Atlanta Braves rumors: Liberty Media preparing to sell the team?

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SAN FRANCISCO, CA – OCTOBER 07: Liberty Media’s John Malone (L) and Aspen Institute President and CEO Walter Isaacson speak onstage during ‘TV, or Not TV’ at the Vanity Fair New Establishment Summit at Yerba Buena Center for the Arts on October 7, 2015 in San Francisco, California. (Photo by Mike Windle/Getty Images for Vanity Fair) /

Given the circumstances of Liberty Media’s acquisition of the Atlanta Braves, it’s expected that this will be a short-term partnership…

With skyrocketing team values, the recent events surrounding the Braves’ front office, and the recent sale of the Marlins, could these Atlanta Braves rumors be true, with Liberty Media be getting ready to pull the trigger on a deal?

Business is currently booming for sports owners. This is specifically true regarding the ownership of MLB teams. Since just 2014, the Atlanta Braves‘ value (according to Forbes’ estimations) has more than DOUBLED from an estimated $730 million to a whopping $1.5 billion. While this is still considered middle-of-the-pack among MLB teams, it shows how rapidly team valuations are rising.

Since 1998, the average MLB team value has increased at a rate of about 11.5% each year, while the stock market has gone up just 3.5% annually during the same span. Heck, from 2016-to-2017 alone, the average MLB team value increased 19%. There may never be a better time for an MLB team owner to sell, and there’s no doubt that Liberty Media knows this.

I’m going to lay out just why I think Liberty Media may be prepared and motivated to sell the Braves. Digging into MLB finances and other market implications can be difficult to understand, so I’ll do my best to keep this all as simple as possible while still maintaining the depth necessary for it all to make sense.

ATLANTA,GA – APRIL 6: A general view of Fulton County Stadium taken during the game between the Chicago Cubs and Atlanta Braves on April 6, 1997 in Atlanta, Georgia. (Photo by: Matthew Stockman/Getty Images) /

How the Braves Were Acquired

The first thing anyone needs to know about this whole situation is that Liberty Media did NOT buy the Atlanta Braves. The team instead acquired via a crafty trade, and only because it created a financially advantageous situation for Liberty Media.

Some ten years ago, Liberty media owned approximately 170 million shares of Time Warner, and they wanted to sell a portion of these shares back to Time Warner. However, at the time of the sale, corporate capital gains were taxed at ordinary income rates, which at the time would have been roughly 39 percent for Liberty Media, according to the Wall Street Journal.

(Important note: This article was released a year before the sale of the Braves, and numbers were tweaked to adhere to new laws).

The final deal involved Liberty Media selling Time Warner 68.5 million shares of Time Warner stock, worth about $1.48 billion, and the 39 percent tax would have been just under $600 million ($577,200,000, by my calculations).

Because the deal was structured as a “cash-rich split-off,” as long as roughly one-third of the deal consisted of an active business (such as the Atlanta Braves), the transaction was completely tax-free, including the cash portion. The deal had the Braves valued at $460 million, which is just under one-third of the $1.48 billion, so Time Warner threw a bunch of small magazines into the deal to make up for the rest.

The only reason Liberty Media owns the Braves is that doing so enabled them to save hundreds of millions of dollars in a stock sale.

BATH, ENGLAND – OCTOBER 13: In this photo illustration, £1 coins are seen with the new £10 note alongside euro notes and US dollar bills on October 13, 2017 in Bath, England. Currency experts have warned that as the uncertainty surrounding Brexit continues, the value of the British pound, which has remained depressed against the US dollar and the euro since the UK voted to leave in the EU referendum, is likely to fluctuate. (Photo Illustration by Matt Cardy/Getty Images) /

The Terms of the Sale

Because it was so evident that Liberty Media was only using the Braves to save themselves from taxes, MLB drew up a few guidelines for Liberty Media to follow regarding ownership of the team. These provisions are necessary because when dots are connected, it’s evident that a long-term “pump-and-dump” scenario may have been Liberty’s goal all along.

These provisions included Terry McGuirk & co. continuing to run the team, ensuring competence in the front office. MLB’s lawyers also got Liberty Media to agree to keep payroll around recent levels (which wasn’t helpful for the team, considering Time Warner had already begun cutting payroll to put more money in their own pockets), thus avoiding a scenario much like we’re currently seeing with the Miami Marlins.

Side note: It’s interesting that MLB stepped in to mandate payroll, considering this interview with Rob Manfred on the Dan Le Batard Show, where, regarding the Marlins cutting payroll and gutting the team, Manfred says, “We do not approve any operating decisions by any ownership. … Clubs make those local decisions by themselves.”

Another article from Biz of Baseball from 2007 also pulls a quote from then-MLB Commissioner Bud Selig out of an AJC article saying, “They [Liberty Media] have committed to 4 1/2 years ownership, minimum, which frankly is more than we get guaranteed from anybody else.”

Those 4 1/2 years of guaranteed ownership ran out at the end of 2011, and just two years later, following the conclusion of the 2013 season, the Atlanta Braves’ intentions of relocation were announced.

The relocation wouldn’t be as interesting if it weren’t for the 60-acre development surrounding the Braves’ new stadium, The Battery Atlanta (which, at the time, we all thought was to increase the Braves’ revenue, and thus payroll). Complete with a hotel, an apartment complex, Comcast corporate offices, and several restaurants and other businesses to attract consumers and fans alike, The Battery is the perfect real estate investment for a potential buyer, and there’s no doubt that Liberty Media also knew that.

Given, the nature of Liberty Media’s ownership, it’s way too obvious that they’ve been pumping money into the Atlanta Braves’ brand (albeit not into the MLB roster) to create the best possible product to sell.

