Ownership Talk

[m2002brian]

Still haven’t seen any threads related to ownership news.
I believe we had agreed that we would open up ownership talk after the last playoffs, I could be wrong.

Anyhow.

BIG news expected any time from now until Monday.

https://www.si.com/nba/timberwolves/minnesota-timberwolves-news/wolves-ownership-decision-deadline-is-monday-everyone-is-on-pins-and-needles-01jkb8dxq80v

[minimus]

Somehow I don't expect that either Glen or Lore/ARod group is going to pay huge taxes.

[Nick K]

Decision to be made by Feb. 10th. Maybe sooner.

[Klomp]

Today or Monday...

Read on Twitter

[Domejandro]

Read on Twitter

For the record, Dan Bowling is functionally a Marc Lore mouthpiece on this topic. Dude literally admits to just speculating in that thread. I could see them winning, but I’m unimpressed with his claim.

Read on Twitter

Read on Twitter

[Klomp]

For the record, Dan Bowling is functionally a Marc Lore mouthpiece on this topic. Dude literally admits to just speculating in that thread. I could see them winning, but I’m unimpressed with his claim.

This is true. I was sharing it more to show that they are feeling confident ahead of the ruling. But to be fair, I've heard the same from Glen's side.

[minimus]

There is long list of many things that ARod and Lore should take care of, once they get their ownership:

- get in touch with KG and hang his jersey (the easiest and most entertaining)
- get money for new arena (the most difficult)
- clear up situation with TC contract
- Randle situation
- new contracts of Reid, NAW
- draft

I just hope that they dont f**c up this organisation like new owners of DAL did. ARod and Lore kind of got a second chance because Gobert and Towns trade were made in co-pilot mode with Taylor. But now it is really time to WORK and build something special

[fattymcgee]

Ding, dong the witch is dead!

[Baseline81]

Ding, dong the witch is dead!

Yup. This is from the Star Tribune:

Arbitration experts in the Twin Cities noted ahead of the process that panel decisions are typically final.

“Arbitration awards are virtually unappealable,” said Terrence Fleming, a lawyer at Fredrikson who specializes in business litigation. As a practical matter, Fleming said, the panel’s decision will be final.

Egregious examples of fraud or bias — for instance, if one of the arbitrators didn’t disclose a relationship with either party — could be grounds for appeal, but legal experts said it’s extremely rare.

https://www.startribune.com/minnesota-timberwolves-arbitration-decision-alex-rodriguez-marc-lore-glen-taylor/601220100

[Klomp]

Here's a question that I don't think has been asked....

Everyone knows that the $1.5B purchase price was well under market value. Would Lore and Rodriguez essentially be able to get the team value "reassessed" and put whatever "equity" (I don't know if I'm using the right terminology, I'm not good with real estate-type stuff) back into the team and/or the next arena project?

[Domejandro]

Here's a question that I don't think has been asked....

Everyone knows that the $1.5B purchase price was well under market value. Would Lore and Rodriguez essentially be able to get the team value "reassessed" and put whatever "equity" (I don't know if I'm using the right terminology, I'm not good with real estate-type stuff) back into the team and/or the next arena project?

For what it is worth, they have already sold off some portion of the team at a higher evaluation to cover purchasing the team at the $1.5B evaluation... which raises financial concerns long-term, but oh well.

[thinktank]

Here's a question that I don't think has been asked....

Everyone knows that the $1.5B purchase price was well under market value. Would Lore and Rodriguez essentially be able to get the team value "reassessed" and put whatever "equity" (I don't know if I'm using the right terminology, I'm not good with real estate-type stuff) back into the team and/or the next arena project?

For what it is worth, they have already sold off some portion of the team at a higher evaluation to cover purchasing the team at the $1.5B evaluation... which raises financial concerns long-term, but oh well.

Explain how that adds financial concerns long-term, please.

[winforlose]

Here's a question that I don't think has been asked....

Everyone knows that the $1.5B purchase price was well under market value. Would Lore and Rodriguez essentially be able to get the team value "reassessed" and put whatever "equity" (I don't know if I'm using the right terminology, I'm not good with real estate-type stuff) back into the team and/or the next arena project?

For what it is worth, they have already sold off some portion of the team at a higher evaluation to cover purchasing the team at the $1.5B evaluation... which raises financial concerns long-term, but oh well.

