The headlines scream of missed opportunities for investors as high-return deals are executed in private sports franchise transactions. For family offices and ultra-high-net-worth investors, frustrations may mount. Gaining exposure to this asset class has been rather difficult despite vast resources, as many of the lucrative deals are executed in private. But there is a way for individual investors to participate in this exciting growth asset class.
The public markets offer investors a way to gain exposure to professional sports teams. Further, meaningful inefficiencies are at work in the public market, much to the benefit of the individual investor. While private valuations soar, public market valuations for the same properties sell at a discount, offering a strategic entry point for investors.
The convergence of a transformed media landscape and the unwavering global loyalty of sports fans has fueled remarkable returns for private sports owners, often surpassing traditional benchmarks like the S&P 500. Technological advancements and increased connectivity have unlocked novel revenue streams beyond traditional ticketing and broadcast rights, further propelling the sector's growth.
In a fragmented media environment, sports remain a powerful aggregator of live audiences, a prized asset for broadcasters and advertisers. The unparalleled viewership of sports, consistently dominating live-TV ratings, attracts premium advertising dollars. The internet has broken down geographical barriers, transforming once-local fan bases into global communities and drawing new players like Amazon, Apple and Netflix into sports broadcasting. These tech giants, seeking to monetize vast user bases, are willing to pay top dollar for media rights.
Institutional investors — private equity firms, pension funds, sovereign wealth funds and ultra-high-net-worth individuals — have recognized this potential, driving up valuations. Unfortunately, direct ownership of premier sports franchises remains a high-barrier game, as most teams are privately owned and therefore only available to a handful of large institutions and ultra-wealthy individuals. However, public markets provide overlooked opportunities. These listed companies trade at attractive valuations and offer diverse investment opportunities.
Consider Manchester United (NYSE: MANU), one of the largest sports franchises in the world. In February 2024, a 25% stake in the club was acquired by Sir Jim Ratcliffe at $33 per share. Yet the current market price for MANU stands at $14.50, presenting a potential entry point for investors.
This valuation disparity is not isolated. Madison Square Garden Sports Corp. (NYSE: MSGS), which encompasses the New York Knicks and New York Rangers, illustrates a similar discount. CNBC places the combined value of these franchises at $11 billion ($7.5 billion Knicks, $3.5 billion Rangers), while the current MSGS market capitalization hovers around $4.8 billion, representing a discount exceeding 50%. Many other publicly traded teams offer similar valuation discounts.
These public market valuations offer an entry point reminiscent of private franchise acquisitions a decade ago. This divergence presents a strategic opportunity to acquire premium assets at a discount to private valuations. Beyond fundamental value, we anticipate continued growth driven by escalating media rights deals, enhanced operational efficiencies and expanding monetization avenues.
Professional sports boast a significant proportion of contractually secured revenue, ensuring predictable cash flows and resilience against economic fluctuations. Deeply rooted fan loyalty further stabilizes revenue through season ticket renewals and premium experiences. Additionally, increasing global investor interest in sports assets provides a long-term tailwind, as more capital seeks access to a traditionally illiquid asset class.
Public markets also provide access to sports assets outside of teams, offering diversification opportunities. Formula One (Nasdaq: FWONA) and the Ultimate Fighting Championship (UFC), through TKO Group Holdings (NYSE: TKO), exemplify this, allowing investors to capitalize on the growth of rapidly expanding sports properties. These organizations operate as near-monopolies, offering durable competitive advantages and making them attractive long-term investments.
The publicly traded sports properties are often premier, globally recognized assets. Prestige plays a crucial role in long-term value, as storied franchises command global fan bases, premium sponsorships and generational brand equity. Given the choice, most investors would gravitate toward icons like the New York Yankees, Dallas Cowboys or other globally significant brands. Their prestige, coupled with sustained media and sponsorship growth, solidifies their status as superior long-term investments. Publicly traded companies offer access to premium brands, which allows investors to build a portfolio of high-quality sports properties.
Regulatory shifts and the growing institutionalization of sports are enhancing operational efficiency, governance and financial performance, further increasing the appeal of these assets. Meanwhile, emerging revenue streams — such as immersive fan experiences, VIP ticket packages and other hospitality efforts — are expanding monetization opportunities, positioning franchises for sustained long-term growth.
In summary, public markets offer a unique opportunity to invest in premium sports assets at a significant discount to private valuations. With rising media rights revenues, expanding global fan engagement and resilient business models, these assets present strong upside potential while relying less on overall economic growth than other industries with similar return profiles.
For investors seeking exposure to sports as an asset class, the game is far from over — it’s still in the early innings.