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November 2, 2012
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Some readers may not be aware, but I am co-founder and part owner of a professional sports franchise. After I quit Lehman in 2007, I invested in and helped (with my partner Andrew Nestor) form the investor group of the Tampa Bay Rowdies, a pro soccer franchise.
The two questions I get about it once people find out are:
So, why now after being silent on the subject for more than 200 blog posts covering almost 3 years am I finally adressing the Rowdies? Because last Saturday, in a thrilling comeback final game that ended in dramatic penalty kicks, the Tampa Bay Rowdies won the 2012 NASL Championship! I serve as a director for the Rowdies, don’t attend many games, and haven’t even met our head coach, so I am as absentee an owner as you will find. But that doesn’t mean I won’t get a championship ring!
Watch highlights here:
The original Tampa Bay Rowdies won the NASL championship back in 1975, and were very popular in town, especially in games it played against their rivals the New York Cosmos. In fact, in the early 1980s, the Rowdies were averaging more than 25,000 fans per game. This season the Rowdies, playing at Al Lang Stadium in St. Petersburg, averaged 3,372 fans per game. But these days there is much more local sports competition from the Rays (MLB), Buccaneers (NFL), Lightning (NHL).
Bringing this post back to the MLP world, there are several MLP affiliated major sports franchise owners. The most recent is the new owner of the Cleveland Browns, who is the president and CEO of Pilot Flying J. Pilot Flying J recently acquired Maxum Petroleum, which has filed for an MLP IPO (although hasn’t filed an amended S-1 since early July). Others include (I’m surely missing some):
Owning the GP of an MLP and owning a pro sports franchise would be a pretty awesome combo. I guess now that Manchester United has gone public you can buy some of that and of a publicly-traded GP and have the cash flows of each, but the real reason you own a sports team is for the ancillary benefits (most of which I don’t get as an absentee owner, sadly) of hosting your friends and business associates at a game, being a local celebrity, competing against other team owners for championships, etc.
Business Model Breakdown: Minor League Soccer and MLPs
I have firsthand what you can probably guess: the business models of a Second Division soccer franchise (with no major TV deal or league-wide corporate sponsor) and that of an MLP are very different. I’ve listed a few of those reasons below, just for fun. The list helps highlight some of the attractive features of MLPs, while hopefully deterring young sports entrepreneurs from jumping into a sports team too fast. Owning a small sports franchise can be likened to owning an airline in the way Richard Branson once described how to become a millionaire: start with a billion dollars and launch an airline.
Cash Flow:
Costs:
Equity Issuance:
Dilution:
Competition:
Cyclicalilty of Demand:
But, for one night at least, it was all worth it…now if each of you will just click over to the team store and buy several items, that would be great…