Explain how that adds financial concerns long-term, please.

I think he is referring to the fact that they needed to tap into the asset itself to fund the purchase. Additionally, assuming a traditional partnership structure, all owners share in profits and liabilities. So if the team operates at a loss to try and build equity (spends a lot in tax to increase the value of the team,) there are more voices putting pressure on ALORE to focus on short term profit instead of long term equity.

[Domejandro]

For what it is worth, they have already sold off some portion of the team at a higher evaluation to cover purchasing the team at the $1.5B evaluation... which raises financial concerns long-term, but oh well.

Explain how that adds financial concerns long-term, please.

I think he is referring to the fact that they needed to tap into the asset itself to fund the purchase. Additionally, assuming a traditional partnership structure, all owners share in profits and liabilities. So if the team operates at a loss to try and build equity (spends a lot in tax to increase the value of the team,) there are more voices putting pressure on ALORE to focus on short term profit instead of long term equity.

This is accurate, but an additional factor is that it suggests that they do not have a substantial amount of liquid assets, which potentially indicates that they do not have the capacity to operate at a significant loss for a substantial amount of time (ex: Being a Repeater-Tax team feels very unlikely).

Personally, I don't think people should be panicked, but I do want people to be prepared to see what an ownership structure that is more financially constrained looks like.

[Klomp]

Explain how that adds financial concerns long-term, please.

I think he is referring to the fact that they needed to tap into the asset itself to fund the purchase. Additionally, assuming a traditional partnership structure, all owners share in profits and liabilities. So if the team operates at a loss to try and build equity (spends a lot in tax to increase the value of the team,) there are more voices putting pressure on ALORE to focus on short term profit instead of long term equity.

This is accurate, but an additional factor is that it suggests that they do not have a substantial amount of liquid assets, which potentially indicates that they do not have the capacity to operate at a significant loss for a substantial amount of time (ex: Being a Repeater-Tax team feels very unlikely).

Personally, I don't think people should be panicked, but I do want people to be prepared to see what an ownership structure that is more financially constrained looks like.

1. Everyone is doing whatever possible to avoid the repeater tax. It's the nature of the new NBA, not an indictment on any ownership group.
2. I'll admit, I'm not good when it comes to financial type stuff beyond the basic old-school cap sheet. But is asset liquidity really the most important thing for owners?
3. I think this is where the importance of a potential new arena comes into play. That's the single easiest way to help both the franchise valuation and profit line take a huge step forward. Taylor was stuck in the mud on this point, unwilling to consider making an upgrade. Just as a point of reference, Target Center is the NBA's second oldest arena, only ahead of MSG.

[winforlose]

I think he is referring to the fact that they needed to tap into the asset itself to fund the purchase. Additionally, assuming a traditional partnership structure, all owners share in profits and liabilities. So if the team operates at a loss to try and build equity (spends a lot in tax to increase the value of the team,) there are more voices putting pressure on ALORE to focus on short term profit instead of long term equity.

This is accurate, but an additional factor is that it suggests that they do not have a substantial amount of liquid assets, which potentially indicates that they do not have the capacity to operate at a significant loss for a substantial amount of time (ex: Being a Repeater-Tax team feels very unlikely).

Personally, I don't think people should be panicked, but I do want people to be prepared to see what an ownership structure that is more financially constrained looks like.

1. Everyone is doing whatever possible to avoid the repeater tax. It's the nature of the new NBA, not an indictment on any ownership group.
2. I'll admit, I'm not good when it comes to financial type stuff beyond the basic old-school cap sheet. But is asset liquidity really the most important thing for owners?
3. I think this is where the importance of a potential new arena comes into play. That's the single easiest way to help both the franchise valuation and profit line take a huge step forward. Taylor was stuck in the mud on this point, unwilling to consider making an upgrade. Just as a point of reference, Target Center is the NBA's second oldest arena, only ahead of MSG.

I am gonna answer out of order because everything is connected.

