Tilman Fertitta furloughed 40,000 employees across his restaurant and hotel/casino empire in an effort to mitigate losses while shelter-in-place orders remain in effect across the nation, but the Houston Rockets owner has said he would not consider selling a limited stake in his franchise.
The cash-strapped businessman will instead look to raise as much as $200 million in additional liquidity to cover the expenses until the threat of coronavirus passes.
One prominent sports investment banker told JohnWallStreet that it was unlikely any NFL, NBA or MLB owner would be forced to sell an interest in their team over the next several months unless he/she was over-leveraged across his/her portfolio (the leagues themselves have low debt limits) and his/her other businesses are in the tank.
Teams in all three leagues have strong business fundamentals behind them and the individuals who own them “are really, really rich.”
The longer the sports hiatus goes on, the greater the chance that an owner will face cash flow problems and be forced to sell an equity stake. Owners of NHL teams that fail to break-even and MLS clubs that regularly lose money are the ones most likely to find themselves in trouble if the sports shutdown drags on.
A second investment banking source said it wouldn’t be a shock “if at some point the owner of a team that has been losing money—and now faces trouble with his/her primary business—decides that it no longer makes sense to continue funding the losses.”
With the economy headed towards a recession, it isn’t the ideal time to unloading a limited partnership in a sports franchise.
"It seems just a little bit out of touch to be calling around during a global pandemic asking if someone wants to buy a small piece of your team. Sure, there is always a market for distressed opportunities, but there likely won’t be many full-priced L.P.s sold until business returns to normal.”
Control stakes are a different animal. If one were to become available, it likely would command a premium (simply because of how few and far between the opportunities are).
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