Remember, two months ago, when the Brooklyn Nets were on the market? Russian billionaire owner Mikhail Prokhorov looked certain to sell his 80 percent stake in the team, which he purchased five years ago for $223 million, at a tidy profit (one estimate pegged the franchise’s current market value at $2.7 billion). Now there’s a report that the team is no longer for sale. So what happened?
ESPN’s Darren Rovell reports that ties have been severed between Prokhorov and Evercore Partners, the investment bank he hired to explore a sale of the team. From that report:
Prokhorov…hired the bank in January to take offers on the heels of Steve Ballmer’s $2 billion purchase of the Los Angeles Clippers. But in recent days, the idea that the team would be sold in the very-near future didn’t seem likely.
“Nothing has happened and they’ve been talking about it (in the media) for a year,” Nets CEO Brett Yormark said last week on a panel in Manhattan. “So I’d probably say I don’t think anything is going to happen. We have an ownership group that is very committed.”
Nets’ general manager Billy King also told season-ticket holders at a recent dinner that he expects Prokhorov “will be around for a while.”
Something clearly changed between January and last week. According to an anonymously-sourced report from Forbes, Prokhorov was never fully committed to selling a majority ownership stake, which makes the prospect of buying in unsavory to any wise investor. Basketball franchises are scarce commodities worth an eye-popping amount of cash, but as an investment, the Nets are supremely damaged. Last year, the team lost $144 million, or $131 million than the second-most revenue-challenged franchise. Most of those losses are come from the league’s punitive luxury tax, levied against teams that go over the salary cap. The Nets soared past the cap soon after Prokhorov promised a championship within five years by dishing out atrocious contracts to aging stars. So a minority owner of the Nets would incur payments on all that red ink, without having much say in how the team is run.
One sports banker told Forbes that the “sale process was a mess,” and that no one was interested in on Prokhorov’s terms. That banker also said that it was Evercore, frustrated with the process, that cut ties with Prokhorov, not the other way around.
In January, Forbes valued the team at $1.5 billion, sixth-highest in the league. Last year, the Clippers sold for nearly 3.5 times their Forbes valuation; using that multiplier, the Nets’ open-market worth is $2.7 billion (and that doesn’t include the Barclays Center). In January, it looked like the increasingly-absent Prokhorov was attempting to cash out. Now, it looks like he was on a fishing expedition for a sucker.
Follow Phillip Pantuso on Twitter @phillippantuso.