You can chart just about everything. Scientists chart weather patterns, marketers chart statistics of whatever they’re selling and some even chart war cycles.
I thought it would be interesting to think about the eminent sale of the L.A. Clippers from Donald Sterling and his wife to Steve Ballmer.
Now, there are many reasons why Mr. Ballmer would want to purchase a professional sports franchise. Notwithstanding ego, money and power, he is certainly looking fill a void by virtue of his recent retirement from CEO of Microsoft.
In his quest for a quick solution to fill his time, he was compelled to offer an extraordinary competitive bid which came in at around $2 Billion.
It’s just like the winner of a fine piece of art work at an auction. The winner was willing to pay more than everyone in the room which on the surface seems foolish, then everyone claps as if they admire the overpayment.
There aren’t many professional sports franchises worth upward of $2 Billion, but there are a few. In particular, as a gauge Manchester United which is one of most storied “Football / Soccer” franchises in the world is traded publicly and hold a valuation of around $2.7 Billion.
This may have been some twisted version of a benchmark, but any way you slice it, the new benchmark is current the current price being paid for the clippers.
Maybe Sterling is dumb like a fox.
Recent sales in the NBA, namely the Milwaukee Bucks sold for $550 Million and is estimated currently to be worth less.
While the Clippers are in a big market, they aren’t the big market team like the Lakers for example. Of course the Yankees, Dodgers, Cowboys, Red Sox and others can command high price tags, but they are different franchises with a very different history than that of the Clippers.
There’s little doubt Mr. Ballmer knows he’s over paying for this franchise, but he obviously doesn’t care and obviously has the extra cash laying around.
Cutting to the chase, this type of news headline will most likely come back in a few years to identify the marking of a top in the Sports Franchise market and who know what else.
Remember, an asset is worth what someone is willing to pay at that point in time. If you think the price is too high then don’t be that person.