The record sale of the Houston Rockets for $2.2 billion earlier this week must have brought a lot of smiles to the faces of the NBA’s rich-get-richer owners as they added zeroes onto their portfolios, because murmurs are growing louder that multiple teams could change hands in the near future.
First on the auction block could be the Brooklyn Nets. Russian billionaire Mikhail Prokhorov is planning to offload the team he took full ownership of just 21 months ago in a multi-tiered sale that would allow an investment group to purchase a minority stake in the franchise now with an option to buy the team outright as soon as the end of the decade, according to the New York Post’s sources:
“There will be a new owner in the next few years,” one of the sources said.
Prokhorov initially purchased an 80 percent ownership stake in the Nets and a 45 percent chunk of the Barclays Center project in 2010 for $223 million, and then spent roughly $285 million more in December 2015 to assume complete control of both entities. After the Los Angeles Clippers sold for $2 billion in 2014 and the Rockets went for another $2.2 billion this week, Prokhorov will set a similar price tag for the Nets, while maintaining full ownership of the Barclays Center, per the New York Post.
This is not the first time Prokhorov has put out feelers on an asset that has exponentially increased in value over the past seven years. As early as June 2014, before he took over 100 percent of the team, he was reportedly “listening to offers.” Six months later, he hired a firm to help sell the team. Nearly two years later, he hired an investment bank to lead the search for a “local minority investor.” And this past April he publicly announced in Russia that “49 percent of the Brooklyn shares are up for sale.”
Statement from Prokhorov's spokesperson: "As we have said for many months, ownership is always open to offers — that's just good biz" #Nets
— Mike Mazzeo (@MazzNYDN) January 13, 2015
Unable to find a minority investor willing to meet his asking price, Prokhorov has become increasingly open to the idea of selling his majority stake in the team, the New York Post reported. Forbes valued the Nets at $1.8 billion in February, the NBA’s seventh-most valuable franchise. The same report set Houston’s value at $1.65 billion, almost 20 percent less than Leslie Alexander got from Tilman Fertitta.
Prokhorov lost money on the Nets and Barclays Center from 2013-16, including a $144 million loss during the 2013-14 season, following the trade of three unprotected first-round picks and a pick swap for past-their-prime players Kevin Garnett, Paul Pierce and Jason Terry. That deal rebuilt the Boston Celtics and sent the Nets spiraling into an unprecedented run of failure with no lottery reward for it.
Still, the Nets operate in the league’s largest media market, and any success in New York City could lead to a financial boon for potential investors. The team finally reported an operating income in the black this past season, albeit at just $15.7 million ($125.5 million less than the equally inept crosstown New York Knicks), and there are finally signs that they could be digging themselves out of their hole.
The last of the first-round picks they sent out in the 2013 trade to Boston was just packaged to the Cleveland Cavaliers in the Kyrie Irving deal, so Brooklyn will finally be out from underneath that albatross. Last year, they hired general manager Sean Marks and equally promising coach Kenny Atkinson. Marks has made a handful of savvy moves, signing Jeremy Lin and acquiring both D’Angelo Russell and Allen Crabbe among them, and Atkinson got the most out of a weak roster last season.
There is hope for the Nets, and a new owner could help instill it in Brooklyn following five straight seasons with fewer and fewer wins since moving to the borough, culminating in just 20 in 2016-17.
The Memphis Grizzlies might be on the other side of that hill. As The Ringer’s Haley O’Shaughnessy reminded us, Grizz owners are headed for a showdown on the five-year anniversary of their purchase next month. Minority stakeholders Steve Kaplan and Daniel Straus can make controlling owner Robert Pera a “buy-sell” offer he may not be able to refuse in October, according to a 2016 ESPN.com report:
At that time, Kaplan and fellow minority owner Daniel Straus, an East Coast health care magnate and the team’s vice chairman, have an option to make a bid for controlling interest in the team at a price of their choice, sources said. At that point, Pera would have two options: buy out Kaplan and Straus at that named price, or sell his shares to them based on the same valuation. Control of the decision ultimately would rest with Pera.
Pera and Kaplan have had a longstanding feud dating back to when the former essentially blocked the latter from making a deal with Minnesota Timberwolves owner Glen Taylor not unlike the one Prokhorov is seeking, which would have given Kaplan a minority stake and a path to majority control.
In essence, Pera, who has reportedly barred other investors from the team’s decision-making process, could assume majority ownership by buying out the 28.44 percent stake held by Kaplan and Straus (Pera currently owns 25 percent, enough to serve as controlling owner), or he could sell his own stake to the other two minority owners. Forbes recently valued the small-market Grizzlies at $790 million.
It will be interesting to see how the investors view the franchise’s future. The team has flourished under the current ownership group, winning 50-plus games in three straight seasons from 2013-15, including a 2013 Western Conference finals appearance, and developing a “Grit ‘n’ Grind” mantra that has forged a bond between the team and the city that adopted it from Vancouver in 2001.
However, that win total has dipped closer to .500 the past two seasons. The Grizzlies lost franchise favorite Zach Randolph in free agency, and Grindfather Tony Allen remains unsigned. They were the heart and soul of the franchise, and their departures could signal a steady decline for some time.
Meanwhile, Former Defensive Player of the Year Marc Gasol recently told a Spanish news outlet that he “may have to revisit things” with respect to his commitment to the organization. While the Grizzlies reportedly consider Gasol “untouchable” in a trade, the 32-year-old owns a player option in 2019.
The Grizzlies also have more than $160 million committed to Mike Conley and the oft-injured Chandler Parsons through 2020, and if that’s not a core worth building around, they could eventually decide to trade anyone and everyone in order to enter a full-on rebuilding process. Except, that process could be made more difficult by the fact that, like the Nets did, they owe Boston a future first-round pick.
The Grizzlies are projected to miss the playoffs in a reloaded Western Conference this season, and it’s hard to believe they’ll continue paying more than 75 percent of their salary cap in 2018-19 to a 33-year-old Gasol, 30-year-old Conley and Parsons, who has torn both his meniscuses the last two years.
Are Pera or the Kaplan/Straus combo willing to enter what could be an extended rebuilding phase in the NBA’s smallest media market when franchises are selling for record highs? We shall soon find out.
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