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Steve Ballmer Buys Clippers For 2 Billion!


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The price that the Clippers sold for is high, but for good reason.

 

Next year they will be a heavy title contender. They were probably the 4th best team in the league this year. They've got one of the best coaches, two franchise players, including a 25 year old who is already MVP caliber, and a pretty solid bench that includes the 6th man of the year.

 

They are stealing a lot of fans and attention from the Lakers, and this will continue, as the Lakers will probably suck for at least another couple of years, while the Clippers will improve. They are in a huge media market. Elite NBA players in Los Angeles get lots of endorsement deals and national attention. LA is a city that big name free agents generally want to play in.

 

If they can win a championship in the next 4 or 5 years (which is a real possibility), the stigma of their losing past will be lifted. If that happens, I can see them becoming one of the leagues more popular teams.

 

Ballmer didn't get a bargain, but I don't see this as grossly overvalued either.

 

 

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The price that the Clippers sold for is high, but for good reason.

 

Next year they will be a heavy title contender. They were probably the 4th best team in the league this year. They've got one of the best coaches, two franchise players, including a 25 year old who is already MVP caliber, and a pretty solid bench that includes the 6th man of the year.

 

They are stealing a lot of fans and attention from the Lakers, and this will continue, as the Lakers will probably suck for at least another couple of years, while the Clippers will improve. They are in a huge media market. Elite NBA players in Los Angeles get lots of endorsement deals and national attention. LA is a city that big name free agents generally want to play in.

 

If they can win a championship in the next 4 or 5 years (which is a real possibility), the stigma of their losing past will be lifted. If that happens, I can see them becoming one of the leagues more popular teams.

 

Ballmer didn't get a bargain, but I don't see this as grossly overvalued either.

 

True, but it's the highest price ever paid for an NBA team...it can't be a good deal.  With multiple bids well in excess of what most people thought it would go for, Sterling is making a killing.  I believe the original estimate just a month ago was that he MIGHT get $1.2B.  $2B blows through that number! 

 

Heck, Ballmer could have bought Beats for a little more and actually made regular profits, while working out a deal with MSFT to sell the headphones.  ;D  Cheers!

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Although, if Gates had bought the team with Ballmer, I certainly think fans would have loved videos like this before games. 

 

 

Incidentally, I think it works because of Gates...he's got a pretty good sense of comedic timing ever since he started hanging out with Buffett.  Cheers!

 

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I think buying a professional team has some similarities to buying a rare piece of jewelry or a piece of art.    There's a limited supply, the investment might not be justified based upon the earnings of the item/team and much of the value is likely derived from the joy of owning it.  How good do you feel looking at your Monet, your wife's 15 karat diamond ring or your team? 

 

This is just one perspective.

 

 

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I think buying a professional team has some similarities to buying a rare piece of jewelry or a piece of art.    There's a limited supply, the investment might not be justified based upon the earnings of the item/team and much of the value is likely derived from the joy of owning it.  How good do you feel looking at your Monet, your wife's 15 karat diamond ring or your team? 

 

This is just one perspective.

 

I agree.  I think in rare instances these guys buy a team for an ROI (at least not a large one).

 

But here in T.O., Rogers bought the Jays and then Skydome for next to nothing. They've successfully vertically integrated the game, in their building and broadcast on their TV and radio stations.

 

Some say Ted was building his empire before he passed away but even if he was it looks like a pretty good move.

 

Rogers shareholders may have a different opinion though.  ;D

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It's really all about the new TV deal, the current one expires in 2016. Clippers currently get $25 mm a season, in comparison the Lakers have a deal of $3 billion over 20 years (or $150 mm a season). The Dodgers earlier this year got $8.35 billion over 25 years (also the team sold for a cool $2.1 billion) Sure he probably overpaid, but probably not by too much.

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Ballmer way overpaid

 

So it's entirely in character for him, then :)

 

I get that this is a value investing board but its not always about the money.

 

How many of you have bought a useless/worthless pieces of carbon and paid thousands or even tens of thousands?

 

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Ballmer way overpaid

 

So it's entirely in character for him, then :)

 

I get that this is a value investing board but its not always about the money.

 

How many of you have bought a useless/worthless pieces of carbon and paid thousands or even tens of thousands?

 

 

I was going to reply that it was about the scale of the purchase, but I just looked it up and Balmer is worth about $20B,  I bought my wife a 1/4 carat ring when I was in college and it was considerably more than 10% of my net worth at the time.  So you make a good point.  $2B seems excessive for a vanity purchase to many of us simply because we are not worth $20B.

 

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Anyone has useful information on how sports teams are valued.

For example it would include a value decomposition i.e. the different components and how they would be valued

 

Also a list of Mr Ballmers most expensive purchases would be great... (he is the kind of guy who buys used underwear on Ebay for $10000 bucks) but never mind

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Guest 50centdollars

I don't know how ballmer valued the clippers. They don't even own the arena they play in so they will not get anything non-basketball related, which includes concession stands, parking, and the corporate suites.

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Why are you guys assuming that the 2 Billion price was based on a "valuation" of the team? Ballmer, I believe, has never thought along those lines, if he sees an asset that is strategic to his plans, he will pay what he thinks he can afford. My understanding is that his bid of 2B was designed to be well above any other bids and it would force a sale, even from an unwilling seller like Mr. Sterling.

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Why are you guys assuming that the 2 Billion price was based on a "valuation" of the team? Ballmer, I believe, has never thought along those lines, if he sees an asset that is strategic to his plans, he will pay what he thinks he can afford. My understanding is that his bid of 2B was designed to be well above any other bids and it would force a sale, even from an unwilling seller like Mr. Sterling.

 

He's a tech guy, they constantly get price to earnings confused with price to revenue.  I agree with you Palantir on the thinking.  I am sure he also realized that the team currently makes about $11 million according to Forbes.  The new national tv deal in a couple of years is expected to add another $30 million annually, as will a new local tv deal (currently $30 million).  It is possible the local deal ends up much higher based on what the Dodgers and Lakers ($150 million average over 20 years) are getting.  It is my understanding that he can deduct goodwill for taxes, which will be about $100 million annually, the earnings are all tax deferred. 

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  • 2 months later...
  • 1 month later...

NBA gets $24B tv deal over 9 years....

 

http://www.cbssports.com/nba/eye-on-basketball/24739554/report-nba-set-to-announce-new-television-deal-worth-24-billion

 

I would guess that this is part of the reason Ballmer paid so much for the Clippers.

 

 

$87M per team... wow nice to have that kind of income without doing a thing. $2B doesn't seem quite as nuts anymore. 

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  • 3 weeks later...

He gets $1B in tax benefits:

 

 

Ballmer makes slam dunk on Clippers deal

http://www.ft.com/intl/cms/s/0/67215cd2-5d00-11e4-9753-00144feabdc0.html?siteedition=intl#slide0

 

Steve Ballmer stands to gain as much as $1bn in tax benefits as a result of his $2bn purchase of the Los Angeles Clippers basketball team, helping to explain why the Microsoft billionaire paid a record price for the club.

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