Thursday Evening Thread, turn the page
Posted on Thursday, May 8th, 2008 at 6:22 pm by Mr. Baker (thinking good thoughts for George Karl))
As I watch West play in the playoffs I have to ask: why is he there?
I have a simple answer, because he would want more money next year and Bennett is not spending a dime while in Seattle for the next two years.
He is saving it up, borrowing it, to cover a debt that will grow well beyond that 40 million in operating losses. Everybody is going to reach for your wallet, Clay. And when it is empty they will reach for your assets.
May 8th, 2008 at 6:30 pm
Well, that and Delonte was certainly on the shortlist to be the first Sonic to throttle Pajamas!
May 8th, 2008 at 7:06 pm
I would take Dana Barros right now over Delonte West, unless what we saw from him early in the season was not who he is as a player. Sure, there were flashes, but he is the most undisciplined PG I have seen in awhile, makes Jason Williams look like Jason Kidd. Although SG is probably his position yet PJ had to “evaluate” him at the point.
May 8th, 2008 at 7:07 pm
Maybe it was the players around him with the Supes.
May 8th, 2008 at 7:17 pm
Delonte was too Gangsta - He even packed a piece. Clay was afraid that Delonte just might waste him some day if he kept the young thug around too long. Even mild-mannered Kevin Durant wanted to throttle Clay-Boy.
May 8th, 2008 at 7:22 pm
Not having seen a playoff game, is Delonte doing well?
May 8th, 2008 at 7:22 pm
Ya Im glad delonte is gone his attitude is toxic.im mad he’s on a good team though.
May 8th, 2008 at 7:23 pm
Is Delonte West really worth talking about? Doubt the Cavs will even want him back. Maybe we can pawn Ridnour off on them this summer.
May 8th, 2008 at 7:23 pm
Ya Im glad delonte is gone his attitude is toxic.im mad he’s on a good team though.
May 8th, 2008 at 7:30 pm
Not having seen a playoff game, is Delonte doing well?
In the first two games against the Celtics, he’s combined for 3-15 shooting, with a 7 to 5 assist/TO ratio. I don’t care to bother to look what he did against the Wizards.
May 8th, 2008 at 7:39 pm
OVER PAYED FOR THE TEAM: 70 mil
FIRST YEAR LOSSES: 20 mil
2009 & 2010 LOSSES: 60-100 mil
COURT FEES: 10+ mil
SEEING CLAYS FACE AFTER SCHULTZ WINS FRAUD CASE…PRICELESS!
Ok, so PBC will have incurred between 150-200 mil before they even have a shot at buying out the lease…not to mention the “re-lo” fees that would be incurred to move….
So….200-250+ mil in the red BEFORE the players would even set foot on the regular season floor….oh and let’s not forget 14th-42nd, loss of revenue sharing(or severely decreased) and well no TV deal(not in that market) and lack of adequate suite sales……what an amazing business man Clay is!
May 8th, 2008 at 7:42 pm
DT asks…
Is Delonte West really worth talking about?
Good question - Easy Answer - No
But the point above is well taken - Clay will watch the $$$ on any player decisions this summer - cutting cost will be priority #1 above team development and wins.
May 8th, 2008 at 7:55 pm
“But the point above is well taken - Clay will watch the $$$ on any player decisions this summer - cutting cost will be priority #1 above team development and wins.”
This is going work for us in the long run….Clay will give Ballmer a bare-bones team with Durant, Green, Rose, and Collison at the heart of it…and the 2010 offseason will be a push for FA’s and a playoff spot.
May 8th, 2008 at 7:55 pm
“But the point above is well taken - Clay will watch the $$$ on any player decisions this summer - cutting cost will be priority #1 above team development and wins.”
This is going work for us in the long run….Clay will give Ballmer a bare-bones team with Durant, Green, Rose, and Collison at the heart of it…and the 2010 offseason will be a push for FA’s and a playoff spot.
May 8th, 2008 at 8:00 pm
IF Bennett hangs on through this financial armageddon (mostly caused by his own boneheaded decisions), he will complete the gutting of the Sonics this summer. I have no idea why anyone is getting excited about the draft or “cap space” or anything regarding the future while this continues. These Sonics, in Seattle with Bennett as owner, will be the Two-Buck Chucks of pro sports. He will trade picks and dump as much payroll as he can (what little is left, that is). That’s a scenario that should make Stern just cringe, but somehow I think he’s just fine with it. I think it’s understated to call that corruption…
Joshu@: Question: You listed ‘First Year Losses.’ Bennett and his OK corral have owned the Sonics for two seasons so far. Is the $20 million loss for both years? It must be nice to marry rich enough to be able to burn cash at those rates. (Oh, yeah, he’s probably mostly burning Aubrey’s cash. That’s got to be a fun discussion between the partners…)
May 8th, 2008 at 8:11 pm
Another victory for the city of Seattle (and the potential ownership group) as the judge ruled that Griffin’s records will remain sealed:
http://seattletimes.nwsource.com/html/localnews/2004397987_apbknsupersonicstrial.html
May 8th, 2008 at 8:11 pm
Joshu@ Says:
Ok, so PBC will have incurred between 150-200 mil before they even have a shot at buying out the lease…
Interesting math. BTW, if he takes the losses for 2009 & 2010, there won’t be a lease to buy out.
May 8th, 2008 at 8:12 pm
Anyone catch this?
http://tinyurl.com/5cmb5h
Bennett and his attorneys got their heads handed to them AGAIN. Messed up trying to get documents from the Griffith group opened. Somehow they didn’t meet their own agreed-upon ‘good faith effort’ requirements. Imagine that? Bennett didn’t get ‘good faith’ right. It’s truly the Gang That Couldn’t Shoot Straight…
(And, here I thought they were going to put up a good fight, but it gets more laughable by the day…)
May 8th, 2008 at 8:19 pm
Interesting note in the Times article.
“Pechman ruled that the SuperSonics didn’t make a good-faith effort to resolve the document dispute and failed to abide by an agreed-upon rule requiring 10 days to pass before challenging the confidentiality of documents”
Hopefully this isn’t the last time we hear something like this. Let it be the first of many!
May 8th, 2008 at 8:22 pm
Man Chris Paul is a great player….
May 8th, 2008 at 8:23 pm
Good news again one more even if small victory for seattle!
May 8th, 2008 at 8:33 pm
Brawl just broke out between the M’s and Rangers.
May 8th, 2008 at 8:39 pm
Click Continue under the red font
You can continue to the site you entered by clicking >continue
May 8th, 2008 at 8:40 pm
Don’t forget the fan class action when figuring losses. Potentially $10-15M there. The case has turned into a slam dunk.(Not a Flip Murray one. A real dunk by someone who can make it.)
I spoke to an attorney today who felt that Bennett was really in trouble legally. He’s burning all his credibility with Pechman months before he has to face her again in the Fraud case which is much more important. This guy was really critical of heavy handed tactics by Bennetts law firm. Their depositions of our city leaders have reportedly been very, very aggressive.
May 8th, 2008 at 8:40 pm
Sorry to interrupt the thread. Yea, its good news for Seattle, and hopefully its just one of many small victories.
SAVE OUR SONICS!!!
May 8th, 2008 at 8:42 pm
They didn’t wait the 10 days because they wanted to get it out there before the BOG meeting so they could nail the vote.
May 8th, 2008 at 8:43 pm
The interesting thing about the rulings so far is the consistency. If Clay Clay had any fantasy that he would win in this case, he must be wondering now. It’s not just that this judge is ruling against him at each turn, it’s that his legal counsel has been so incredibly poor. The errors and obvious lack of a strategy means Bennett and his buddies are going to have to seek other solutions.