6 Apr 1997: Manager Bobby Cox of the Atlanta Braves throws a pitch during a game against the Chicago Cubs at Fulton County Stadium in Atlanta, Georgia. The Braves won the game 11-5. /

Why a Sale Makes Sense

By no means am I an expert in the stock market, but with some research and looking in the right places, it doesn’t take one to connect a few dots. A year before SunTrust Park (and The Battery Atlanta) opened, Liberty Media went public on the stock market with the Braves, unveiling three series of tracking stock.

By the time the tracking stocks were released (April 2016), potential investors had a pretty good idea of the direction SunTrust Park (and The Battery Atlanta) was headed. While purchasing tracking stock doesn’t signify ownership in the team, it does reflect the financial performance of the team (and The Battery), which is precisely what investors (or potential buyers of the team) would care about.

Because of The Battery Atlanta, buying the Atlanta Braves is just as much a real estate investment as it is an investment into the team itself. Oversight of and revenue drawn from The Battery will be the driving force in a sale of the Braves, which could be coming very soon.

A few weeks ago, I posed the question: How long had the MLB’s investigation into the Braves been going on before it was announced? My reasoning behind this question was that I believe there may be a sale in the works and that the investigation may have pumped the brakes on a potential deal.

According to former portfolio analyst and current Senior Financial Analyst, Jason Starling, the idea of a sale happening soon may not be too far-fetched. When reached out to about the situation, Starling said, “Given the circumstances surrounding Liberty Media’s original purchase of the Braves, as well as the current value of Atlanta Braves tracking stock, relative to earnings, I think a strong case can be made that a team sale is imminent.”

MLB’s 2016 GM Meetings lasted from November 7th through November 10th, 2016. On November 10th, 11th, and 14th (the 12th and 13th were Saturday-Sunday). Respective volumes for Liberty Media’s Braves Series — A tracking stock (BATRA) on the stock market were 104,246, 101,230, and 130,957, and the stock’s price spiked from $17.12 a share to $20.31 a share, and this number has since served as a makeshift “floor” for the stock.

From January 4th to January 17th, 2017, the price of the Braves’ tracking stock fell from $20.90 a share to $19.54 a share, and then rose. Then, from January 23rd to February 8th, the stock fell again from $21.70 a share to $19.45 a share.

After these back-to-back fluctuations, the tracking stock slowly climbed throughout the year to $26.08 a share, before falling dramatically from this amount the day after John Coppolella resigned (October 3rd) to as low as $21.69 a month and a half later on November 5th. The stock rose again from $21.77 a share to $23.65 a share just weeks after the conclusion of the investigation (and the Braves’ punishment) was announced.

To me, the back-to-back drops in January and February signify that something may have been going on regarding MLB’s investigation of the Braves, and the spike just after the announcement of the conclusion of the investigation further supports that.

Connect the Dots…

Here’s what we know:

The Braves were sold/acquired under some pretty shady financial circumstances.
Major League Baseball placed strict guidelines around Liberty Media’s acquisition of the Braves, which, according to Rob Manfred, Major League Baseball does not do.
Liberty Media, the Braves, and Major League baseball want fans to believe that the investigation into the Braves started on October 2nd and ended on November 21st, and enough evidence gathered during that time to strip the Braves of 13 prospects, a future draft pick, and international pool money.
There was a spike in BATRA’s trading volume and price immediately following the 2016 GM meetings, as well as back-to-back spikes in late January and early February of 2017.

There are a few dots to be connected here, and elsewhere. Fans cannot continue to accept things as mere coincidence.

A Potential Buyer?

Although this is complete speculation, I believe there’s a buyer looking to make a move on the Atlanta Braves — not for the sake of owning a professional sports team.

Between the two Braves tracking stock groups whose ownership summaries are publicly visible, Park West Asset Management owns nearly $100 million worth of shares (approximately $96,835,000). This is a great deal invested in a sports team’s tracking stock, especially for a hedge fund sponsor.

Park West’s connection to the Atlanta Braves

Currently, Park West owns more shares in each series of Atlanta Braves tracking stock than anyone else, and they’ve bought close to two million shares (1,888,614 by my count) since April 1st. They currently own 3,828,018 shares between the two groups.

It’s also worth mentioning that sometime this year, Park West Asset Management sold out on the ~$5.5 million worth of Liberty Interactive (affiliated with Liberty Media) stock they previously owned.

When I reached out to Park West, they declined to comment on the situation, which isn’t surprising at all.

Aside from Park West’s activity with Braves’ tracking stock, they own 2.2 million shares (approx. $73 million) in Eldorado Resorts, a hotel/casino chain, as well as 1.3 million shares (approx. $60 million) in Monarch Casino & Resorts — there’s currently a push to legalize casino gambling in Georgia via Senate Bill 79.

Park West definitely enjoys their fair share of real estate investment, and their biggest investment of all may come via a purchase of the Atlanta Braves.

Recap

More from Call to the Pen

While this is all speculation, one could argue that the connections made between the nature of Liberty Media’s ownership of the Braves, the terms agreed to between Liberty Media and Major League Baseball, and a few stock market hunches do, in fact, point towards a potential sale.

Ownership of the Braves by an investment group like Park West may not be ideal for fans, who would love an owner as involved as Ted Turner was, but that doesn’t mean it isn’t possible.

Being a Braves fan hasn’t been easy the last few years. Between a rebuild and subsequently poor on-field performance by the team to a scandal and what appears to be a disinterested owner, fans are ready for a change.

Next: Is Mike Moustakas headed to New York?

Lots of fans would be thrilled with a new owner, but would you be happy with yet another corporation purchasing the Atlanta Braves for reasons that aren’t 100% to have the best MLB team in the league? Of course, this doesn’t mean that’s exactly how things would go, but I wonder if the Braves would be in the same situation, just with a different name on the door.

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