• Loading stock data...
Saturday, June 28, 2025

Why Sports Teams Welcome Private Equity Ownership

  • All major U.S. sports leagues, except the NFL, are allowing institutional investors to take minority stakes in teams.
  • Venture capital firms allow principal and minority team owners to take advantage of increased valuations.
Private Equity Sports
Daniel Dunn-USA TODAY Sports

Prolific sports team owner Ted Leonsis broke down the first three generations of business types who purchase pro franchises during our phone call earlier this week.

“The first phase were the real estate people,” Leonsis said. “They wanted to build or buy the stadium and they were looking for things to put in it. They were in the rental business, basically. The second phase of entrepreneurs came in and they were more media oriented. Cable was just launching, which became a big, new revenue stream. Turner, CBS, and Tribune got involved. The third generation was my generation: the web/internet [entrepreneurs].”

The former AOL executive who owns the Washington Capitals, Wizards, Mystics — and the city’s Capital One Arena —  welcomes the fourth generation: private equity. In just the last several months, the NBA, NHL, MLB, and MLS have all cleared the way for large private equity firms to purchase minority stakes in their teams.

“There’s been big appreciation [in team valuations],” Leonsis continued. “The downside is how do you get monetized? The only way you could really [take advantage] is if you sell the team. There are some really big funds that can give you growth capital for you and your partners with some liquidity. It’s been a godsend for a lot of teams who went through the pandemic.”

  • None of Leonsis’ teams have taken private equity money, but several others have — especially in the NBA.
  • The San Antonio Spurs are among them with Sixth Street Partners purchasing a 20% stake in the team last June.

“We’ve had decades of aligned leaders throughout the organization who’ve turned our bedrock of values into real life action and impact,” Peter J. Holt, chairman of Spurs Sports & Entertainment, told Front Office Sports. “This, combined with the leadership, vision, and creativity at the NBA league level, is one of the many reasons why I believe we’re interesting to a group of dynamic partners.”

Techies Still Want a Slice 

Dell Technologies founder Michael Dell purchased 10% of the Spurs at the same time of Sixth Street’s investment. Earlier this month, Airbnb co-founder Joe Gebbia purchased an undisclosed chunk of the Spurs as well.

  • Gebbia told FOS that his investment wasn’t just a financial play.
  • He’s a longtime NBA fan and one of his first jobs in his native Atlanta was as a Hawks ballboy.

“The Spurs are just an incredible team,” Gebbia said. “What the Bulls were in the ‘90s is what the Spurs were in the 2000s. Five championships in 15 years. You have Coach Pop [Gregg Popovich] and players like David Robinson, Tim Duncan, and Tony Parker — heroes as a kid I grew up looking up to.”

Before Airbnb, Gebbia’s unofficial first startup was actually a college basketball team. He restarted a basketball program at Rhode Island School of Design that had been dormant for about 50 years.

“As a broke college student, [team ownership] was in a dream somewhere,” Gebbia said. “How could I be involved in the NBA one day? My first experience was starting that basketball team. I had to recruit the team and raise money. I had to market it as a brand.”

Limits of Minority Ownership 

Minority ownership is often seen as more about prestige than power. You don’t have a lot of, if any, say in how the team is run and few teams pay dividends to their minority investors.

The same applies to private equity firms purchasing a stake in a team, which is limited to 20% in any one NBA franchise.

  • No team can have more than 30% total of private equity ownership.
  • An institutional investor can invest in up to five NBA teams.
  • Rules are similar for the other leagues.

“The beauty of sports and the way the hierarchy works is that your team has to have a controlling owner who has 100% authority,” Leonsis said. “What the leagues have done with the private equity firms was to create rules of the road on how much you can own. You can’t come to board meetings. You’re essentially a passive investor.”

A Major Return on Investment

One look at how much Leonsis’ sports investments have returned and it’s clear why private equity wants in.

Leonsis and his partners paid $85 million for the Capitals in 1999 and $551 million for the Wizards in 2010. (The Wizards purchase included the stake in Capital One Arena that Leonsis and his investors didn’t already own.) Now, the Caps are worth $1.5 billion and the Wizards are valued at $1.9 billion.

According to Pitchbook, since 2002, all four of the major U.S. sports leagues have performed better than the S&P 500, and in some cases by a very wide margin. Here are the leagues’ respective returns over the past 20 years:

  • NBA: 1057%
  • MLB: 669%
  • NFL: 558%
  • NHL: 467%
  • S&P 500: 458%

Valuations have held steady or risen since the start of the pandemic two years ago, even as profits have fallen — a product of reduced schedules, crowd-size mandates, and a general concern over the spread of COVID-19.

