The Pro Sports Boom: While Others Bet, We Win

We operate deep in Maryland Terrapins basketball country … so we were as elated as anyone over Derick Queen’s buzzer-beating jumper that lifted his team over Colorado State and into the NCAA Sweet 16 basketball tournament Sunday night.

Welcome to March Madness, the year’s biggest basketball event and the biggest betting event.

Americans will bet a projected $3.1 billion on the men’s and women’s NCAA tournaments — up 14.8% from the $2.7 billion last year. That means March Madness betting grew nearly 6.5 times faster than the economy itself.

And that’s just legal wagering. A study last year found that an additional $4.3 billion was bet illegally.

March and April represent a “big fix” stretch for sports junkies. In addition to March Madness, you’ve got the NFL Draft, the NBA Playoffs, and MLB’s Opening Day. 

There’s also The Masters, the spool-up of NASCAR, and Formula One’s Australian Grand Prix.

It’s a a non-stop schedule of high-end competition … never-ending analysis … social-media debates … and relive-it-again highlights. 

But even as the action plays out on the diamond, the hardwood, the gridiron and the asphalt, a “deeper game” is playing out behind the scenes. It’s the kind of game that Wealth Builders like us will want to play. We’re talking about frenzied dealmaking for pro sports teams, including:

1. The New York Giants and San Francisco 49ers football teams are looking to sell minority stakes in their respective franchises.

2. The MLB San Francisco Giants sold a 10% stake to private-equity (PE) firm Sixth Street, with the sports news site Sportico valuing the Giants and its team-related holdings at $4.2 billion.

3. And Bill Chisholm, a co-founder and managing partner of the PE firm Symphony Technology Group, purchased the Boston Celtics for $6.1 billion, the largest sale of a sports franchise in North America. 

We’ve already given our SPC Premium members several ways to profit alongside the pros. And here’s still one more beneficiary of all this valuation-boosting wheeling-and-dealing: Madison Square Garden Sports Corp. $MSGS ( ▼ 1.36% ) .

MSG owns the New York Knicks and New York Rangers; and business for both the NBA and NHL is booming.

Forbes said the 2023-2024 NBA season boasted both record attendance and record sponsorship, producing $13 billion in revenue. And revenue for this year should see another double-digit surge.

Hockey isn’t doing so bad, either.

As you can see in the Statista chart below, after a couple years of pandemic-induced declines, NHL revenue is back in breakaway mode.

In late 2024, Forbes valued the Knicks at $7.1 billion and the Rangers at $3.5 billion — a combined value of $10.6 billion.

What’s intriguing here for us as Wealth Builders is, on paper, Madison Square Garden Sports is undervalued, making it a potential special-situation opportunity. 

With Madison’s market cap of $4.6 billion, it means:

• The Boston Celtics ($6.1 billion) alone are more valuable than Madison’s holdings of the Knicks, the Rangers and its two development teams. 

• The Knicks ($7.1 billion) are valued 54% higher than Madison’s current market cap.

• And the combined value of the Knicks and Rangers ($10.6 billion) is 130% higher than Madison’s current market cap. 

That’s intriguing … and also frustrating to shareholders; it suggests value is trapped inside Madison. 

Boyar Value Group President Jon Boyar told Barron’s that MSGS would benefit from a spinoff of one of the two teams. He also says Madison could sell minority stakes of the team and use the proceeds to buy back stock.

The management team has resisted for an understandable reason …

Sports teams "are scarce assets,” Chief Operating Officer Jamaal Lesanetold Barron’s. He also said the company might consider a minority-stake sale, noting there was nothing “concrete to report.” 

He’s right about the Knicks and Rangers being scarce assets.

Between the NFL, NBA, NHL and MLB, a little over 100 pro teams exist. And those franchises will only rise in value over time.

According to the India-based Business Research Co., the global professional sports market is expected to grow from $484 billion in 2023 to $651 billion by 2028, which is a one-third increase in a tiny five-year span.

For Madison, it’s a company we’ll continue to monitor, because there is value to be unlocked. The looming question is if it will be unlocked any time soon and if there’s a missed opportunity cost by not owning other companies and assets in the meantime. 

For example, over the last five years, you would have been better off just owning the S&P 500. 

The company also doesn’t pay a dividend, so you can’t generate income. And you don’t want to own MSGS as a straight “bet” on a buyout, minority stake sale, or ramped-up stock buyback. 

That’s why we’ll keep watching this company for you.