Professional sports are big business, to put it mildly. A top franchise, no matter the sport or market, can be worth billions of dollars.
More and more, sports organizations are beginning to offer shares to investors on the open market, but if you're to profit, you need to be armed with the right knowledge about how to invest in sports teams.
Sponsorships, ticket sales, broadcasting rights, and even tax breaks all contribute to the value of a team.
Most of these sports teams are held privately, in families or small combines. But there are ways you can figure out how to invest in sports teams, going from fan to financier by picking up shares of these organizations - but perhaps not in the ways you'd think.
According to Forbes, as of May 2013, the world's most valuable sports team is Spanish soccer team Real Madrid C. F., which plays in Spain's top-level La Ligadivision - one of very few teams never to have been relegated, that is, sent down, to a lower league.
Real Madrid knocked English Premier League titans Manchester United F. C. down to the No. 2 spot. Real Madrid has an annual turnover of $669 million, and the team is valued at more than $4.3 billion. Even in Spain, whose economy is a shambles, sports is a growth industry.
Rounding out the world's top five most valuable sports teams are the New York Yankees, valued at $1.85 billion, followed by the Dallas Cowboys and the Washington Redskins, at $1.85 and $1.56 billion, respectively.
Big Profits From Big Sports Mania
If you're looking for a more serious sporting investment, cast your eye overseas, to European soccer.
Europeans are sports-mad in a way that puzzles Americans, but Americans do have a presence in the boardrooms of European soccer organizations.
The Glazer family, from New York, owns Manchester United F. C., the second-most valuable team in European soccer.
Anyone can buy shares of Manchester United PLC (NYSE: MANU). MANU has a 52-week range of $12 to $19.34, and is now trading right around $17 on medium volume.
Manchester United has done fantastically well, usually coming in near the top of the English Barclay's Premier league, and even creeping into the consciousness of generally pro soccer-oblivious Americans.
Fans of the English game are somewhat unnerved by the sheer amount of debt - $1 billion, provided by New York hedge funds - that the Glazers have saddled the club with, but the annual payments are a manageable $57.7 million per year.
Investors can buy shares of Premier League and other European league teams like the Tottenham Hotspur F. C. or Italy's Juventus F. C. The teams are traded in London and Milan as Totttenham Hotspur Ltd (LON: TTNM) and Juventus Football Club SpA (BIT: JUVE).
Shares of Hotspur have traded as high as $105, but have recently settled in the $60 range. Shares of JUVE should be looked at as speculative penny stocks, but they are up close to 10% for the year. It's important to note, when checking performance, that these stocks are traded in sterling and euro - not dollars.
As of now, Manchester United is the biggest team traded on the New York Stock Exchange, but that situation can't last much longer. There's just too much money to be had.
Investing In Sporting "Infrastructure"
Another sports play - pun intended - might be to look at sport outfitters like NIKE Inc. (NYSE: NKE), adidas AG (ETR: ADS), or Under Armour Inc. (NYSE: UA). These companies often have a truly global presence, outfitting players in many different sports on all six inhabited continents.
They ink multimillion dollar/pound/euro, multi-year sponsorship deals with various sports teams, and players usually end up wearing their logos and clothing, granting tremendous media exposure.
These stocks are almost universally expensive, but they are usually very good performers. Adidas shares are highly sought after, and can be thought of as good performers. ADS is currently trading around $108, and yields about 1.6%.
Nike has had a bit less of a rocket ride this year, and now trades in the $60 range. Under Armour trades in a similar way to Nike, with comparable performance.
Again, it's important to note that these stocks trade in local currency - in this case, euros and dollars. If an investor can get a bead on a sponsorship deal that's about to be made, then they may have the chance to get in at a ground floor.
An Unconventional Offering
If you're looking into how to invest in sports teams in America, there are relatively few American major league teams that offer shares to the public, and none of them are securities in the conventional sense.
The Green Bay Packers of the NFL have an unconventional offering. The team sells stocks very rarely, every few years. The last offering was in 2012, and shares cost $250.
Packers' shares have been called "the worst stock in America" by the The Wall Street Journal. The stock pays no dividend, gets no benefit from earnings, and isn't a tradable security in the strictest sense of the word. Shareholders are even warned that they "should not purchase common stock with the purpose of making a profit."
But people can't get enough of the Packers' stock, and roughly 280,000 "shares" were sold - for bragging rights and an "insubstantial" vote on franchise affairs. These shares might do better "relegated" to stocking-stuffer status. For real opportunity, you'll have to look a bit further afield.
The European model shows us that sports teams can, and perhaps should, be publicly traded concerns.
And it could be worth your while to learn how to invest in sports teams. Not only does it give fans a real sense of ownership, but for teams, it can be a handy way to raise revenue in a pinch, which can then be spent on improving prospects.
Stuck in the basement of your division? Sell some shares, scout some talent, put them on the field ... and see what happens.
Related Articles:
- The Guardian:
How the Glazer family are indebted to borrowing at Manchester United - Forbes:
The World's 50 Most Valuable Sports Teams - Deloitte:
Real Madrid becomes first sports club to generate annual revenues in excess of €500m - The Wall Street Journal:
Are The Green Bay Packers The Worst Stock In America? - BBC Sport:
Manchester United owners hit by debt payment rise
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