloomberg Billionaires Index, up from $8.8 billion three years ago. In fact, he’s now the second richest NBA owner behind only Steve Ballmer of the Clippers who’s worth a staggering $73 billion, the sixth biggest fortune in the world.
But Tsai and Ballmer are among the winners in the economic downturn that has plagued the world since the COVID-19 struck China last November. As Brian Windhorst writes for ESPN, the league’s owners are more and more divided into the have’s and have less. The divide, he said, is bound to affect not just league finances, but basketball operations going forward.
As they face what some expect to be tens of millions per franchise in losses next season, some teams might have to slash payroll, perhaps trading players or electing not to aggressively pursue free agents. Others might offload draft picks.
“I suspect first-round picks will be for sale in this draft,” one team executive said. “We haven’t really seen that in a decade.” The last first-round pick to be sold was in 2013 by the Denver Nuggets (the Utah Jazz selected Rudy Gobert at 27th).
Teams can pay up to $5.6 million dollars for a pick.
The big issues is that many owners are in businesses that are severely hit by the pandemic. Micky Arison of the Heat is in cruise lines. Tillman Fertitta of the Rockets has both casinos and restaurant chains for example.
Even Tsai, whose net worth has increased by $1.2 billion in the past seven months, has spoken about the need to pay more attention to the finances of his teams. As he told a group of Stanford engineering students back in late April...
“[N]ot just with the Brooklyn Nets, we also own the New York Liberty. I own an indoor lacrosse team called the San Diego Seals in San Diego, spending more time really digging into the business of sports because I’m fanatical about sports but the business side is fascinating as well. So i’d like to spend some more time there.”
Despite various issues effecting the league, there’s no indication the Nets will face problems on the scale of other clubs like the Warriors who not only have a huge payroll but a huge “nut” in their new Chase Center. The arena was producing $5 million a game in revenue before the pandemic between two and five times other teams game day take. Windhorst reports that the Warriors may have to go into the debt market to raise capital.
Tsai, on the other hand, appears to be cash-rich as well as asset-rich. Over the past year, Tsai sold about 25% of his shares of Chinese tech giant Alibaba, stock valued at $3.3 billion. Its uncertain how much of that was used to pay Mikhail Prokhorov for the 51 percent of the Nets and all of Barclays Center and how much of it is earmarked for other acquisitions or philanthropy. The Nets and Barclays Center continue to pay their hourly workers.
Tsai, a native of Taiwan with Canadian citizenship, may face other risks including geo-political ones as China and Chinese companies like Alibaba face more scrutiny from the Trump Administration. Last month, Sen. Marsha Blackburn, R-Tennessee, asked Adam Silver for information on the league’s relationship with Alibaba, which she inaccurately described as a “Chinese state-owned enterprise.” Alibaba is a public company traded on both the New York and Hong Kong stock exchanges.
League-wide, Windhorst enumerates who among the NBA owners face financial issues —and tough decisions— beyond the well known cases of the Heat, Warriors and Rockets. The Thunder’s ownership, led by Clay Bennett, is largely supported by the energy business, “which has taken a financial beating in recent months,” Windhorst notes. Similarly, Pacers owner Herb Simon has seen his company, mall operator Simon Properties Group, lose more than $25 billion in stock value since January. And Glen Taylor, who’s money is in electronics and printing, has put the Timberwolves up for sale. (On the other end of the scale, the Cavaliers, he notes, will benefit from owner Dan Gilbert’s planned stock sale in Quicken Loans.)
Cost-cutting, including in basketball operations, is a likely route for those who are trying to save cash. Better that than borrowing more or taking bigger losses ... or in extreme cases, selling. How will all this affect the Nets? Tsai has said that he’s willing to pay the luxury tax if it will mean a championship and other than Joe Harris free agency, the Nets basketball costs are all sunk. They agreed to their big deals last June.
Will the Nets be able to take advantage of other teams’ desperation, what Windhorst describes as a deepening gulf among owners? You don’t get to be a billionaire or NBA team owner without understanding your competitors’ weakness. Stay tuned.
- NBA owners’ current financial turmoil portends future payroll problems - Brian Windhorst - ESPN