Clay, if you can’t figure it out: Cut your losses and go home. Sell to Ballmer now…
May 8th, 2008 at 8:50 pm
They are going to depose Ballmer. I wonder whether that will piss him off in a “no wonder I’ve never wanted to get involved in Sports” way or a “screw you I’m going to show you what real money is all about when I own your team.” king of way…
May 8th, 2008 at 8:51 pm
Joshua said,
“OVER PAYED FOR THE TEAM: 70 mil
FIRST YEAR LOSSES: 20 mil
2009 & 2010 LOSSES: 60-100 mil
COURT FEES: 10+ mil”
Brian Robinson added: “Don’t forget the fan class action when figuring losses. Potentially $10-15M there.”
Let me add: Don’t forget the $32.5 mil relocation fee.
Seattle has an 80% chance of winning the specific performance issue in June. Still facing the Schultz suit with mega-million $$$ in damages (Schultz could amend his claims later, asserting that Bennett tanked the team).
The PBC will be either financially or legally forced to sell to a local Seattle group and take the expansion team that Stern will push through for his good buddy.
May 8th, 2008 at 8:54 pm
Sorry guys, forgot about year one of this ownership…my bad. That year and this last year will make up for how much the lease would have been. In all reality…I just can’t believe he is willing to dump 200+ mil for this team….especially when he will be going into a situation that he can’t make any significant money.
May 8th, 2008 at 8:54 pm
According to the ruling, they’ll still be able to use the AEO confidential material when they depose Ballmer.
May 8th, 2008 at 8:56 pm
I thought the “re-lo” was going to be upwards of 50 mil.
May 8th, 2008 at 8:58 pm
“screw you I’m going to show you what real money is all about when I own your team.” king of way… ”
hopefully this option! is ballmer being deposed a bad thing for us?
May 8th, 2008 at 8:58 pm
“The PBC will be either financially or legally forced to sell to a local Seattle group and take the expansion team that Stern will push through for his good buddy.”
This makes the most sense only if they were to get an expansion at a reduced cost.
May 8th, 2008 at 9:00 pm
“According to the ruling, they’ll still be able to use the AEO confidential material when they depose Ballmer. ”
Im confused why would they be able to use it when they depose him but not in trial? So they still get to see the documents?
May 8th, 2008 at 9:00 pm
Here’s the filing:
http://blogmedia.thenewstribune.com/media/users/ericwilliams/Pechmanongriffin.pdf
May 8th, 2008 at 9:04 pm
If someone tell me, it’s just a sport, I tell them to buzz off! But with Clayton Bennett when someone tells him to just walk away it’s just a sport, he better start listening, he’s destroying his credibility and name big time! His reputation is spiraling downward and will never be the same!
May 8th, 2008 at 9:17 pm
So the judge’s order posted by Dick Tate slammed the PBC on a minor procedural matter. It is not goof for the PBC to get the judge ticked off. She took them to school in that order.
The PBC will have to show the relevance of the material to the trial or she will deny allowing it to be presented. Until that issue is heard and decided, it is ordinary to continue to use the disputed documents at the depositions, which sometimes proves embarrassing.
In general, federal judges limit the scope of the trial to the greatest extent possible, yet remaining fair. The judge will rule that these confidential papers are irrelevant to the issues at trial. Any testimony concerning these documents will be stricken from the record.
May 8th, 2008 at 9:19 pm
I meant to type: It is not good for the PBC to get the judge ticked off.
May 8th, 2008 at 9:20 pm
mmmm yes, Adrian Griffin’s potential future, D West’s potential future, what does it matter when you are trying to save a buck that you are just going to give to Slade Gordon for the pleasure of beating you in court.
Maybe West will improve in the next 2 years, maybe Griffin will retire if he hasn’t retired at the end of the bench already. Small details, minor costs not going to happen, paper napkins not cloth, Washington State wants some money too. Spend second round picks on euro players under contract, gatta pay Stern back.
May 8th, 2008 at 9:27 pm
$350m purchase price
$35m losses first two seasons
$90m losses 2008-09 and 2009-10
$10m legal and related costs
$30m relocation fee
$10m fan class action suit
$525 million TOTAL
Is this getting close? If the Sonics stay in Seattle for two more years and then move to OKC, Bennett and his guys are into this for something in the neighborhood of $525 million before the first game at Ford Center. Does anyone have good data on the likely value of an NBA franchise located in OKC? Not only did they overpay initially, they have made such a mess that they will wind up paying $200+ million above actual value to have those courtside seats in OKC. Now that’s what I call ‘premium seating’…
May 8th, 2008 at 9:33 pm
About the Schutlz suit, let’s say the judge ruled it was fraud how PBC bought the team and took the team away from PBC, would they be able to appeal that ruling?
May 8th, 2008 at 9:39 pm
no relocation fee, not his team to relocate
May 8th, 2008 at 9:40 pm
So they will be allowed to use the documents in being deposed but the judge will rule them irrelevent to the case?why wld they be able to see them for being deposed but it was ruled they have to remain sealed?I don’t get it…..
May 8th, 2008 at 9:43 pm
Hey, it looks like fox sports news is on our side–this is pretty cool!
http://tinyurl.com/6y9alp
May 8th, 2008 at 9:45 pm
With a favorable lease in OKC the team might be worth $300M unless the new owner can move the team to his home town.
You forgot the cost of the Schultz trial. If Bennett loses that one the team gets sold for something under $300M to ‘honest local buyers’. The city will likely sue him for their lost revenue since he Major Leagued the team and cost them alot of rent payments. He also likely has $10M in relocation expenses to move the staff and whatever to OKC.
May 8th, 2008 at 9:52 pm
I don’t think you guys understand how much the Bennett group is worth. The two richest guys each had their net worth increase by $500 million in one year — between 2006 and 2007.. That is a total of $1 billion those 2 owners alone added to their net worth in ONE YEAR. And that was before the most recent huge increase in oil prices, which probably has increased their net worth at least another $1 billion combined in the past 4 months. Remember, these guys are in the oil and gas business, which has been making record profits lately.
There is no question this is no financial hardship on the Bennett group whatsoever. It is a good question, however, if they really want to put that much money into their little basketball hobby.
They might not want to spend that much money in this adventure, but they surely can afford it whithout even blinking.
I think the next two seasons, if the Sonics are in Seattle, the Sonics will receive quite a bit of money from other NBA teams in the limited revenue sharing they have. The total revenue sharing just went up from $30 million per year to $49 million per year. The Sonics might get $10 million or more or that in each of the next 2 seasons, which would limit their operating losses a little bit. The way revenue sharing works, is that the less revenue the Sonics take in in tickets, concessions, etc., the more revenue other teams will have to give them. I think glennpdx’s numbers are Bennett’s worst case scenario. It might be quite a bit less than that, in reality.
May 8th, 2008 at 9:55 pm
what they can not do is include quotes in those horrible motions they keep filing. If they could publicly embarrass Griffin or Ballmer, making the effect of influencing the court of public opinion, even though the battle that counts is the one with the Judge.
Oh sweet irony, they did not wait long enough, did not use good faith, involving an agreement they not only agreed to but helped write. A modeled behavior, an echo of future rulings.
May 8th, 2008 at 10:02 pm
Big Dipper I don’t think you know what the combined net worth of the Schultz group was. There were 54 people in that group. They too, were worth billions and their net worth went up while they owned the team. They sold because they are all smart business people and the NBA made no financial sense.
May 8th, 2008 at 10:03 pm
dipper, that is why the net loss this year is 20 and not 30 million, 20 next year and not 33 million.