2. The issue is money in, money out. So you start with overhead, (payroll, operating costs for the various facilities, money owed to vendors/independent contractors, and really any other operating expense,) then you move on to expected money in (gross income or income before taxes.) If the money in does not exceed the money out, now the ownership must use independent wealth to finance the difference. If they are cash poor that means borrowing money against the value of another asset, and that means paying interest. So you compare the expected appreciation of the asset (the team,) against the cost to borrow money and you get your short term return on investment.
2A. Opportunity cost must also be considered. So you have a million dollars, and you can either invest in A or B. You know Anis returning 5% annually so if you invest 1 million you get $50,000. B is only returning 2% so you only get back $20,000. Now there can be a lot of reasons to invest in B (diversifying to lower risk, B having more potential to appreciate and create long term value, ect…,) but any investment in B is going to cost that 3% in opportunity cost. Getting back to the 1 million example, you lose $30,000 by investing in B.
2B. So we take our overall costs and our gross income (remember you have to pay tax and depending on partnership agreements the gross could go down, so net profit is often lower,) and we adjust for opportunity cost, and we ask how profitable is the return. Now we have all heard it takes money to make money, and this is very true in investing. If you see the Wolves as gaining x% in value and the base is in the billions, it might be worth losing short term money for that appreciation. But the more interest you pay to subsidize the loss, the harder it is to return enough money on that appreciation. I can simplify that more if you would like?

3. There are two ways to build the new arena. The first is with private funds, the second is public funds. Flagrant Howls thinks that Bloomberg is going to supply most of the money and that it gets done without public funds. This suggests a profit sharing agreement between ALORE and Bloomberg on all events and that Bloomberg will also have a long term investment in our teams success. Public arenas come out of the tax payers and are harder to get and come with delays and possible obligations to the tax payers and require no such long term investment by wealthy 3rd parties.

1. Building a new arena is one way to bridge the gap between operating loss (how much money you must pump in to keep the team running beyond what you take in net profit,) and investment appreciation. Cutting costs is another way to bridge the gap. This is where the concern comes in. Being a non tax team and a non 2nd apron team are very different things. In the modern NBA most contenders are tax teams. The ones that are not, are young enough (OKC,) that the payroll hasn’t caught up yet. Rookie scale Chet and JW are short term opportunities that will soon give way to big tax payments. If we are serious about contending we need to be serious about spending. The best way to do that is for the owners to NOT need to borrow money (and therefore pay interest,) on the money they use to cover the operating loss.

[shrink]

One thing we know. When Glen Taylor handpicks somebody, they’re going to be great!

Thanks Glen for ARod and Lore! No worries at all!

[thinktank]

Oh geez.

Taylor and Lore are worth the same amount of money (Lore may be worth more).

I have no reason to believe Taylor is any more liquid than Lore.

Plus this group has more money than God (Bloomberg, Schmidt, Lore). 105 billion + 25 billion + 3 or 4 billion.

That money blows Taylor out of the water.

And, Lo-Rod calls the shots.

I think this is a great setup.

[Klomp]

One thing we know. When Glen Taylor handpicks somebody, they’re going to be great!

Thanks Glen for ARod and Lore! No worries at all!

Definitely not a great endorsement for Taylor either though, when you think about it that way....

[winforlose]

Oh geez.

Taylor and Lore are worth the same amount of money (Lore may be worth more).

I have no reason to believe Taylor is any more liquid than Lore.

Plus this group has more money than God (Bloomberg, Schmidt, Lore). 105 billion + 25 billion + 3 or 4 billion.

That money blows Taylor out of the water.

And, Lo-Rod calls the shots.

I think this is a great setup.

I don’t want you to misunderstand what I am trying to say. This is not an attack. I am trying to help you understand the business principles that you are misstating.

Principle 1: If you know you are going to operate at a loss, net worth is not the key figure. It doesn’t matter if you are worth 1 billion or 2, what matters is how much it costs to pay the difference between money in and money out. If you have a line of credit at a low interest rate vs a high interest rate. If you have the reserves to pay the interest without having to sell a different investment and not miss out on that opportunity. Also having multiple investments is important for diversifying which is a strategy to reduce risk in investing.

Principle 2: Minority partners do not give majority partners money for nothing. Bloomberg might loan the money to ownership at a lower rate than the banks, but that comes with strings like some level of control over spending levels or operating costs. Or it could just straight up cost equity. The more of the pie ALORE gives away the less profit they can return on the investment. So yes having deep pockets in the minority ownership has some value, but it is not the same as having it in the majority ownership group.