Andrew Bary

The lofty sales price for pro basketball's Boston Celtics announced Thursday highlights the value in Madison Square Garden Sports, the owner of the New York Knicks and Rangers.

It also underscores the frustration that some investors in MSG Sports feel toward Chairman and CEO James Dolan and the Dolan family, which controls the company. They want the Dolans to do something to cash in on the value of those teams, but nothing appears to be happening.

The Celtics are being sold for $6.1 billion to a group led by William Chisholm, highlighting the rising value of sports franchises. The sale process had gone on for several months and resulted in one of the highest prices ever paid for a U.S. sports team.

MSG Sports shares gained on the Celtics news, rising 1.6% to $197.75 Thursday, but the company's market value is $4.8 billion (and roughly $5 billion including net debt). That is a discount to the Celtics sale price even though MSG Sports owns two teams.

The stock has been a disappointment over the past few years. It is down about 10% so far in 2025 and little changed over the past four years despite a bull market for stocks and rising values for pro sports teams.

The Knicks, which play in the country's largest market, were valued in late 2024 by Forbes at $7.5 billion, a premium to the Celtics, which were valued by Forbes at $6 billion. Forbes valued the New York Rangers at $3.5 billion.

That results in a total value of $11 billion for the two New York teams, more than double the current value of the company in the stock market.

Why the big discount? The Dolan family has been unwilling to sell the company, or either one of the teams, spin off one of them, or sell a minority stake in one of the teams.

Pro sports teams are trophy assets that usually offer a big payoff to owners and investors only in a sale. Despite some of the highest ticket prices in the NBA and NHL and lucrative media rights, MSG Sports doesn't generate much in profits.

The company had $18 million of adjusted operating income in the six months ended in December. High player salaries are a big reason for the slim profit. MSG Sports pays no regular dividend.

Jon Boyar, president of the Boyar Value group, says the company could benefit from a spinoff of one of the two teams, or a sale of a minority stake to private equity or a rich person or individuals. The proceeds could used to buy back MSG Sports stock, he says.

MSG Sports investor base includes some sophisticated, sports-savvy holders including Silver Lake, which could participate in any transaction devised by the Dolans.

The company has been resistant to monetizing either of the teams. James Dolan has argued that they are assets whose value keeps rising.

"They are scarce assets," Chief Operating Officer Jamaal Lesane said of the teams on the company's earnings call in February. "They have strong business fundamentals and we don't think that those are appropriately reflected in our current stock price. So we would never rule out the possibility of a minority stake sale, but we also at this time have nothing concrete to report. "

The Celtics are a good comparison to the Knicks because neither MSG Sports nor the owner of the Boston team owns the arenas where the teams play. The Knicks and Rangers play in Madison Square Garden, owned by Madison Square Garden Entertainment, which is also controlled by the Dolan family through supervoting stock.

Boyar argues that MSG Sports is a cheap way to invest in pro sports. It is arguably more attractive than the private sports investment funds that are being pitched now to wealthy investors.

The Celtics sale is a positive signal for the company. Indeed, MSG Sports investors hoped a rich Celtics deal would be a catalyst for MSG Sports stock. But the impact has been muted so far, perhaps reflecting doubts about whether the Dolans will take some action to unlock value in the teams.

With MSG Sports, investors get two of the premier teams in basketball and hockey at deep discounts to their probable values. A big payoff, however, may take time.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 20, 2025 17:08 ET (21:08 GMT)

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