They have a high net worth, but it might not be their team to move.
May 8th, 2008 at 10:10 pm
As oil and gas prices go through the roof, I wonder how many “neuveaux riches” with petroleum windfalls and inferiority complexes will come raiding the coastal cities for teams and other regional treasures? I can see Sacremento going to Montana (the Bakken Shale oil deposit), and maybe the lakers to Abu Dabai (Well, that’s a stretch…but only because air travel will cost too much).
May 8th, 2008 at 10:17 pm
Agreed, Big Dipper.
And the scary thing is that Ballmer, Griffin and co. can still completely own them.
May 8th, 2008 at 10:22 pm
Patches: The Schultz group could not get a new arena. Bennett’s group seems satisfied with the arena in OKC. They think they can break even in OKC. The Sonics would never have been able to break even in KeyArena, according to Schultz.
So the Bennett group sees light at the end of this tunnel. The Schultz group saw no way to end the operating losses. If Bennett’s group thought they would continue to lose tens of millions every year for the indefinite future, they might try to get rid of the team. If they think they can break even in OKC, then maybe sell the team for $500 million or more ten years from now, it doesn’t look so bad for them.
Still, I am not saying that Bennett’s group will agree to incur unlimited losses. I have no idea how they feel about this kind of losses. I am just saying that their net worth keeps increasing by $1 billion or more every year, so if they lose $30 million per year or so on the Sonics, it’s not exactly going to put them in the poor house. These losses have zero effect on the life styles of the Bennett group, and very little effect on their total net worth. Just depends on how they feel about losing that kind of money, that’s all. Being treated like heroes in OKC might be worth that kind of money to these guys, who knows?
May 8th, 2008 at 10:23 pm
Patches, if the team is sold while in OKC the opt out option, after 6 years if there are poor financials, goes away and the lease then has to run the full 15 years with big buyout.
May 8th, 2008 at 10:49 pm
That article is from March 8th. I hope they can do some more recent follow up, but it is some good points from ESPN.
May 8th, 2008 at 10:59 pm
If the PBC is so wealthy that they can bleed $30 million, $60 million, or even $100 million in costs and/or losses over the next few years - without even blinking - then why in the world did they borrow around $90 million from the NBA to finance the purchase of the Sonics in the first place?
May 8th, 2008 at 11:06 pm
Looks like Clay Bennett is not terribly loved in Spur-ville. A month ago, San Antonio’s media was questioning how close Bennett came to moving the Spurs to Nashville!
Buck Harvey: Spurs skirt snakes on the plain
Web Posted: 04/14/2008 10:13 PM CDT
The Spurs always were vulnerable to relocation until funding for the AT&T Center was found, and McDermott saw danger in 1993. Then, he put together a 22-piece ownership group to buy the team from Red McCombs.
McCombs has insisted he never would have sold to a group who intended to move the Spurs. But, as Seattle knows, intentions change
Guess who quietly acquired a majority stake in the spurs as shares became available, all the while claiming to interest in moving the Spurs, despite being involved in a new and empty stadium in Nashville.
Bennett stayed in the background, albeit with his company, Gaylord Properties, as the largest shareholder. This is the only time in Spurs history when a group or person without ties to South Texas was in that position.
Had this continued, how long would it have been before Bennett offered the remaining investors a lucrative exit strategy?
Enter Holt. He initially bought only 13 percent of the franchise, then purchased more when the Maloof brothers, who later purchased the Sacramento Kings, put in a bid.
Holt’s next move solidified everything, and anyone who considers him cheap should consider this: Holt bought out Gaylord.
Looking back, was San Antonio in a chess game it didn’t know was being played?
Seattle has been in something closer to a vise. Bennett and his Oklahoma buddies bought the Sonics, then met the usual arena resistance that’s in every city.
Looks like Bennett tried the subtle, long-suffering method of deceit in San Antonio. Now, he says to himself “Hmmm, that subtlety crap didn’t work–I guess I’ll just tell transparent lies and bully the city till I get my way. That’ll make me rich and popular.”
Here’s the link to the article:
http://tinyurl.com/6cp29z
May 8th, 2008 at 11:17 pm
Whoops. “Claiming TO interest in moving the Spurs” above should read “claiming NO interest.”
May 8th, 2008 at 11:38 pm
Is pechman the same judge for Schultz’s case? If so, I think that is good news.
May 8th, 2008 at 11:46 pm
Obviously the magnitude is different but if I were the PBC I might be sweating the Schultz case a little more now.
In this Griffin ruling it says PBC tried to meet its good faith efforts by basically making a few token efforts to connect with Griffin and then bailed. “PBC filed its motion…without any further attempt…as required by the rules of this court”. Therefore, “the court finds that PBC did not make a good faith attempt to resolve”.
Sound familiar??
PBC made ONE token effort at good faith arena ideas and then bailed without any further attempt as required by the sales agreement (12 months).
Clay and Co have to see the parallels between the Griffin and Schultz “good faith”. They also know its the same judge and now know how strongly she feels about “good faith” agreements.
Just my take
May 8th, 2008 at 11:49 pm
“There is no question this is no financial hardship on the Bennett group whatsoever.”
Really?! 200 mil in losses aint a financial hardship? Also, the team is only worth an estimated 270 mil which networth falls a bit short of 500 mil.
“why in the world did they borrow around $90 million from the NBA to finance the purchase of the Sonics in the first place?”
Exactly, they are just like anyobdy else, from what I understand Clay is the CEO of a company that is worth 900bil and some change….though he wouldn’t shoulder the profit alone…200 mill is just under 25 % of those assets….wow…not financially hurting…if they go 200+ mil in the red and were to make it to OKC…they won’t recover.
May 8th, 2008 at 11:52 pm
I meant “shoulder the losses”
May 8th, 2008 at 11:54 pm
When you have a business owner that can make a billion in a year he can also lose a billion. If McCain doesn’t win the election it could get much, much different for our Oklahoma billionaire friends. If you have a billion dollars then in all likelyhood less than $400 million will be liquid. The rest is tied up in assets. You’re talking about giving up 20% of your net worth and 50% of your available capital on a hobby that will likely lose money every year you own it. Also you burn 2 full years on crap that frankly you don’t have time for. its a big cost for anybody.
If I were to spend 20% of my net worth on saving the Sonics my wife would shoot me. At some point you have a financial responsibility to your family.
May 9th, 2008 at 12:11 am
Satan Bennett, squirm like a worm you clown.
May 9th, 2008 at 12:25 am
Smart business people know when to exit. Some don’t. Yahoo!
May 9th, 2008 at 12:27 am
I asked this question earlier but it was waiting for moderation and still hasn’t bee released.
Say Schultz wins the suit andthe judge takes the Sonics away from PBC, will PBC have a chance to appeal? Or is that decision gonna be it?
May 9th, 2008 at 12:55 am
Ok, so I ask a lot of questions. While I like reading the guesses of my fellow nobodys (no offense meant) I would really love answers from those who know. I can understand if something can’t be talked about due to ongoing cases but just say that. “We hear the question but cannot offer a reply” is much better than no reply at all.
Questions I still have are below. If they got answered with solid answers, not guesses, then I missed them.
Pool of acceptable answers (detailed explanations of answers welcome as well):
- True for sure
- False for sure
- Strong potential but not guaranteed
- Possible according to my best friends cousin who read a law book once
- Depends on other court cases
- Answer that requires more than the above short responses
Court case questions:
1) Yesterday I posted a forum rambling where somebody said there was another lawsuit coming from the city/state concerning “fraud issues” with the Renton proposal. Answer pool response?
