Mls Private Equity Rules Include $500m Floors Voting Limits
Major League Soccers new rules around private equity ownership include restrictions on how much equity a fund can buy, how many clubs it can back, how many board seats it can hold, and how big the fund has to be.
MLS briefed clubs on the guidelines, put together by the league and its finance committee, in a recent league presentation, portions of which were viewed by Sportico. A league spokesman declined to comment.
MLS owners voted last year to allow private equity ownership, joining the NBA and MLB in entering a new era in sports investment. Faced with soaring valuations and COVID-related financial challenges, the leagues are hoping to make minority sales easier, allowing owners to access capital.
Theres so much money in the marketplace right now, and to be able to get some of the really smart people in the business to invest without a path to control, without anything other than capturing the appreciationand theres been a lot of appreciation, particularly in Major League Soccermakes sense, MLS commissioner Don Garber said in an interview during Sporticos MLS Valuations 2021 event in July. Im a big fan of it. I love the guys that are talking to us, and I think it will be good for our clubs.
The MLS guidelines cover four main areas: specifics for what constitutes a qualified fund, rules around the investments themselves, governance restrictions and different deal types.
Best of Sportico.com
Expansion Of Major League Soccer
Major League Soccer has expanded several times since the league began play in 1996. Major League Soccer was established as the top level of professional soccer in the United States in 1993 with 10 teams and began play in 1996. It has expanded several times since 1998 into new markets across the United States and, since 2006, Canada.
St. Louis City SC is the 29th MLS team and the most recent expansion team, having joined the league for the 2023 season. The league plans to expand to 30 teams and may expand to 32 teams at a later date. Expanding and establishing a larger national reach is seen as essential to securing television rights fees needed to reach MLS’s initially stated goal of becoming one of the top leagues in the world by 2022.
In 2013, New York City FC agreed to pay a record $100 million expansion fee for the right to join MLS in 2015. This record was surpassed by the ownership groups of FC Cincinnati and Nashville SC, which each paid $150 million to join MLS . The same amount was paid as an effective entrance fee by a group that bought Columbus Crew SC in 2018, which led to that team’s previous operator receiving a new team in Austin, Texas, that joined MLS in April 2021. Before Sacramento’s group withdrew its franchise acquisition, MLS also announced that the ownership groups of the 28th and 29th teams would each pay a $200 million entrance fee and that of the 30th had to pay $325 million.
Buyout Of Guaranteed Contract
A club may buyout one player who has a Guaranteed Contract during the offseason and free up the corresponding Salary Budget space. Such a buyout is at the club’s expense.
A club may not free up space in the Salary Budget with a buyout of a player’s contract during the season. If a club buys out a player’s contract during the season, the buyout amount will be charged against the club’s Salary Budget.
Right of First Refusal
Former MLS Player
Subject to rules regarding the Re-Entry Draft and Free Agency, if a former MLS player, who the League previously attempted but was unable to re-sign, returns to MLS, his former club will have a Right of First Refusal.
That club will not have a Right of First Refusal if:
- The club received any consideration in connection with the transfer of such player to a non-MLS club or
- The player was excluded from possible selection in the Expansion Draft.
Don’t Miss: Real Estate Investment Fund Fees
Los Angeles And Salt Lake City
The performance of the US national team at the 2002 World Cup, where they reached the quarter-final, sparked a recovery in the league’s fortunes, and attendances once again began to rise. MLS began looking to expand once more with a number of cities interested in hosting new teams. The demand for an expansion team grew.
MLS awarded a second franchise to the Los Angeles area, Chivas USA, in 2004 and began play in 2005. The expansion fee was $7.5 million. The team was owned partly by C.D. Guadalajara owner Jorge Vergara, and took the name and colors from the Mexican club with the aim of appealing to the Hispanic community in Southern California. Chivas and the Los Angeles Galaxy shared The Home Depot Center and played in the league’s first local derby game.
The league also announced Real Salt Lake in 2004 and began play in 2005. The expansion fee was $7.5 million for the team in Utah. The franchise received permission to use the “Real” name from Real Madrid as part of a business agreement between the Salt Lake owner Dave Checketts and the Spanish club. Real Salt Lake initially played its home games at Rice-Eccles Stadium on the University of Utah campus before moving to Rio Tinto Stadium in the suburb of Sandy in October 2008.
Are Soccer Stocks A Good Investment
For many fans, soccer stocks are more of a novelty than an investment, providing another way to support their favorite teams. While not unheard of, you wouldnt typically invest in a rival team to the one you supportyoure almost guaranteed a pie in the face if you rock up at a Liverpool game and announce youve got Manchester United stock.
Theres no saying how stocks are going to perform, as different European soccer teams have had vastly different results over the last 5 years, as of the time of writing.
For example, Manchester United has gained just 4.47% in value in the last 5 yearsyou couldve gotten similar results with a savings account. Meanwhile, Juventus has seen gains of 156.25% in the last 5 years. Clubs have lost money, tooBorussia Dortmund stock has gone down 14% in 5 years, while AS Roma stock has gone down 9.76%.
