Jika.io - a platform for retail investors to make critical financial information easier to use.
As I was watching the Islanders – Devils preseason hockey game in UBS Arena a few weeks back, I thought to myself, this sure is fun to watch, but how can I make money from it?
While this thought didn’t actually cross my mind, since the question was asked, I might as well answer it. Most people would tell you that the only way to generate profit from sports is through sports betting channels, whether it be through BetMGM, DraftKings, or FanDuel.
The sorry reality for these methods is, the odds are stacked against you – the vast majority of sports betters end up with less money than they started. According to some, only 3-5% of sports betters are profitable in the long run.
A perhaps lesser-known way of investing in sports teams is buying equity in the team if it is publicly traded on a stock market. Like any other stock, if the share price goes up in value, you can generate a positive return and vice versa.
In this article, we’ll talk about why a team would want to be publicly traded, which teams are up for sale, and even if your favorite team isn’t publicly traded, we’ll talk about other ways of investing in sports.
Why would a team want to be publicly traded?
The reason a sports team would want to sell shares to the public is the same reason any other company would - to raise money. When a team lists its shares through an IPO (initial public offering), investors pay money up front for those shares which go directly to the sports team. In return, investors receive partial ownership of the team and can sell it at any time to another investor who wishes to buy that share.
A team may wish to expand its stadium, acquire an all-star player, or raise salaries for staff. All these wonderful things cost money, and one avenue to generate a lot of cash is by selling shares of the team to the public.
For example, back in 2012 Soccer team Manchester United began trading on the New York Stock Exchange (NYSE) and successfully raised $233 Million, which was used to pay off some of the team’s $680 million in debt. The initial share price was $14 and approximately 16.6 million shares were issued.
There are downsides as well to going public. For one, teams that go public are subject to the same scrutiny as any other publicly traded company - this includes the need to release annual and quarterly financial reports, along with regulatory oversight from the SEC. Secondly, shareholders who hold ownership of the team can vote on a board of directors, which decreases the control a team has over its management.
Which teams are publicly traded?
Here’s a list of several companies and their corresponding sports teams that are currently listed on the stock market.
While this isn’t a list of all the sports teams that are publicly traded, the full list isn’t a whole lot longer. The reason you don’t see other major sports teams, like the New York Mets or Boston Celtics could be for a couple of reasons: They may not need the extra cash, the teams place a higher value on deciding upper management for themselves, or they simply don’t wish to undergo the scrutiny of the SEC and other bureaucratic agencies.
Other ways to invest in sports teams
There is a relatively high likelihood that your favorite sports team is not on this list. You therefore have 2 options if you want to invest in your favorite sports team: 1) Forget about your current preferences and become a fan of one of the 6 listed here, or 2) Invest in a broader company that encompasses your favorite team.
To demonstrate the second option, suppose you are a huge Kentucky Derby fan. While there isn’t an option to buy shares of a particular horse, you can invest in Churchill Downs (NASDAQ: CHDN), the Kentucky Derby Company organizer. Here is a list of other stocks you can invest in which may encompass your favorite sports team:
Here are just a few examples of how to invest in the broader category of sports-related investments. Though ESPN, Nike, and Dicks don’t directly relate to a specific team, their revenues increase when sporting events increase in popularity.
The more people watching ESPN, the larger Disney’s ad revenue will be from commercials. And when Dicks or Nike sells more athletic apparel due to popular athletes, its revenue increases which as well may boost share price after earnings reports.
On a similar note, if you are bullish on the WWE being a smashing success in the long term, you would purchase shares in WWE and hope for the best.
Is investing in sports stocks worth it?
Sports stocks can be an excellent way to diversify your portfolio. Having a diverse portfolio lowers the total risk of that portfolio, so if your investment portfolio lacks diversity, this type of investment may be for you.
That said, investing in sports stocks is like investing in any other type of stock – by combining your own research with available analyst recommendations you may generate a positive return on your investment. Before investing in any security, it is important to do your own research beforehand.
Buying shares of a sports stock will not get you box seats, free tickets, or peanuts at the ballpark. But it certainly has the potential to generate the money to buy those things. Most people aren’t aware that sports teams have anything to do with the stock market- but boy are they missing out. The global sports industry is estimated at approximately $1trillion and there is tremendous potential for an intelligent investor.