2) We keep hearing that the city might have another suit going after financial losses caused by the ‘Major Leaguing’ practices of the PBC. Nothing yet. Answer pool response?
3) We keep hearing that the Yarmuth will head towards anti-trust yet I think I read somewhere that Yarmuth himself said they weren’t. Nothing yet. Answer pool response?
4) We keep hearing that the feds, via Cantwell/Murray, could take a look at the situation. Nothing yet. Answer pool response?
5) We keep hearing that if the BOG votes for relocation (as they did) then Stern, the NBA, and the BOG would be added to some kind of suit. Nothing yet. Answer pool response?
6) We keep hearing that the NBA and OKC might be drug into this in some sort of tampering case. Nothing yet. Answer pool response?
7) We keep hearing that the city businesses will file a class action looking for losses caused by PBC. Nothing yet. Answer pool response?
9) We keep hearing about eminent domain potential. Nothing yet. Answer pool response?
10) Its been mentioned that PBC/SOS interaction and documents might come into play. Did they really say or do anything damaging? Can SOS/BR shed light? Answer pool response?
Random questions that just pop into my head from reading SC.COM:
11) I read awhile back that SOS met with the NBA and PA on a trip to NY. Answer pool response? What happened in both meetings?
12) I posted about Rossi on the radio talking about his “inside information” he’ll share on his next radio appearance. Answer pool response?
13) I heard that Squatch was canned and is now living with his cousins in the mountains. Answer pool response?
Thats all for now.
May 9th, 2008 at 1:11 am
Of course he can appeal, which will keep the team in the Constructive Trust until such time as the appeal process is complete. If Schutlz loses he can appeal as well. The team will remain here the entire time.
Keep in mind that the legal battle with Major League Baseball over the Pilots went on 6 YEARS until the league agreed to settle.
Glenn, to answer your question, the team has gone down in value. First he sold off the Storm, then he ditched Allen and Lewis, lost sponsors and season ticket holders, and is getting closer to the end of the arena lease without a new one in place. It would be hard to imagine this team being worth more than $250 million if he managed to get it into OKC after 2010. So if the business model of the NBA is that you make your money when you sell then how long does he have to be in OKC before the team increases in value more than 2 fold?
This could be a never ending nightmare for Clay Bennett.
May 9th, 2008 at 6:01 am
“Glenn, to answer your question, the team has gone down in value.”
I’d venture that you’re wrong on this one Steven. He overpaid for the asset to begin with, that’s a given. However, I still believe that today he could offer it on the open market and at a minimum be made whole.
Now once he locks into the OKC market and there’s no outs on the lease he probably loses a lot of the ‘possible short term profit’ that at this point he could make if he chose to sell.
May 9th, 2008 at 7:07 am
“If McCain doesn’t win the election it could get much, much different for our Oklahoma billionaire friends. If you have a billion dollars then in all likelyhood less than $400 million will be liquid. The rest is tied up in assets. You’re talking about giving up 20% of your net worth and 50% of your available capital on a hobby that will likely lose money every year you own it. Also you burn 2 full years on crap that frankly you don’t have time for. its a big cost for anybody.”
Wow, you sound like a soundbite for the DNC. You think either political party has a strangle hold on billionaires. Don’t matter what party is in power, money people do well.
And you argument (if you think it still makes sense)applies to money people including Ballmer and anyone else.
Really expected more out of you, Robinson.
May 9th, 2008 at 7:10 am
“I’d venture that you’re wrong on this one Steven. He overpaid for the asset to begin with, that’s a given. However, I still believe that today he could offer it on the open market and at a minimum be made whole.”
Maybe, but unfortuneately, I would have to agree with Pyeatt on this one. That’s why Seattle will be a barren landscape for basketball if the Sonics leave. Who would want to own a team in this toxic atmosphere?
May 9th, 2008 at 7:15 am
“And you argument (if you think it still makes sense)applies to money people including Ballmer and anyone else.”
Only if you take the arguement from ‘industry’ to cross-sectional as you’ve attempted by calling it ‘money people’. There’s a good chunk of the money which the PBC has capitalized on has been due to the run up in one sector, and its a sector which has been known to have huge swings. Microsoft is not immune to market forces, but its not nearly as sensitive to the political arena as oil/energy is.
The rest of Brian’s arguement is textbook stuff, if you don’t agree with it you simply don’t understand the basis for how people list thier worth.
May 9th, 2008 at 7:25 am
“The rest of Brian’s arguement is textbook stuff, if you don’t agree with it you simply don’t understand the basis for how people list thier worth”
I was not commenting on that part of it, however if you are worth a billion, you can leverage 12 to 15 times that amount in cold cash very easily and generally cheaply.
Bottom line is this type of daydreaming is futile.
May 9th, 2008 at 7:44 am
Major kudos from Steve Kelley this morning. Congratulations, guys. All the hard work is starting to get serious recognition:
http://seattletimes.nwsource.com/html/stevekelley/2004402280_kelley09.html
May 9th, 2008 at 7:48 am
Nice Kudos from Steve Kelley of the PI to Brian and SOS for their part in making life difficult for Clay Bennett. Without the effort of the grass roots organization this team would be gone.
http://tinyurl.com/3k7mlv
May 9th, 2008 at 7:49 am
Oops, Kelley works for the Seattle Times.
May 9th, 2008 at 7:55 am
“I was not commenting on that part of it, however if you are worth a billion, you can leverage 12 to 15 times that amount in cold cash very easily and generally cheaply.”
No you can’t.
If you’re lucky and the revenue streams will support it you might be able to leverage yourself to a position where you can get 1.2 to 1.5 times that amount, not 12-15.
Unless you have some other asset to cross reference.
May 9th, 2008 at 8:24 am
Whatever the amount you can “leverage” you are still borrowing the money. There is a cost to that. Leveraging whatever amount is more cost and expense. Despite the bungling of this deal, I am going to assume Clay and PBC know quite a bit about the cost of money.
As much time as I spent thinking about this stuff, I never broke it down into a percentage of total and liquid assets. I think Brian’s number are a bit low for the entire group but a great point to consider. Colors my perspective a bit.
May 9th, 2008 at 8:26 am
Good to see so many financial experts on this board. My whole point is….going down 200 mil in any industry is generally a bad thing….Producer….I will give you the opportunity to spin this in some way if you would like.
Let’s not forget that aside from losing 200 mil(if a move were to happen) Kevin Durant won’t be re-siging with a PBC-owned team in OKC.
-40 mil in losses for first 2 seasons
-Court dollars
-Any losses incurred while owning the team before being put into trust
All of that will be for nothing. Again, don’t care who the heck you are…losing 50-70 mil and coming away with nothing but a bad reputation is going to make Clay a laughing stock.
May 9th, 2008 at 8:44 am
None of the Bennett group owns 100% of the Sonics, obviously. Let’s take one of the owners. I think Tom Ward is worth around $2 billion. He probably owns about 1/3 of the team (if someone wants to look up the exact numbers, that would be fine, but I’m too lazy).
So, if Ward owns 1/3 of the Sonics, and Ward’s net worth rose by $500 million in one year, and the Sonics lost $30 million in that year, then Ward’s losses would have been 1/3 of $30 million or $10 million.
So Ward’s net worth rose by $500 million in 2007, and he lost $10 million on the Sonics in 2007, which he could use as a tax write-off. You really want to make the argument that Ward is getting “bled” by owning the Sonics? Really?
If Ward is worth $2 billion, and that is rising by $500 million per year, and his 1/3 ownership of the Sonics is costing him $10 million per year, you truly think that is a problem for him?
Maybe it is. But I sort of doubt it. I don’t think any of us really knows if that is a problem for Bennett’s group, or not.
