There are a limited number of publicly traded sports teams available for investors across the various North American sports leagues.
One public company offers ownership of a leading National Basketball Association and National Hockey League team and enters the spotlight with potential legal challenges for the teams' owner.
What Happened: For years the New York Rangers (NHL) and New York Knicks (NBA) have ranked among the most valuable sports franchises in their respective leagues. Both teams are part of the assets owned by publicly traded Madison Square Garden Sports Corp MSGS.
Fans have grown impatient with the performance of the Knicks in particular and for years have wanted majority owner James Dolan to sell the team. A new legal challenge could add a wrinkle into his years of not selling the team.
Earlier this week it was announced that Dolan was named in a lawsuit that alleges he sexually assaulted and trafficked a masseuse in 2013.
According to NBC Sports, plaintiff Kellye Croft said she was flown by Dolan from New York to Los Angeles where she expected to be the masseuse for Eagles lead singer Glenn Frey, while the band was on tour. Croft said that she was allegedly pressured into a sexual relationship with Dolan, was abused and introduced to disgraced film producer Harvey Weinstein, who also allegedly sexually assaulted her.
Dolan has denied any wrongdoing in the claims made by Croft.
NBA Commissioner Adam Silver was asked about the allegations and had little to say at the current time.
"I saw the article and don't know anything else about it other than I read the article so we'll stand by and wait to find out more information," Silver said.
Weinstein also denied the allegations. The former film producer is currently serving time in prison in New York for a sexual assault conviction.
Why It's Important: While the charges are at this point just charges and the lawsuit in the early days, it could have an impact on Dolan, the sports teams he owns and the public stock linked to the sports assets.
Dolan is the CEO of Madison Square Garden Sports and also the CEO of Madison Square Garden Entertainment Corp MSGE, which owns the famous namesake Madison Square Garden where the Knicks and Rangers play.
NBA fans may remember that a battle against Los Angeles Clippers previous owner Donald Sterling resulted in him eventually being forced to sell the team and receiving a lifetime ban from the league. Sterling's punishment came from racist statements made and complaints from players and employees.
While the allegations against Dolan are completely different and still early, there is a chance that down the road the NBA has to punish him, which could put Silver in a tough place given the past precedent set.
MSG Sports President and COO David Hopkinson said in 2023 that the company was open to selling a partial stake in the Knicks or Rangers.
"We have no plan to sell either team," Hopkinson said at the time. "No current plans there, but we certainly won't rule out the possibility of selling a minority stake in the Knicks or Rangers."
With the NBA changing a rule to allow private equity investors and sovereign wealth funds to invest in teams, there has been increased interest in stakes in teams. Private equity company Silver Lake owns around 10% of MSG Sports and had been interested previously in owning a larger stake in the company.
Sportico valued the Rangers at $2.45 billion in 2023. Sportico valued the Knicks at $7.43 billion in 2023. Both valuations included the arena, which is not owned by Madison Square Garden Sports.
The current market capitalization of Madison Square Garden Sports is $4.5 billion with an enterprise value of $5.7 billion.
Recent sales of NBA teams have seen huge valuations like the Charlotte Hornets valued at $3 billion, Dallas Mavericks valued at $3.5 billion and the Phoenix Suns valued at $4 billion.
A potential forced sale by the NBA or NHL of the sports teams or Dolan having a change of heart and selling could unlock value for shareholders given the prominence of the teams and high valuations.
MSGS Price Action: Madison Square Garden Sports shares trade at $185.28 versus a 52-week trading range of $164.79 to $215.79. Shares of the company are up 4% in the last year and up only 0.1% over the last five years.
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