As always, past performance doesnt indicate future results. Carefully look into any football clubs financials before you invest.
Don’t Miss: How To Invest In Otc
Second Growth Phase: 2015present
MLS began its current growth phase in 2015. With the 2014 contraction of the league behind them and not having added any teams since 2012, the league set off on expanding from an 18-team league in 2014, to a 29-team league in 2023. This phase is also marked by the significant increase in expansion fees. While previous five expansion teams, Montreal , Portland , Vancouver , Philadelphia and Seattle each paid expansion fees of $3040 million, when the second growth phase began, Orlando , Atlanta , Minnesota and NYC paid fees of $70100 million, marking a stark contrast to the previous phase. The latest expansion team to begin play in the league, Charlotte FC, reported paid $325 million.
Madison Square Garden Sports
MSG Sports is the product of a 2020 spinoff in which Madison Square Garden Entertainment — owner of the iconic venues Madison Square Garden and Radio City Music Hall in New York City, among other real estate investments — became a separate company. It’s a rare way to own a piece of an actual sports team since MSG Sports is the parent of the National Basketball Association’s New York Knicks and the National Hockey League’s New York Rangers.
The NBA and NHL seasons were put on temporary hold in 2020, making MSG Sports another pandemic rebound play. Over the long term, this company’s fortunes will ebb and flow with the success of its two primary franchises. The Knicks made a return to the NBA playoffs in the 2020-21 season, which could be an especially positive development if the team can remain competitive. Additionally, MSG Sports owns esports teams that are part of Counter Logic Gaming, a league that competes in video games such as League of Legends, Fortnite, and Super Smash Bros. It also owns Knicks Gaming, an NBA 2K League esports team.
Don’t Miss: How Can I Invest In An Index Fund
How To Invest In Sports Teams And Groups
Lots of people dream about owning a sports franchise, but those who actually fulfill that dream belong to a very exclusive club. For the rest of us, there are opportunities for fractional ownership of sports teams by investing in the corporate parents that own those teams.
While professional sports may appear to be lucrative due to the huge player contracts, the reality is many team owners don’t seek profits but an increase in value. Even before the global lockdown and quarantines disrupted play of every professional sports league, the truth is a number of teams were consistently losing money. The value of franchises like the Dallas Cowboys, however, have increased in value year after year.
According to reports acquired by ESPN, NBA revenues fell by 10% in the 20192020 season.
Assuming things in the sports world do get back to normal, here are some ways you can get into the game, even if you don’t have a bank account the size of Dallas Mavericks owner .
New York City And Orlando
The 2015 MLS season marked the return of MLS to the state of Florida and the addition of a second team in the New York metro area. On June 27, 2012, MLS announced plans to build a new soccer-specific stadium in Queens, New York, with a seating capacity of 25,000 and located near the USTA Billie Jean King National Tennis Center in Flushing Meadows.On May 21, 2013, MLS announced New York City FC and the location in NYC as the next expansion team. The team’s rights were purchased by the English Premier League club Manchester City and the New York Yankees baseball team for the expansion fee of $100 million, and the team began play in 2015.
Also Check: Fannie Mae Loan For Investment Property
Supporting An Mls Team
Each club has multiple supporters groups, including some with chapters outside their home city.
But you donât have to be a member of a supporters group to follow MLS:
- Download the freeMLS app. Itâs an absolute necessity
- Catch an MLS match on TV practically anywhere around the globe or online via MLS Live
- Listen to one of the multitude of league or club podcasts, including MLSsoccer.com’s flagship ExtraTime Radio
- Get your favorite teamâs gear at MLSstore.com.
Investors Have Paid $325m For A Place In Mls But For How Much Longer
The fortunes handed out for a spot in the league have always been based on the future worth of soccer in North America. But Covid-19 may cause some to reassess
2023 was slated to be Sacramento Republics expansion year in Major League Soccer. After long and protracted negotiations to secure a franchise, it was provisionally announced in October 2019 that Californias capital city had been awarded a spot in the league. That may be the closest Sacramento ever gets to MLS, though, with billionaire Ron Burkle pulling out as lead investor amid the fallout of the Covid-19 pandemic. The clubs entry to MLS is now on hiatus.
According to commissioner Don Garber, MLS lost close to $1bn in revenue over 2020. The losses have been dramatic, he told reporters in December. Clubs are going to have to manage their economics as diligently as possible. Even more striking was that Garber, just a few months later, claimed MLS could lose close to the same figure in 2021.
For a league which has had perpetual, uninterrupted growth as a mission for the last decade-and-a-half, such assertions are concerning, especially when an investor like Burkle pulls out of an expansion franchise. So is the MLS bubble at risk of bursting in as economic uncertainty hits North America?
Also Check: Merrill Guided Investing With Advisor Review
Compare Stock Trading Platforms To Buy Soccer Stocks
Information on this page is for educational purposes only. Finder is not an advisor or brokerage service, and we don’t recommend investors to trade specific stocks or other investments.
