For more than a decade, NFL leaders and sports finance experts have questioned whether the league’s famously risk-averse policies around ownership are costing owners money by artificially limiting the supply of wealthy bidders for teams, thereby depressing valuations.
That theme isn’t going anywhere in the long term, but the recent Seahawks sale process provides scant evidence of that problem coming to bear right now, insiders say. Of course, the Paul G. Allen Estate and bankers at Allen & Co. would have liked more bidders and a $10 billion price instead of $9.6 billion from the group led by venture capital kingpin Vinod Khosla, which is still a record price for an NFL club by a wide margin. But the auction involved multiple bona fide bidders, if not a robust set. And the outcome is shaping up as a solid number from an ownership group with no need for policy waivers or an unwieldy number of limited partners, insiders say. (That could not be said for the 2023 sale of the Commanders to Josh Harris). The consortium is still coming together, but one source called it “tidy.”
The Seahawks sale process would have likely surprised a lot of experts if you could have shown it to them 10 years ago. At the time, there seemed to be an intractable conflict between the ever-rising value of NFL teams and the supply of people wealthy enough to buy them — at least under NFL rules that require a single person to hold 30% of a team, limits groups to 25 investors and caps debt financing at levels far short of what would naturally be available. It seemed virtually certain that, one day soon, a team would become so valuable that nobody could actually buy it under those terms.
‘So many ... billionaires’
What did those predictions not foresee? The explosion of extreme wealth at the highest end of the economic ladder in the 2020s, by virtue of the K-shaped post-pandemic recovery, the 2017 tax code rewrite and the A.I. boom. “There are so many f****** billionaires,” one source said. And this isn’t just for people rich enough to buy controlling stakes; there seems to be a huge supply of people who can join a group for a few hundred million dollars or more. Also, sports have become the asset class du jour, with interest developing in corners where there had been little before.
“We underestimate how much wealth has been created,” said Dynasty Equity co-founder and CEO Don Cornwell at a Wall Street Journal event Thursday, noting that several recent sports deals have used institutional capital but did not appear to require it.
The NFL has not been entirely passive in the wake of the potential threat posed by growing valuations. The league has changed some policies, including allowing private equity to invest up to 10%, increasing the debt limits and dropping the prohibition on owners of other sports teams in NFL cities buying into the NFL. But so far, more dramatic changes have not come.
Some skeptics say the Seahawks’ sale should not be seen as proof those dramatic changes aren’t still necessary. One good outcome doesn’t mean there will be more, they caution, and that if the Seahawks are worth $9.6 billion in the NFL’s 14th-largest market, then teams in the top-five markets are worth at least several billion more. At those prices, trouble is coming if the league doesn’t change its policies to allow for a more corporate and less family-focused approach to ownership, these policy hawks say.
The NFL Finance Committee and the Special Committee on Ownership Policy will continue to evaluate these questions and to tinker. But anyone hoping the Seahawks deal by itself would spur big action must be a little disappointed.
