Michael Jordan selling portion of Hornets so he can share financial risk, reward
Michael Jordan’s surprising sale of part of the Charlotte Hornets is not a night-to-day decision, but rather a conscious one for a franchise that will need some stability as a small NBA market. Jordan sold a portion of his team to Gabe Plotkin, founder of Melvin Capital, and Daniel Sundheim, founder of D1 Capital— two Wall Street hedge-fund traders in hopes to share the financial risk as well as the reward that comes with owning the franchise:
“Fundamentally, what (Michael Jordan is) doing is he’s taking some money off the table,” Marc Ganis, an industry consultant with extensive experience in sports franchise transactions, told Erik Spanberg of the Charlotte Business Journal on Sunday. “That’s what’s going on. And, by the way, he’s not the only NBA owner that is looking to do something similar.”
Ganis said Jordan wants to share some of the financial risk and reward while also benefiting from astute business perspective.
Jordan initially bought a stake in the then-Charlotte Bobcats in June 2006 — ultimately buying out former majority owner Bob Johnson in 2010. That initial $175 million investment now has the team, which later had its name changed back to the Hornets, valued at $1.3 billion according to Forbes — more than seven times what the NBA legend bought it for.
The Hornets, however, are worth below the league average of $1.9 billion, which represents the potential risk of dipping even more, especially after losing longtime franchise star Kemba Walker in free agency.
Jordan’s sale will bring in some outside money from savvy investors, and while he won’t get the full payout as he has over the last few years of owning the team, he also won’t have to take entire losses on his own. The hope is that both of these Wall Street traders will help improve his profit margins and help boost the team into a more fruitful investment.