May 9th, 2008 at 8:44 am
Good to hear from you Brian. I dont know what it is about you, but for some reason when you put your .2 cents in, I always feel better.
Gotta say HELL YAH Durant. I love his comment about that FAT MOFO! This kid is worth fighting for. For those of you that attended that last game against Dallas and saw Durant lead on the crowd chanting S.O.S., tell me you didnt get chills down your back.19 years old, and even though the team was told to do as little as possible to be fan friendly and we all saw the entire year as far as interviews or any kinda coverage about the Supes, yet this kid says FU you FAT MOFO and cheers on the fans chants. By far my favorite player. No question. SAVE OUR FFFNNN KD LED SONICS!
May 9th, 2008 at 8:57 am
Where on earth does the Sonics purchase bring up someones net worth 500 mil? That team is only worth 270 mil. Either way, it was brought up earlier that they borrowed 90 mil from the NBA for the purchase….not to mention(as Brian put it) not all the assets that these guys have are liquid…so you really can’t just “mobilize” large chunks of cash at will.
Also, the whole point, again, is…if this team were to end up in OKC they would be 200+ mil in the hole. And there is no VIABLE STRUCTURE for recovery. Goodness gracious. You don’t get where you are as a business man by throwing dough to the wind year in and year out without a compensatory objective. The Sonics in OKC, without Kevin Durant…is not stable.
May 9th, 2008 at 9:20 am
“So, if Ward owns 1/3 of the Sonics, and Ward’s net worth rose by $500 million in one year, and the Sonics lost $30 million in that year, then Ward’s losses would have been 1/3 of $30 million or $10 million.”
But there is one little problem with this analysis, and I’ll grant that it goes the same way with Balmer, and that’s using net worth as a liquid number.
For example, lets say I am worth 2 billion dollars, but 1.5 billion of my ‘net worth’ is situated in the shares of XYZ stock of the company I run. Another 200 million is in other assets which are not liquid and I have 300 million in relatively liquid funds.
Using your example it would all depend on where the ‘500 million’ gain comes from. If that 500 million is all in the appreciation of his stock in ‘XYZ’ company while his relatively liquid assets grew at a much smaller rate, the 10 million dollar potential loss becomes a much different issue.
Where it becomes problematic really is if you’d see a 600 million dollar gain in XYZ and 100 million dollar loss in the other investments. These big investors, Ballmer included can only sell off certain portions of thier investments in the companies they control due to SEC regulation.
Could these guys easily live through a money drain, absolutely. Is it something tehy’re going to be willing to do? What if the national political landscape changes and the industries they’re situated in have cyclical problems? I don’t know the answers, just think its fair to ask the questions.
May 9th, 2008 at 9:23 am
I agreee Big Dipper…. The whole question of how much finacial loss Clay & his fellow owners are able/willing to absord is simply uncertain. We can’t really know if they will fold soon in the face of finacial and other pressures or if they are in this to the bloody end no matter what the cost.
So… We are left with 2 main things to do:
1. Make them stay - Force them to face the reality of 2 more years in Seattle and all the associated problems and risks and see what they do. We cannot be intimidated or discouraged by any loud and arrogant verbal statements now from Stern or Clay about “The Sonics will move to OKC - Period - it’s just a matter of when etc.” We have to assume that could be BS poaturing and call their bluff.
2. Try to get an arena deal done ASAP - Be able to offer the NBA a new arena with a positive local ownership group to keep the team in this outstanding market. This could give Stern & the NBA owners an “Out” - a better option than 2 years of lame duck etc. - It could force some owners to start to move off of supporting this move to OKC. It becomes an obvious positive for the league to keep the team here - remove future PR & litigation hassles/risks - and simply clean the mess up. But they never will support us until we get our arena act together. It is sad - but our Olympia leaders have not been leaders in this.
So - keep forcing the issue to keep the team here for 2 years - then see what Bennett does - and find an arena solution ASAP.
Give the NBA a better option than 2 years of lame duck etc. & hopefully they take it. If not - on to Howard’s case as likely our last hope.
May 9th, 2008 at 9:25 am
Joshu: Tom Ward’s net worth has little to do with the Sonics. He’s worth $2 billion because of his oil and gas business. It is his share of his oil and gas business which caused his net worth to rise by $500 million in one year — that had nothing to do with the Sonics. He can use that money from his “real” business to pay for his hobby of owning the Sonics.
The Sonics are not a business to these guys. They are just a hobby. Like owning a $200 million yacht. Just one of Paul Allen’s yachts costs him $20 million to operate and maintain EACH YEAR. But some rich guys love to own yachts. Allen also owns 2 other yachts, and I believe two 767’s.
http://www.yachtcrew-cv.com/paulallen.htm
The Sonics are costing Bennett’s group a lot of money. But they are making so much money in oil and gas that they can afford it, probably. Just like Paul Allen made his fortune from Microsoft, and spends a little of it each year running his hobby, the Trailblazers.
May 9th, 2008 at 9:38 am
It is his share of his oil and gas business which caused his net worth to rise by $500 million in one year — that had nothing to do with the Sonics. He can use that money from his “real” business to pay for his hobby of owning the Sonics.
As Scott notes above, he can only use that money if it is easily turned into liquid cash. If he had to sell part of his ownership in his oil and gas business in order to get th liquid cash to dump into the Sonics, he might not be so willing to or easily able to do this. Often times, majority shareholders that also have management responsibilities are limited in the amounts and volumes of shares they can dump due to SEC regulations. There may also be other issues going on within the other company that might not make it advantageous to dump shares (ie. a minority owner he’s not fond of that may be trying to get more control of the company), we just don’t know these things.
Anyways, having their “net worth” increase doesn’t mean their liquid assets increased a proportionate amount.
In addition, if their liquid assets have been sitting in individual equity stocks or mutual funds, there is a good possibility they have actually lost value over the past 10 months.
There is no doubt there is a lot of wealth in the PBC, how much liquid money they have readily available and are willing to continue throwing at their Sonics investment is something that will just have to been seen.
May 9th, 2008 at 9:47 am
I understand big, my whole point 10 mil here and 10 mil there adds up. Going 200+ mil in the hole is astronomic, and while they feel they can break even in OKC, I believe that is at optimum operating levels(maximizing fan attendance, superstar figure on team…etc.). In all reality KD isn’t going to stay and they wouldn’t have any money to use until 2010…the first year they got there. I am sorry, but I just don’t see that team doing anything but lose money in OKC. So that 200+ mil in the hole is a whole new animal when you throw in operating losses AFTER all the revenue sharing and the like. Whether or not this is a hobby for them it is still a BUSINESS. A yacht is not a business. There is a good chance that this team if it were to move to OKC would 2 good years of attendance, breaking even(possibly) and then 10-15 mil a year losses…again, take that into account and then add the fact that there is that 2 year out clause in the lease…cmon’ man, I don’t by that this is JUST a hobby…that’s garbage….
May 9th, 2008 at 10:03 am
JJ Says:
If not - on to Howard’s case as likely our last hope.
That would require an arena solution as well. If Howie managed to win, there wouldn’t be anyone to step up to buy the team without an arena deal. Then what? Does the team go back to Bennett?
May 9th, 2008 at 10:05 am
Josh… Your point above makes logical sense - but I also think we need to recognize we simply cannot know what is really inside the hearts and minds of Clay & his fellow owners in terms of this main question:
“How much financial harship/loses are they able and willing to absorb to get their NBA team to their hometown in OKC?”
IMO - we simply cannot know -it is not all about logic - peoples values and priorities are different. This is a “Hobby” as suggested above. We can’t know what these guys really will or won’t do in this area. All we can do is force the issue and find out & hope for the best.
