Company Profile and Corporate Governance
Madison Square Garden Sports Corporation (New York Stock Exchange: MSGS) is the owner and operator of the New York Knicks of the National Basketball Association (NBA) and the New York Rangers of the National Basketball Association (NBA). Hockey League (NHL). The company’s financial performance rests on its strong brand value, sponsorship deals, media rights and a licensing deal with MSG Entertainment to play his games home at Madison Square Garden. The company derives its revenue from merchandising opportunities and ticket sales, but media and networks are the primary drivers of these team sales.
The company is primarily owned by the Dolan Family Group and the sports franchise is headed by James Dolan. The company’s ownership structure is divided into two tranches of common stock, with Class A common stock giving him one vote per share and collectively electing him 25% of the board of directors. On the other hand, Class B common stock entitles him to elect 10 votes per share and the remaining 75% of the board. Overall, the Dolan family owns all of the Class B shares, his 3.2% of the Class A shares, and holds 70.7% of the company’s total voting power. In addition, the Dolan family occupies his eight of the seventeen seats on his MSGS board of directors. This corporate his governance is important because the stakeholder interest in the sports franchise comes from the sale of the team. It is essential to consider this when considering the purchase of MSGS stock. Because the company’s ascent potential is largely determined by his Dolan family. However, there has been a recent wave of sports franchise sales, and families may be lured in by the large premiums associated with these deals.
recent team sales
In 2021, private equity firms invested nearly $2 billion in equity in sports franchises. Team interest in ownership of the sport has grown, with many incumbent owners tending to sell their teams due to public outcry or profit realization. In the last five years, four NBA, two NFL, three NHL and five Champions League football franchises have been sold. Furthermore, 2022 will be an unprecedented year for the return of professional teams. English Premier League’s Chelsea FC sold for his $3.2 billion, Phoenix Suns sold for his $4 billion, Denver Broncos sold by Rob Walton for $4.65 billion, a record price set. This has led many franchise owners to explore potential sales opportunities, including Premier League’s Liverpool FC, NFL’s Washington Commanders, and MLB’s Washington Nationals and Los Angeles Angels. However, he has one team situation that is very similar to MSGS. That is Manchester United (MANU).
Manchester United is owned by the Glazers, an American family that owns the Tampa Bay Buccaneers. Their ownership of the Premier League club has faced strong protests from the beginning as they faced fan protests, heavy debt and poor team performances. His $955 million leveraged took ownership of the club when executing his buyout. This resulted in a large debt to Man United and an uproar from the fans. This was compounded by the lack of performances of a team that had not won a trophy since 2017. This is surprising as Manchester United are the UK’s most valuable club and the third most valuable in the world according to Forbes. We are considering selling the club due to the combination of Premier Seeing his league peer sold at a premium of over 70% of his, the Glazers are more motivated than ever to complete the sale and realize a profit.
MSGS is in a similar position, with both Knicks and Rangers fans at odds with the Doran family for some time. In the early 2000s, the Knicks and Rangers weren’t doing well. The Knicks made the playoffs twice in his first decade of the 2000s and had no record for nine years, while the Rangers failed to make the playoffs in his first four years. Additionally, fans and even former NBA Commissioner David Stern criticized James Dolan’s management of the Knicks. This has included questionable contracts and personnel decisions, fans and even his treatment of Knicks legend Charles Oakley. opposition has been eliminated from the arena. This has sparked outrage in the fan base as a whole, and they have been pressuring him to sell the team. This isn’t the best scenario for the fanbase, but given the hefty tags associated with top-tier sports franchises, this could also be bad for the Dolan family. They sell at high premiums, with the Phoenix Suns at 48% above market value, the Brooklyn Nets at 40.4% in 2019, and even the Houston Rockets in 2017 at over 30% premium. His current MSGS owner has the potential for high returns if he seeks out sales opportunities, and given the market opportunity in New York, potential buyer interest will never run out.
Given Dolan’s optimistic approach of selling two franchises, it’s important to find the total value of the team to find the overall enterprise value. This was done by calculating the intrinsic value of the Knicks and Rangers separately, and then calculating the sum of the two as the total value of the company.
The Knicks represent a large part of the overall value of the company due to the team’s high cash flow and much larger market. His NBA gross earnings are 2.75 times his NHL’s, which explains the difference in value between his two franchises. However, the Rangers have had more success in the league last season, making it to the Eastern Conference Finals.
Overall, the combined value of the two franchises equals $7.73 billion using the exit multiple and $5.96 billion using the perpetual growth method. In fact, exit multiples are commonly used to value these companies, and buyers tend to spend more per dollar of his EBITDA on sports franchises than on other industries. If Dolan explores a sale opportunity, the franchise could sell for a premium that he exceeds the current enterprise value of his MSGS by 47%. This price is likely given the precedent deal and the very large market that the Knicks and Rangers will benefit from.
Madison Square Garden Sports is an unconventional company with an interesting ownership structure, yet in an industry with few public competitors. With many franchises realizing high premiums in recent years, the most optimistic upside opportunity lies in companies being sold. The Dolan family will benefit from the sale of the two teams as it not only avoids public scrutiny but also earns high returns and delivers a 47% premium over the company’s current enterprise value. I can do it. However, the family says it has not explored these sales opportunities, putting MSGS investors in a pinch as they must rely solely on the financial performance of the two franchises. It is encouraging for MSGS shareholders to consider the similarities between the Manchester United and New York franchises as a way to anticipate a possible sale of the company.