Finder is not a client of any featured partner. We may be paid a fee for referring prospective clients to a partner, though it is not a recommendation to invest in any one partner.
Is Major League Soccer On The Rise Not Quite
In October, I was fortunate enough to be a part of a panel at the Harvard Law School Sports Law Symposium entitled On the Rise? Pro Soccer in the United States. The question mark in the title was added at my suggestion. My uncertainty as to the place of soccer in the North American sports landscape is derived from the financial realities of MLS and its clubs, as I will explain in this article .
As an initial matter, if MLS is on the rise, it seems to necessarily suggest that other leagues are on the decline and that MLS may pass them. Indeed, some MLS club owners have spoken of MLS passing MLB and the NHL in popularity. This is not reasonable. The four major North American sports leagues collect the following approximate amounts of revenue each year: NFL – $14B MLB – $10B NBA – $8B and, NHL – $4B. MLS revenues are approximately $1B per year, 25% of the NHLs revenue and only 10% of MLBs revenue. This is not a gap that is likely to close anytime soon, if ever. Consequently, MLS seems likely to remain the 5th largest and most popular league in North America for a long time to come.
Christopher R. Deubert is the Principal at the Law Office of Christopher R. Deubert, Esq., specializing in sports, litigation, and labor and employment. Chris has more than a decade of experience in sports and the law, including a stint as General Counsel of an MLS club, and has more than 30 academic publications to his credit. For more, please visit www.deubertlaw.com.
Don’t Miss: Invest In Gold Coins Or Bars
Is Mls Going To Fail
Some have suggested that MLS is a bubble, or a Ponzi-like financial scheme where income from new investors is keeping the league afloat instead of growing revenues and real value. MLS doesnt help its case by being secretive of its revenues, and even cries poor whenever its time to negotiate a new collective bargaining agreement with players. MLS likely doesnt care about being transparent as it doesnt need to convince us that its financially stable, and its likely even better served by obfuscating the true financial state of the league. Given its a private company, there is no statutory transparency requirement, and so were forced to speculate as to the financial situation of the league.
Revenue estimates put MLS at well into the hundreds of millions. We know the league brings in $90 million per year from the TV deal. We also know, based on an interview with Maribeth Towers, the chief of consumer products at MLS, that the league earns $25 million per year from Adidas in addition to a nine-figure annual business for consumer products, rounding merchandise out to be worth at least $125 million annually. If you count expansion fees as revenue, which we will to assess overall financial health, MLS will collect approximately $917 million in expansion fees between 2005 and 2020 . This amounts to roughly $61 million in annual revenue for those 15 years. This puts our running annual revenue figure at $276 million.
What’s Next In Soccer Analytics
As the technology grows smarter, the data set will only expand and there are some new advancements that could arrive as soon as the end of 2020.
On the field, the systems will understand shot values for specific players. Maybe a shot from 25-yards out is not a smart decision for the average player, but for the LA Galaxy’s Cristian Pavon, it’s a productive shot. Then apply that same line of thinking with pass attempts. Haris Medunjanin hitting a dangerous line-splitting pass forward might turn out to be a safer option than for most defensive midfielders.
âOne way this gets better is as we partner with and have more time with clubs, thatâs where the most forward-thinking data ideas will come from,” D’Auria said. “Thatâs a huge part of our business, sitting next to the analysts and coaches to figure out their hardest and most important questions. How can we help you answer them?â
Another way advancement will be felt is with in-game analysis.
âWe have some data available to us live and one of the projects weâre working on right now is delivering that a bit faster so we can use it in a more automated fashion in-game,” Toronto FC director of analytics Devin Pleuler said. “Itâs definitely something weâre still moving towards. The MLS rules are a lot more progressive than some of the other leagues in terms of data and video on the bench. Weâre exploring ways to get that information down to the coaches and training staff as soon as possible.â
Read Also: Family Offices Investing In Life Sciences
Is Soccer Analytics The Future Of Watching A Game
The partnership with Second Spectrum will also have significant benefits for fans watching at home. On the broadcast side, features like enhanced highlights and other graphics will become more regular during broadcasts, even in real-time.
âIn time, we think theyâll be able to do that in real-time so the whole game will have special graphics on top,” Schlosser said. “Thatâs something weâll work to roll out later this year. Who knows what comes beyond that? There are other applications for scouting, coaching and betting that will all come into play in the future.â
Inter Miami’s Rodolfo Pizarro goal vs D.C. United | Enhanced Highlight
âIn basketball, thereâs a full live stream where, for example, they can put the name of the player atop their head in real-time,” Schlosser said. “Thatâs an interesting one, right? It seems fairly simple, but think about if the announcer didnât have to call out the name of the player who has the ball every time. That could fundamentally change the way a play-by-play announcer calls the game. Itâs an interesting concept to work on moving forward.â
The broadcasts may continue to evolve with the tracking data, making it possible for fans to customize their options.
Some of the possibilities can be seen in Second Spectrum’s partnership with the NBA .
One thing’s for sure, MLS, as it has proven over the years, it doesn’t mind doing things differently.
