(Bloomberg) — With the NFL’s Denver Broncos up for sale, the field is up for a fight among 0.1% of members.
With less than a dozen sales of a National Football League franchise over the past two decades, the opportunity to own the Broncos offers a rare opportunity for the Kingmakers to enter an elite club. And the barrier to entry into the halls of NFL owners keeps getting higher. Valuations of professional sports teams have skyrocketed in recent years, worth billions.
Hedge fund titan David Tepper won the bid for the Carolina Panthers a few years ago, paying an NFL record $2.3 billion in cash and eclipsing the $1.4 billion Terry Pegula paid for the Buffalo Bills in 2014. In 2019, Alibaba co-founder Joe Tsai also paid an unprecedented $3.3 billion for the Brooklyn Nets NBA team after Tillman Fertitta bought the Houston Rockets a few years earlier. Online news site Sportico valued the Broncos at $3.8 billion in September.
Rising valuations are a direct result of an increase in wealth. Soaring markets and stratospheric values for everything from homes to cryptocurrencies, thanks to years of financial incentives and ample liquidity, have raised the fortunes of wealthy Americans to historic lows. The richest 171 Americans in the Bloomberg Billionaires Index collectively added $660 billion to their net worth last year. The result is a growing pool of people with the means and desire to chase a steady number of NFL teams.
Owning a professional sports team doesn’t offer a pass to a VIP club just for the ultra-rich. With tech magnates, hedge fund titans, business moguls and more entering bidding wars, acquiring a franchise can be part of a bigger business strategy as it can bring lucrative financial incentives.
According to the Tax Foundation, owners are allowed to deduct the cost of purchasing a team over 15 years from their taxable income, a form of deduction known as amortization. Sportico reported that anyone who buys the Broncos could face a tax write-off of $3 billion.
Former Microsoft chief Steve Ballmer, owner of the NBA’s Los Angeles Clippers, used the deduction to help him pay a tax rate of 12% in 2018—roughly the rate paid that year by the Los Angeles Lakers’ LeBron James. A third, according to a report from last year by ProPublica that cited confidential tax records.
The Broncos began interviewing bankers in November ahead of a potential sale. Robert F. Smith, who is valued at $8.9 billion, was seen as a potential bidder, but a person with knowledge of the matter said the chief executive officer of Vista Equity Partners is not currently interested.
For the Panthers, Tepper has partnered with Sherman Financial Group LLC founder Ben Navarro and Stelco Holdings Inc. Chief Executive Officer Alan Kestenbaum. During that bidding process in 2018, Kestenbaum said he did not want a trophy property and viewed a potential purchase as an investment.
This is because sports fans – even though they are often affected by changes in ownership and rising ticket prices – usually remain loyal to their teams, and the demand for live sports keeps the value of television rights high.
Former Broncos quarterback Peyton Manning has spoken with several contenders for the team, and is considering taking on a role as an investor or manager, according to a CBS Sports report.
Several other billionaires have expressed interest in owning a sports team. According to Front Office Sports, a representative for Amazon.com Inc. founder Jeff Bezos previously agreed with sports investment banking firm Moag & Co for a 40% stake in the Washington football team (now the Washington Commanders). conversed with. Former President Donald Trump bid for the Buffalo bill in 2014.
The sale of the Broncos has been in limbo since June 2019 when the death of longtime owner Pat Bolan prompted a family dispute over the franchise. After a legal battle over the rights, the Pat Bowlen Trust finally announced on Tuesday that the team is officially up for sale.
The news coincides with a lawsuit by former Miami Dolphins head coach, Brian Flores, accusing the NFL of widespread racial bias. According to Flores, the Dolphins’ owner, billionaire real-estate developer Stephen Ross, instructed them to “tank” as many games as they can during the 2019 season, hanging a $100,000 reward for each loss.
–With assistance from Scott Carpenter and Devon Pendleton.
To contact the author of this story:
Paulina Cachero in New York [email protected]