It's hard to fathom why anyone would value the A's at $2 billion, as recent reports have suggested. Owner John Fisher is reportedly looking to sell a 25% stake in the team, which would equate to a $500 million investment at that valuation. However, this number seems completely detached from reality.
The Debt Dilemma
The key issue is that the $2 billion "enterprise value" does not account for the team's existing debt. To properly calculate the equity value that a potential investor would be buying into, the debt must be subtracted. If the A's have $1 billion in debt, for example, then the true equity value is only $1 billion. In that case, a 25% stake would be worth $250 million, not $500 million.
Fisher appears to be basing this lofty valuation on the assumption that a new ballpark in Las Vegas will somehow double the team's value by 2028. But this is a highly speculative projection with no guarantee of materializing. Potential investors would rightfully be wary of committing hundreds of millions of dollars based on such uncertain future plans.
Lack of Transparency
Adding to the concerns, the A's have not even finalized the budget or construction timeline for the new Las Vegas stadium. Investors would be taking on significant risk without clear information about the project's costs and timeline. This lack of transparency makes it extremely difficult to justify a $2 billion valuation.
Fisher's attempts to sell a stake in the team are not new - he has reportedly been trying for years without success. The reason is simple: the valuation he is seeking is completely divorced from the team's actual financial realities and prospects. No savvy investor would agree to these terms, no matter how much Fisher tries to spin it.
A Risky Proposition
Ultimately, Fisher is asking potential investors to take on an enormous amount of risk with little upside. From the unknown stadium costs to the team's shaky attendance and revenue projections, there are too many variables working against the $2 billion valuation. Unless Fisher is willing to significantly adjust his expectations, he is unlikely to find any takers for his 25% stake offering.
Part 1/3:
The Challenges of Valuing the A's
A Questionable Valuation
It's hard to fathom why anyone would value the A's at $2 billion, as recent reports have suggested. Owner John Fisher is reportedly looking to sell a 25% stake in the team, which would equate to a $500 million investment at that valuation. However, this number seems completely detached from reality.
The Debt Dilemma
The key issue is that the $2 billion "enterprise value" does not account for the team's existing debt. To properly calculate the equity value that a potential investor would be buying into, the debt must be subtracted. If the A's have $1 billion in debt, for example, then the true equity value is only $1 billion. In that case, a 25% stake would be worth $250 million, not $500 million.
Part 2/3:
Unrealistic Assumptions
Fisher appears to be basing this lofty valuation on the assumption that a new ballpark in Las Vegas will somehow double the team's value by 2028. But this is a highly speculative projection with no guarantee of materializing. Potential investors would rightfully be wary of committing hundreds of millions of dollars based on such uncertain future plans.
Lack of Transparency
Adding to the concerns, the A's have not even finalized the budget or construction timeline for the new Las Vegas stadium. Investors would be taking on significant risk without clear information about the project's costs and timeline. This lack of transparency makes it extremely difficult to justify a $2 billion valuation.
Challenging the Narrative
Part 3/3:
Fisher's attempts to sell a stake in the team are not new - he has reportedly been trying for years without success. The reason is simple: the valuation he is seeking is completely divorced from the team's actual financial realities and prospects. No savvy investor would agree to these terms, no matter how much Fisher tries to spin it.
A Risky Proposition
Ultimately, Fisher is asking potential investors to take on an enormous amount of risk with little upside. From the unknown stadium costs to the team's shaky attendance and revenue projections, there are too many variables working against the $2 billion valuation. Unless Fisher is willing to significantly adjust his expectations, he is unlikely to find any takers for his 25% stake offering.