If they are in this to get the team to OKC regardless of the cost - Howard’s lawsuit is likely our best/only hope. I don’t know if they are or not - My best guess is they have a limit and 2 years of lame-duck status in Seattle will push them over that limit. Clay & Stren will want an “OUT” soon if they cannot get Nichols to settle the lease suit. But who knows.
What we need to do is get an arena deal done to offer them an “Out” if they want “Out” in June, when they are staring at 2 years of lame-duck status in Seattle. (Assuming Nichols does not cave to a likely huge settlement offer coming soon)
May 9th, 2008 at 10:05 am
The rest of Brian’s arguement is textbook stuff, if you don’t agree with it you simply don’t understand the basis for how people list thier worth.
- Producer simply doesn’t understand the basis of many, many things…why not add how people list their worth as one??
There is no doubt there is a lot of wealth in the PBC, how much liquid money they have readily available and are willing to continue throwing at their Sonics investment is something that will just have to been seen.
- $200 Million dollars is a lot of money regardless of how much you have in your pocket book. I doubt Bill Gates would just shrug off a $200 million dollar loss and that would be the equivelent to us spending $100 for dinner.
One of the reasons (as listed above) is that these people don’t just have all this money in a big coin vault (like Scrooge McDuck), but it is invested in their companies. If anyone is questioning the volaitility of the energy/oil market they might want to check out how all those Enron Millionaires are doing these days.
But another reason that people dont like to lose $200 million dollars is that $200 million dollars can be used to fund other projects and actually make them MORE money.
It seems odd that one would argue that they are willing to lose money when Howard Schultz, who is just as wealthy as they are wanted no part of that and finally decided to find a new buyer. Sure Howie might have been disenchanted with his work at getting a new arena…but he also didn’t like losing his money…one reason why billionaires are so rich is that they are greedy SOBs most of the time.
May 9th, 2008 at 10:05 am
Josh: no offense, but what you think about the Sonics chances of making money in OKC is completely meaningless. These guys have studied it, and seem satisfied. I don’t think they are interested in your opinion, or my opinion, on that. Don’t you think they have a slightly better idea of the financial situation in OKC than you do?
As far as their assets being liquid or not, who knows. Some people here seem to know a lot about investments. If Ward’s money is in stock in oil and gas companies, does stock like that pay dividends, or not? If it did, what might the yearly dividends be on say, $1.5 billion of stock in an oil and gas company? Any idea? Or stock like that does not pay dividends? I know some stocks pay dividends, and others do not.
What are the chances of these guys getting income from dividends in their stock every year?
I know I read articles that the Schultz group was using their Sonics losses as tax write-offs, so how does that figure into the equation?
And yes, I think the Sonics are a hobby for Ward and McClendon. Maybe not as much for Bennett. At any rate, you have to figure the Sonics are still worth well over $300 million, and their value will keep going up over time. If these guys were looking for an investment, rather than a hobby, they would not have chosen the Sonics, in all probability.
May 9th, 2008 at 10:08 am
Josh - I know you are saying owning this team for caly is NOT a “Hobby” - Maybe the word is not the best & it is different from a “yacht” - but the point is simply that owning an NBA toeam for many of these owners is a very different type of entity than a regular business. It is something they do for fun and ego etc. - it is usually not their main business - it is an extra deal they do with all the millions/billions they have to figure out how to spend.
May 9th, 2008 at 10:09 am
Another thing to remember about a person’s net worth is that since much of it is tied into stocks that lead to a controlling interest of their companies there is a certain amount of money they could not touch even if they wanted to. Are they going to sell off enough of their interest in their companies to facilitate this hobby…and make themseleves vulnerable to losing the businesses they helped make successful?
No one knows….but I think most would think it is somewhat doubtful.
May 9th, 2008 at 10:11 am
Josh: no offense, but what you think about the Sonics chances of making money in OKC is completely meaningless. These guys have studied it, and seem satisfied. I don’t think they are interested in your opinion, or my opinion, on that. Don’t you think they have a slightly better idea of the financial situation in OKC than you do?
- Well as Aubrey said…they think that in OKC they would basically break even…so putting themselves $200+ million in the whole means they would need to wait at until the franchise was worth $550 million to ever come out ahead.
May 9th, 2008 at 10:13 am
Josh - I know you are saying owning this team for caly is NOT a “Hobby” - Maybe the word is not the best & it is different from a “yacht” - but the point is simply that owning an NBA toeam for many of these owners is a very different type of entity than a regular business. It is something they do for fun and ego etc. - it is usually not their main business - it is an extra deal they do with all the millions/billions they have to figure out how to spend.
- Also, this is simply not true…almost every owner treats their team like a business. This is why so many owners are not willing to go over the luxuary cap. You have a few owners who truly treat this as a hobby (Cuban, Allen, Dolan)…but all history indicates that the owners DO NOT want to lose money when they field a team.
May 9th, 2008 at 10:30 am
Dick T. - Point above well taken that even if we win Howard’s law suit we will need an arena solution. I understand and agree.
The arena always has been and still is central to this whole issue. Now maore than ever in that if we had an arena solution and Clay/Stern do NOT want to face 2 years of lame-duck status in Seattle - we need an arena solution to give them a postive “Out” that the other owners could support.
If clay wanted an “OUT” I wonder if he would just put the team up for sale in June - in the open market - and see what happens. Without an arena we might be vulnerable to another city buying the team with a different kind of pledge that Clay gave us 2 years ago - They could say - yes we are buying the Sonics now but no we do not intend to keep them in Seattle - no deception here - we will move them to San Jose, Vegas, KC wherever in 2 years unless the city lets us out of their lease. Clay might do this as part of trying to get the hihgest price for the team if he decides to sell.
May 9th, 2008 at 10:38 am
Well considering that billionaires can blow hundreds of millions of dollars without batting an eye, or so we guess, I don’t see why Ballmer’s group would be waiting on the sidelines to aquire a team that can’t get an arena deal done. What’s 75 million more to seal the deal? Ask Producer, these guys spend $75 mil on their breakfast each morning.
May 9th, 2008 at 10:51 am
First let us not get caught up comparing Clay Bennett and his partners to Paul Allen and Steve Ballmer.
When you are “Paul Allen rich” you can buy $200 million yachts with pocket change.
Ballmer alone is worth much more than all the Oklahoma City ownership group combined.
To put it perspective. If you have 1 million dollars many would consider you wealthy. You come to King County and want to buy a place to live and a condo costs you $350,000. Cuts into your cash pretty deep. Then consider you might have to spend $200,000 more to upgrade to a house when you bring your family up a year later. Doesn’t put you in a great cash position anymore does it?
If you were worth $100 million and you came to King County you could buy a waterfront home and wouldn’t even dent your pocket book.
That is the difference between Allen and Ballmer and Bennet and his friends.
It is one thing to be worth $1 billion on paper and another thing to have it in cash under the mattress. A guy like Bennett can drop a million here or there and never miss it but he can’t drop $100 million here or there without it putting a serious bind on his finances. Yes his risk is spread out among other guys worth a billion or two but they also have other financial obligations that require capital and you can bet they don’t keep hundreds of millions sitting around that can be bown on a whim.
No matter what the rising price of oil might do for their companies cash position that doesn’t mean that money went directly into their pockets.
