According to Forbes, the Clippers were recently ranked 13th on the list of the National Basketball Association's most valuable franchises, worth an estimated $575 million. Ballmer is paying more than three times that amount.
What's more, his $2 billion offer is more than 15 times the Clippers estimated $128 million in revenue and 133 times operating profit of $15 million.
Under normal circumstances, that would be considered a ridiculous deal. But admittedly, this is not normal, and Ballmer is paying a big price to rid the NBA of Donald Sterling. Furthermore, NBA franchises don't trade like stocks; sales are rare, and Ballmer has the wealth to make the deal happen.
Investors who want exposure to an NBA team but don't have Ballmer's fortune can get it via ownership of Madison Square Garden (MSG), which owns the New York Knicks, the most valuable NBA franchise according to Forbes.
The Knicks are worth an estimated $1.4 billion. Putting the team on par with the revenue and operating income multiples that Ballmer is paying for the Clippers would make the Knicks worth $4.3 billion (in terms of revenue) or $12.76 billion (in terms of operating profit). Those valuations may be ridiculous in their own right, but if the Clippers are worth $2 billion, the Knicks should fetch considerably more in a sale.
MSG data by YCharts
Considering that the entire Madison Square Garden Co. is valued at less than $4 billion on an enterprise value basis (market capitalization plus debt, minus cash), the Clippers sale may have some interesting ramifications for MSG.
MSG owns many other assets besides the Knicks, including the New York Rangers, which was recently ranked by Forbes as the National Hockey League's second most valuable franchise at $850 million. The Rangers have also advanced to the Stanley Cups finals.
The company also owns Madison Square Garden itself- -- one of New York's most iconic properties, the associated air rights, as well as the MSG networks.
With the news of the Clippers offer, shares of MSG rose about 4% in Friday morning trading to $55.15. Including today's gain, the stock has fallen about 4% so far this year, compared with less than a 1% gain for the Dow Jones Industrial Average.
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At the time of publication, the author had no position in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.