If someone auctioned off an item from the McDonald’s Dollar Menu, how much would you bid? Apparently Steve Ballmer wants that Big Mac for $12, but the auctioneer’s ex who actually paid for the burger isn’t satisfied. Okay, so that might have been the most oversimplified analogy in history but I didn’t go to business school. Sue me, as long as you’re not Donald Sterling.
ESPN learned that Ballmer’s winning $2 billion bid to buy the Los Angeles Clippers is 12.1 times the team’s expected 2014 revenue. While I don’t actually know the impact of that statement in absolute terms, Ramona Shelburne’s reporting helps to clear up what “12 times revenue” means for this whole fiasco.
“No team in the history of sports has sold for six times total revenues, so that should give you an idea of how crazy this purchase price is,” said a sports banker, who was not involved in the transaction. Even according to Bank of America, no team has been purchased for more than five times its total revenues.
This information became available to ESPN on Tuesday, when Shelly Sterling’s lawyers submitted the Clippers’ bid book as an exhibit in the ongoing trial to determine if she acted legally in selling the team. According to Shelburne, the team’s expected revenue before taking into account player salaries should hit $164.9 million broken down as follows:
- $62.3 million from ticket sales
- $25.8 million from local cable contract
- $24.1 million in additional team revenue
- $52.7 million shared league revenue
A Bank of America official took the stand Tuesday afternoon and testified that the bank originally valued the Clippers between $1 billion and $1.3 billion.
Crunching a little calculus shows that the Clippers sale was breaking the “X times revenue” record anyways based on the other offers Shelly Sterling received. A $1.2 billion price would have been 7.3 times revenue. All of this goes to show that the NBA/Microsoft/society-at-large is trying to grossly overpay Donald Sterling to go away forever, and it’s still not enough.
Sterling’s lawyers filed another lawsuit late Tuesday afternoon against Shelly Sterling, Adam Silver and the NBA, this time in Superior Court. Donald Sterling is seeking damages on the grounds that he was defrauded in the sale process and that upon revoking the trust in early June he became the only Clippers shareholder and ipso facto the only person who can sell the team.
This came after Clippers interim CEO testified that if Donald Sterling is not removed by the start of the season, coach and team president Doc Rivers would leave and start a death spiral for the organization.
Parsons said if Doc left it would accelerate a “death spiral” for the Clippers. — Arash Markazi (@ArashMarkazi) July 22, 2014
Shelly Sterling is expected to take the stand Wednesday afternoon.