May 9th, 2008 at 10:56 am
Not all owners have as much wealth as the Bennett group. Look at this list of owners at Hoopshype. Click on the “owners” dropdown, and you can see what they say is the net worth of most owners. Most NBA owners are not worth as much as Ward or McClendon, individually. Everyone is so used to “billionaires”, but many NBA owners are not billionairs.
http://hoopshype.com/owners/donald_sterling.htm
Here are a few:
Leslie Alexander: $80 million
Donald Sterling: $500 million
Herb Kohl: $279 million
Chris Cohan: $325 million
Joe and Gavin Maloof: $200 million
Larry Miller: $480 million
Wyc Grousbeck: $360 million
Mark Cuban: $1.8 billion
Ward and McClendon are EACH worth over $2 billion. Most NBA owners are not nearly that rich. Many NBA owners likely could not afford to lose as much as the Benett group can afford to lose.
It would be interesting to know what sort of salaries Ward and McClendon pay themselves as CEO’s, or whatever title they hold, of their companies. And what about yearly income from dividends? Anyone know anything about that? I admit I don’t know if they would be getting dividends on that type of stock or not.
May 9th, 2008 at 10:56 am
MYK… Yes - owners care about making money - maybe my analogy is weak. I simply would say that for many of these owners their whole involvement in being an NBA team owner is often drive and influenced by different dynamics that just making more $$$$.
Your observation on NBA owners reluctance to go over the salary cap is a good one. As i say above, my best “guess” is Clay and his fellow owners do have a limit for what $$$ losses they will absord in this - and a 2-year lame duck status in seattle probably forces them over that point. Let’s hope so.
But I also say we are all speculating in terms of this question:
“How much money are Clay & his fellow owners able & willing to lose to get themesleves an NBA team in OKC?”
It is interesting and fine to speculate - but we simply do not know the answer to that question.
So let’s force them to stay for 2 years and apply other pressure alongside this reality and find out.
May 9th, 2008 at 10:57 am
“If it did, what might the yearly dividends be on say, $1.5 billion of stock in an oil and gas company? Any idea?”
Do you have any idea what a dividend really is?
On a pure fundimental level if the dividend is $1 per share per year and each share was worth $100 (note simple numbers for simple calc’s), this would leave the owner with $15M worth of ‘dividends’, however on the stock price the dividend being paid out directly comes off the price of the stock. So if you were to assume that no trades were made on that day and the dividend were paid out (obviously this doesn’t happen, but were talking about the theory behind the mechanism) the stock price would drop to $99 a share and the stock total would be worth 1.485M. The net of this transaction is zero.
“I know I read articles that the Schultz group was using their Sonics losses as tax write-offs, so how does that figure into the equation?”
Negative K-1 income would be a reduction on the parent companies books and thus in the end a reduction on the taxes paid by the individual. They still would lose though.
May 9th, 2008 at 11:08 am
Forbes ranking of the world’s billionaires (out of roughly 500):
Ballmer ranked 15th
Ward and McCLendon are not listed. If they were worth 2 billion each, then they’d both be listed around 205-210.
May 9th, 2008 at 11:09 am
http://tiny.cc/SZIci
May 9th, 2008 at 11:10 am
One question I have, and maybe Steve Pyeatt can answer it is this: if the Sonics are put in a “trust”, if Schultz wins his suit, who would pay the $20 million per year in losses it takes to operate the team while it is in that trust? Schultz? I mean, if the courts take the ownership away from Bennett’s group, I don’t see how they could make Bennett’s group keep paying the losses to operate the Sonics. So who would do that?
May 9th, 2008 at 11:12 am
I think we all understand that we have no idea how much money the ownership group is willing to lose. The debate here seems to be on just how rich these guys are…
May 9th, 2008 at 11:13 am
If Ward and McClendon were worth 1 billion each they’d be ranked at about 445.
May 9th, 2008 at 11:22 am
Good question dipper - maybe they rule Bennet has to pay losses until a new owner takes ownership?
May 9th, 2008 at 11:26 am
“Ward and McCLendon are not listed. If they were worth 2 billion each, then they’d both be listed around 205-210.”
Tied for 220th at 2.1 Billion.
May 9th, 2008 at 11:29 am
“I mean, if the courts take the ownership away from Bennett’s group, I don’t see how they could make Bennett’s group keep paying the losses to operate the Sonics. So who would do that?”
The group that buys the team probably gets the debt responsibility.
May 9th, 2008 at 11:37 am
But where does the money come from to operate the team while it is in trust? Does the trust have the ablility to borrow money to run the team?
May 9th, 2008 at 11:39 am
If Schultz is winning his case, he can amend his claims and/or transfer his rights to third party individuals or groups. I expect him to amend to include damages in addition to receiving the team back. Damages could include loss of value of the team and future costs to bring it back. If the courts find that the PBC induced the transaction through fraud, then Schultz should be made whole.
The Schultz suit casts a huge veil of uncertainty over the PBC. If they lose the June suit and have to keep the Sonics in Seattle for two more years, then they will sell the team with the proviso that Schultz dismisses his suit. Alternatively, the PBC may consent to an order in favor of Schultz as a means of voiding their OKC lease (without seeing the lease, I don’t know what provisions may allow them to escape the lease without paying mega-damages to OKC).
May 9th, 2008 at 11:43 am
http://www.orlandosentinel.com/entertainment/sns-ap-forbes-400-list,0,3452958.story?page=12
This shows Ward and McClendon each worth $2.1 billion, and tied for 220 in the U.S. — not in the world. Although, I can’t tell for certain if those are the latest figures, or maybe a year old. Amazing how many billionaires there are now, just in the U.S.
May 9th, 2008 at 11:45 am
“But where does the money come from to operate the team while it is in trust? Does the trust have the ablility to borrow money to run the team?”
How long do you expect it to be in trust?
Trusts always have the ability to take out loans.
I don’t know what the plans would be, but I don’t see them having the team in trust as a long term solution. Probably only as long as it would take for owners to approve the sale.
May 9th, 2008 at 11:49 am
“Do you have any idea what a dividend really is?
On a pure fundimental level if the dividend is $1 per share per year and each share was worth $100 (note simple numbers for simple calc’s), this would leave the owner with $15M worth of ‘dividends’, however on the stock price the dividend being paid out directly comes off the price of the stock. So if you were to assume that no trades were made on that day and the dividend were paid out (obviously this doesn’t happen, but were talking about the theory behind the mechanism) the stock price would drop to $99 a share and the stock total would be worth 1.485M. The net of this transaction is zero.”
We were talking about liquidity. If Ward had $1.5 billion in stocks that paid a 1% dividend in 2007, that would mean Ward had $15 million in income in that year alone, from his stock. That is cash that he would receive without having to sell any stock, right? I did not ask about dividends as if they would increase his net worth, but just to see how easy it would be for him to come up with $10 million per year or so in cash.
May 9th, 2008 at 12:04 pm
From jsut a liquidity standpoint yes. Although his actual cash taken out from the example would be more along the lines of 10M end game.
For fun I looked up McClendon’s (good lord the internet rules!) dividend information from CHK and he grossed 8.7 million in dividends FYE 12/07.
CHK is really a roller coaster company. Love to have it in the good times, but in the bad it’s got some stinker tendencies.
May 9th, 2008 at 12:06 pm
Myk, you are right on…if this was a “hobby” and not a business you would see a much different mentality from the league as a whole. The fact is, it is STILL a business, and if you run it differently you will go out of business…this is not even close to maintaining a yacht. You have to deal with employees, building leases, player salaries, marketing expenses, you need a legal team to make sure everything is kosher…guys…..it is STILL a business. I can understand them being in it to have fun, but goodness gracious….the bottom line is what got this team in trouble in the first place.
