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Friday, May 30, 2014

Clippers' Sale Price: Paying For An Asset, Or Paying For Publicity?

Reportedly, former Microsoft CEO Steve Ballmer has bid $2 billion to buy the Los Angeles Clippers. This is the team owned by Donald T. Sterling, the octagenarian recently banned for life from the NBA after his reported companion (reportedly named V. Stiviano) recorded someone sounding like (but not proven to be) Sterling saying something about wishing she did not bring her darker-skinned friends to Clippers games.

Note all my hedging. That is because none of the underlying facts have been proven or admitted. Everything is "reported." The reporting -- that is the fact. It's important to know the difference.

Two billion for the Clippers? What would the Lakers get?  

The Los Angeles Dodgers recently sold for about $2 billion. But the Dodgers are a much bigger enterprise. Is this a reasonable price or sheer madness.

For comparison to other major market NBA franchise purchases look to how Russian oligarch Mikhail Prokorov paid $300 million for the New Jersey Nets in 2009, which he then moved to the new Barclays Center in downtown Brooklyn.

It seems like someone is overpaying.  Hopefully the positive publicity from rescuing a team from a disgraced owner will be adequate compensation for the grossly inflated price that is being reported. 

Apparently the best way to get an obscene price on your asset for sale is to make a comment likely to be considered irredeemably racist. In the business takeover world, this used to be called "greenmail." 

If that was the idea, then: Well played, Mr. Sterling. 

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