In 2021, Marc Lore and Alex Rodriguez agreed to purchase 80% of the Minnesota Timberwolves at a $1.5B franchise valuation, paid in 3 installments.
In 2023, Lore + A-Rod brought on additional partner(s) at a $2.1B franchise valuation. [Here’s [the link](https://www.sportico.com/business/team-sales/2023/eric-schmidt-timberwolves-arod-lore-1234761220/#) in this tweet]
Recently, the Charlotte Hornets were sold at a valuation of $3B, while the Phoenix Suns were sold at a valuation of $4B.
As a result of those sales, Lore + A-Rod have been able to sell equity at a much higher valuation ($2.1B) than they bought-in at ($1.5B).
If Lore + A-Rod decided to sell their 80% share in the Wolves in April after the sale is finalized, at an under-market valuation of $2.1B, the pair would make over $400M in cash.
Lore + A-Rod have already built a ton of wealth by owning the Wolves. They have invested heavily in staff/infrastructure, and those investments have paid off handsomely.
If the Wolves continue to be successful on the court, that franchise valuation will likely continue to rise.
How much do the Wolves have to pay in luxury tax penalties to retain their full 9-man rotation?
Assuming the Wolves retain Morris + Anderson for ~$5M/year each, their expected luxury tax payment in 2024-25 is ~$108M, with a similar payment due in 2025-26.
Paying the luxury tax is an investment like any other; by absorbing short-term losses, Lore + A-Rod can benefit from massive long-term gains, such as:
– ⬆️ public support for a new stadium
– ⬆️ national TV brand exposure
– ⬆️ viewership
– ⬆️ advertising/merchandise/ticket sales
The Golden State Warriors are the model for this philosophy:
Step 1: buy a historically inept NBA franchise ✅
Step 2: invest heavily in the on-court + off-court infrastructure, leading to team success
Step 3: capitalize on team success by reinventing brand + building a new arena to generate long-term revenue
Lore + A-Rod are well-suited to follow this model with the Wolves, assuming they are willing to invest heavily in the short-term.
2 additional factors to consider: The NBA’s new TV deal + Expansion Fees
The NBA’s TV deal is set to expire in 2025, so owners and players can expect a massive financial windfall over the next several years.
This increase in revenue will be reflected in an increased salary cap.
After the new NBA TV deal is completed, the NBA is planning to add 2 additional expansion teams.
Assuming a conservative total sale price of $3B per expansion franchise, all NBA ownership groups will receive a check for $100M per franchise – a total of at least $200M in cash.
*Bottom Line:*
**If Lore + A-Rod play their cards right, they have an opportunity to make BILLIONS in equity + long-term revenue + community goodwill, without really losing all that much cash in the short-term due to expansion rights fees and increased short-term revenue.**
Why Minnesota Timberwolves Fans Should Expect Wolves Ownership to Pay $100M+ in Luxury Tax in 2024-25 and 2025-26
THREAD ⬇️ pic.twitter.com/E8KLNAYhDG
— Timberwolves Clips (@WolvesClips) February 21, 2024
by srry_didnt_hear_you
2 Comments
This was a great threat by WolvesClips and I figure we should get as many eyes on it as possible.
It may seem like a no brainer for our owners to go into the luxury tax if we have serious success this season, but it’s never a guarantee and I believe fan pressure can help it become a reality. Well reasoned arguments with actual financial numbers is a great way to go about that, so I gotta thank WolvesClips for getting the ball rolling here.
first im hearing about an immediate windfall with an expansion. Its a no brainer for sure