May 9th, 2008 at 12:17 pm
Ok, guys, my bad for squabbling over such petty things…I really do respect your guys’ opinions. If there is one thing we can all agree on…is that this thing keeps looking better and better every day…even if marginal at best sometimes. SOS and Co. deserve a lot of thanks and credit….but one thing that is not getting any coverage is how hard this City and it’s fans have fought for all 3 of it’s professional sports franchises. We deserve more respect than we get from the Nationwide sports scene. No city has been asked to fight this much, or this hard. But we have. The Supers are LOOOONGGG from gone….so let’s just keep it up.
May 9th, 2008 at 12:19 pm
As far as business vs hobby, I was just making the point that owning the Sonics is costing Ward and McClendon less per year that Paul Allen pays just to keep one of his yachts. The point being that Ward and McClendon don’t own the Sonics to make money — they have other businesses that make them tons of money.
Ward’s money is probably mostly in Chesapeake Energy stock.
Today, that stock is selling at about 56.5.
At the end of last year, on 12/31/007, it was selling at 39.2.
You think Ward might be worth more today than he was 5 mongths ago, when he was worth around $2.1 billion? If he owned $1.5 billion of that stock on 12/31/ last year, the value of his stock just went up by over $600 milllion in the past 5 months. That is over $100 million PER MONTH!
If those figures are even close to accurate, you think he’s really worried that he might lose $10 million - $15 million on the Sonics this year?
May 9th, 2008 at 12:28 pm
“If he owned $1.5 billion of that stock on 12/31/ last year, the value of his stock just went up by over $600 milllion in the past 5 months. That is over $100 million PER MONTH!”
They’re actually pretty close on McClendon’s portion, however you’re looking at it too singularly. 15 years ago CHK was worth about 15 dollars a share, it ran up to a high of about 44 dollars share in about 97. Think McClendon thought he was doing great then? How about in 2000, when it had dropped back to 27 a share? By the end of 2007 it was back to 39, and due to current energy policies he’s added another 544M so far this year in NW value.
However, you can’t take a 17 dollar, 5 month jump in the middle of an energy boom and use that for your baseline for what its going to in the foreseeable future. With Oil Companies there are boom and bust cycles, now is the perfect time for OKC to work to get a team, they’ve got a solid 3 year finanacial backing. But what happens during the inevitable bust cycle?
Looking locally, WAMU had a 8 month stretch in the early 00’s where it jumped nearly the same amount due to regulation boom. Checked how the bust effected them?
May 9th, 2008 at 12:46 pm
Someone is predicting that oil will hit $200 per barrel before long. There will be ups and downs, for sure, but I think energy is a good place to have investments over the long term, don’t you? When did McClendon first get involved in Chesapeake Energy?
Ward and Mclendon don’t need their net worth to keep climbing at the current pace. If it just levels off at even 5% per year average growth, they have no worries forever.
May 9th, 2008 at 1:21 pm
The Big Dipper Says:
May 9th, 2008 at 11:10 am e
“One question I have, and maybe Steve Pyeatt can answer it is this: if the Sonics are put in a “trust”, if Schultz wins his suit, who would pay the $20 million per year in losses it takes to operate the team while it is in that trust? Schultz? I mean, if the courts take the ownership away from Bennett’s group, I don’t see how they could make Bennett’s group keep paying the losses to operate the Sonics. So who would do that? ”
Well, win after he spends at least 20 million this season.
Agree that expendatures are the responsibility of the owner. The trust lasts until another owner is identified. So, the new owner might have to assume the debt of the trust.
How did the Atlanta Hawks get to sign Joe Johnson?
The owner, that’s Bennett now, can not damage to property or they would pay if the team was transferred back. The new owner would have to act in the best interest of the team.
between right now and then a long term arena situation that is acceptable to the new owners has to be in place, that’s funding, scope, cost, lease terms, making the team profitable past 2010.
The new owner might take a loss in the first year or two, though a Keyt Arena renovation would not require a temporary home and would only take about two years, for example. Maybe a hockey dome falls out of the sky, we shall see.
BTW, somebody wayyyy up this thread asked why somebody would borrow 90 million when buying a property if they had half of a billion dollars. The the tax advantages of borrowing money, and losing money, as long as you are able to turn a profit at some point (is it 5 years) are, so I have heard, pretty good. It is darn near free money (interest anyway) and the franchise should appreciate at a faster rate than the interest on the loan. It all comes back in resale, and more, so I have been lead to believe.
Not to throw dirt here, but wealth and cash are not the same thing.
2.1 billion in assets is nothing like 2.1 billion in cash. If I have 1 share at 39 dollars and I went to the store to but a Sonics shirt I would not whip out my stock report and say give e a shirt, I would pay cash or charge it. Onlike the team, the shirt will not go up in value at a faster rate than the interest debt from charging it.
The team, if given back to its rightful owner, Howard, would go back at a given cost as outlined in the purchase agreement. If Bennett borrowed against that asset, or other assets for purchase, that’s his problem (no GAP insurance there).
Maybe somebody that knows something about how much money Howard really lost in operating the team could speak to this. I am not an accountant, lawyer, or tax lawyer.
May 9th, 2008 at 2:18 pm
However, you can’t take a 17 dollar, 5 month jump in the middle of an energy boom and use that for your baseline for what its going to in the foreseeable future. With Oil Companies there are boom and bust cycles, now is the perfect time for OKC to work to get a team, they’ve got a solid 3 year finanacial backing. But what happens during the inevitable bust cycle?
- Also, there are other things to realize:
1) Assuming that most of his wealth is from the company he owns/runs he cannot use a significant portion of that wealth cause he would no longer run the company. It’s like Bill Gates…he might be worth $58 billion dollars, but alot of that is tied up in MSFT. If he wanted to make himself mostly liquid to support some effort…he would no longer be the head guy at MSFT (I know this is an extremely simplistic way to look at things)…
2) We are looking at their money in a vaccuum. Like the only thing they spend their cash on would be the Sonics. I am sure all those guys have tons of other areas where there cash is needed. House Payments, Car Payments, Other Hobbies, Charitible Organizations, Wives, Kids, Misteresses…
We all spend a signfiicant portion of our income to “live” each day and so do these people. They just have much higher bills and tastes to account for.
All of the OKC owners might be stubborn, stubborn people who are willing to risk their financial security to be seen as “heroes” in their hometown. However, that does not mean the money they are losing is not absolutely driving them crazy. I mean we already know some of the ownership group bailed when they knew they’d be in Seattle for a few year…
May 9th, 2008 at 2:40 pm
“Someone is predicting that oil will hit $200 per barrel before long.”
But how good is that for them? Say (insert candidate here) wins the general election and the first thing they mandate is a 15 year plan to help the US become financially soluable by limiting our dependence on foreign oil. Oil may still rise to $200 a barrel, but if there’s not the massive supply market there is now the companies that produce it are in trouble.
“There will be ups and downs, for sure, but I think energy is a good place to have investments over the long term, don’t you?”
Depends. I personally like to diversify into some cyclicals and energy companies used to be value plays. As such they’re generally very strong. As a growth play I don’t think they’re nearly as viable long term. What will be most interesting is if something along the lines of a sugar based fuel substitute were to come along. Could an energy company based in TX or OK compete? Or would they become niche industries within themselves.
“Ward and Mclendon don’t need their net worth to keep climbing at the current pace.”
Absolutely, however if you look at the 10 year moving average of CHK its more along the lines of a 1% a year performer. I don’t know the numbers from 2000 but I’d venture that McClendon was in the top 100 at one point, dropped to 750M range before they started getting traction again.
IMO there’s as good of a chance of him being worth 1B in 5 years than there is of him being worth 3B. I’d imagine he’ll hit the 3 mark at some point however.