Could The Phoenix Suns Sell For $4 Billion?!

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Hey Friends,

In 2014, people were stunned when billionaire and former Microsoft Chief Executive Steve Ballmer purchased the Los Angeles Clippers for $2 billion.

It was nearly 4x the previous NBA record ($550 million for the Milwaukee Bucks that same year), and the acquisition became known as the “Ballmer Bump” — the idea being that he increased the price of all NBA teams through the sale.

That turned out to be true. The Houston Rockets were acquired three years later by Tilman Fertitta for $2.2 billion, and the Brooklyn Nets were acquired two years after that by Joe Tsai for $3.3 billion (including $1 billion for the Barclays Center), which was the highest price tag for a U.S. sports team in history (at the time).

Most Expensive U.S. Sports Franchise Sales

1. Denver Broncos: $4.65 billion (2022)

2. New York Mets: $2.4 billion (2020)

3. Brooklyn Nets: $2.35 billion (2019)

4. Carolina Panthers: $2.275 billion (2018)

5. Houston Rockets: $2.2 billion (2017)

But while Steve Ballmer is no longer in the top five, we may be getting another “Ballmer Bump” this year from Phoenix Suns owner Robert Sarver.

Robert Sarver has been suspended for one year by the NBA and fined $10 million after an investigation found that he made racist statements and engaged in inappropriate workplace conduct toward employees.

But rather than pay the fine, wait for the suspension to run out, and try to repair his reputation, Robert Sarver has reportedly retained global investment bank Moelis & Co. to help sell the Phoenix Suns (NBA) and Pheonix Mercury (WNBA).

But here’s the interesting part: Despite the Suns being valued at $1.8 billion by Forbes last year, many expect the team to sell for much more.

For example, NBA analyst Marc Stein has said the Suns “appear destined to sell for the highest amount in league history,” which would be around $2.5 billion. ESPN’s Ramona Shelburne has also said the Suns could potentially fetch a $3 billion to $4 billion valuation, and Bill Simmons of The Ringer thinks the team could sell in the $4.5 billion to $5 billion range.

Phoenix Suns Overview

• Owner: Robert Sarver

• Year Purchased: 2004

• Price Paid: $401 million

• 2021 Revenue: $206 million

• Operating Income: $15 million

• Debt/Value: 13%

• Gate Receipts: $25 million

• Revenue Per Fan: $11

• Metro Area Population: 5 million

So the real question is, are these potential valuations accurate? Or just wild guesses?

Well, the Phoenix Suns certainly have a lot of positives. The Phoenix metro area has nearly five million people, making it the 10th-largest metro area in the country. They recently completed a $230 million renovation of their downtown arena and opened a brand new practice facility last year that is worth $45 million.

And sure, the city of Phoenix technically owns the arena that the Suns play in, but the team controls the master lease, which allows them to book concerts and other events and pay a percentage of all proceeds back to the city of Phoenix — that’s a distinct advantage, rather than just paying rent.

Furthermore, here are a few pictures of the practice facility. It’s incredible.

But on the other hand, a $4 billion to $5 billion sale would be unlike anything we have seen in recent NBA history.

Take the famous “Ballmer Bump,” for example. In 2014, the Clippers brought in about $150 million in revenue, so a $2 billion sale represented a 13.3 revenue multiple.

That’s significantly more than the ~8x revenue multiple that NBA teams see today, and even if you applied that same 13.3x revenue multiple to the Phoenix Suns’ 2021 revenue of $206 million, that would equal a $2.7 billion sale.

Furthermore, say you based the sale on $250 million of projected revenue and an unheard of 15x revenue multiple, that would still only equal a $3.75 billion deal.

This isn’t an exact science, of course. The rumor is that bids could come from Jeff Bezos ($145 billion net worth), Larry Ellison ($90 billion net worth), Laurene Powell Jobs ($12 billion net worth), and Bob Iger ($690 million net worth), so maybe they get in a bidding war and end up paying more than people expect.

Not to mention the NBA is also seeking $75 billion on its next media rights package, which would be nearly 3x its current $24 billion deal. So maybe potential buyers lump that increase into their final bids, and the number goes higher than we think.

Still, even with sports valuations rising, media contracts headed north, institutional investors buying up minority positions, and Phoenix potentially being a great free agent destination, my guess is we don’t see a $4 billion-plus number.

But it will probably still be an NBA record and a sale that we point to a decade from now as an example of a cheap sports asset.

I hope everyone has a great day. We’ll talk tomorrow.

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