Other forms of entertainment haven’t been able to weather the pandemic nearly as well as pro sports, which are bolstered by massive TV contracts and, more recently, sports betting partnerships.

“We have proved to be a resilient industry,” Leonsis said. “Everyone thought I was crazy for buying the Capitals for $85 million 20 years ago when the team was losing $20 million a year. Now it’s worth a billion and a half.”

Liam Killingstad of FOS Insights contributed to this report.

Linkedin
Whatsapp
Copy Link
Link Copied
Link Copied

What to Read

Seattle Rough & Tumble

Women’s Sports Bars Are on the Rise. Survival Isn’t Guaranteed

Some women’s sports bars are cashing in. Others are clawing for funding.

Shitposters Have Taken the Reins of Pro Sports’ Official Voices

Meet the social media pros turning sports teams into internet trolls.
Jun 17, 2025; Sunrise, Florida, USA; Florida Panthers center Sam Reinhart (13) hoists the Stanley Cup after winning game six of the 2025 Stanley Cup Final against the Edmonton Oilers at Amerant Bank Arena

Stanley Cup’s International Summer Tour: Rules, Repairs, and Raucousness

No pro trophy tour compares to the NHL’s three-month global victory lap.
May 29, 2025; Dublin, Ohio, USA; The TaylorMade club cover of Tommy Fleetwood is seen during the first round of the Memorial Tournament presented by Workday golf tournament.

Golf Equipment Maker TaylorMade Caught Up in Fight Over Who Owns It

There is a dispute over which Korean entity controls the company.

Featured Today

Mar 15, 2025; Fort Worth, TX, USA; UAB Blazers forward Yaxel Lendeborg (3) dribbles the ball upcourt against the North Texas Mean Green during the first half at Dickies Arena

NIL Is Shrinking the Pool of NBA Draft Entrants

Agents are now advising many players to stay in school.
Apr 24, 2025; Green Bay, WI, USA; Penn State Nittany Lions defensive end Abdul Carter on the red carpet before the 2025 NFL Draft at Lambeau Field
June 21, 2025

‘More Is More’: The Elite Luxury Jewelers Decking Out Athletes

Meet the elite group of luxury designers crafting the biggest statement pieces.
Dec 5, 2024; Miami, FL, USA; FIFA president Gianni Infantino presents the FIFA Club World Cup trophy during the Club Word Cup draw at Telemundo Studios.
June 15, 2025

Revamped Club World Cup Is FIFA’s Billion-Dollar Gamble

The revamped soccer event debuts amid controversy.
Jun 10, 2025; Nashville, Tennessee, USA; United States head coach Mauricio Pochettino stands during the anthem against the Switzerland during the first at Geodis Park
June 14, 2025

Gold Cup Is Complicated for USMNT—but U.S. Soccer Has Its Eyes on..

Uncertain tournament success isn’t fazing forward-looking U.S. soccer.
James Harden

Adidas Posts Big Profits in First Quarter Without Yeezy

Profits and sales are up after selling off remaining Yeezys last year.
Oracle Park
March 18, 2025

S.F. Giants Selling Stake to Private Equity to Pay for Facility Upgrades

The team said the cash would not be used to grow payroll.
March 20, 2025

Nike Struggles Continue, but Signs of Turnaround Appear

The embattled company beats tepid expectations in both revenue and earnings.
Sponsored

Hottest Matchups Following NFL Schedule Release

The NFL released the 2025 regular-season schedule, and anticipation is already building in the ticket marketplace with four months to go.
Aug 11, 2024; Paris, France; Medals are carried out on Louis Vuitton trays after the women's volleyball gold medal match during the Paris 2024 Olympic Summer Games at South Paris Arena
February 16, 2025

LVMH’s New Push: World’s Most Powerful Luxury Group Is Coming for Sports

LVMH is making long-term deals—and they’re not done.
February 14, 2025

DraftKings Turns First Full-Year Profit, Stock Up 47% in 2025

The company’s sports betting business continues to grow despite headwinds.
Billie Jean King
February 13, 2025

Billie Jean King: ‘Billionaires, Not Millionaires’ Are Fueling Women’s Sports Boom

Billie Jean King wants more women involved in team ownership, too.
February 5, 2025

Under Armour’s Desired Turnaround Sees Sparks With Q3 Earnings Beat

The 2010s darling has been struggling to find the right formula.