CBA Talk: Why it's so good to own a sports team

CBA Talk: Why it's so good to own a sports team

In September a portion of the Chicago Fire was sold, valuing the team at $400 million. In a sports world where large numbers float by with regularity, another big dollar sign went largely undigested. In 2007, Forbes began to publish valuations of MLS franchises, including the Fire. The first valuation estimated the team was worth $41 million, and so the investors appear to have returned almost ten times their money since then. That’s a 21% annual rate of return, which is a remarkable number for a twelve-year period, especially one that included the great recession of our lifetime. Over that same period, the Average Pat might have seen returns in the 6% range. The Dow Jones Industrial Average (DJIA) had an annual growth rate of 6.1% from the end of 2007 to September of this year, while the S&P 500 trailed slightly at 6.0% over the same time period.

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How Valuable Are MLS Teams Compared To Other U.S. Leagues?

You don’t need actual profits to create a lot of financial value. Just ask Twitter. The potential to generate profit in the future is plenty enough for investors. Because of this paradigm, MLS Commissioner Don Garber repeatedly insults our intelligence when he emphasizes the league is losing money. And now Forbes, in so few numbers, agrees. According to Forbes, the league is generating negative EBITDA (earnings before interest, taxes, depreciation and amortization) but the value of MLS franchises has increased by 50% over the last two years. Forbes doesn’t offer much detail, but perhaps looking at other sports projections can help put the numbers in context.

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