Forbes: LeBron Can Purchase Part of Knicks

[BR0D1E86]

Are you joking? If he borrows 100 million dollars, and buys a big block of MSG stock immediately before he signs with the Knicks, that stock will double in price.

It absolutely will not double in price.

[Sting3r]

youd have to be a greedy ass mofo to even consider it knowing the possible risks. If Im LeBron and already made 100 millions, and am gonna make 100 millions more regardless, Id be content with what I have.

[Kosar86]

I don't see how this gives the Knicks an advantage, as Lebron can also buy a portion of any other team he wants to go to.

the CBA prohibits a player from being an owner of their team at the same time. Since the Knicks are a publicly traded stock, LeBron could double his money in 1 day. He could purchase $100 million in Knick stock July 7th, sign July 8th and have made $200 million in 24 hours...legally.

Wouldnt on July 8th, james be both a player and an owner? Remember when magic came back, he had to sell his lekers ownership stake before he could sign as a player. Thus, lebron would have to sell his stock before he signed....

[TsunamiZC]

Thats cute and all, but does New York have a Lebron song ?? umm yeah I didnt think so, cause Cleveland does.

http://www.break.com/index/we-are-lebron-video.html

[dm17415]

youd have to be a greedy ass mofo to even consider it knowing the possible risks. If Im LeBron and already made 100 millions, and am gonna make 100 millions more regardless, Id be content with what I have.

Its not like Lebron is investing with the Mafia what hes doing is legal and in the end its always about the money.

[LLcoleJ]

Some of you guys need to brush up on how the stock market works.

[Ripp]

The guy who pointed out that lebron isn't an insider is dead on. The simple fact is that lbron isn't part of the company that makes the decision to hire lebron so him buying stock and then signing has no bearing on the insider trading law. Simple fact is lebron has the luxury of knowing that the knicks will hire him if he wants them too allows him to capitalize on the situation. Now if lebron told Donnie walsh that he would sign with the knicks and then walsh buys stock that's insider trading on the part of Donnie walsh lebron falls In the grey area where he's doing something a little shady but no one can do anything about it.

Honestly with this it doesn't make any sense not to sign with the knicks.

LoL.

So do you think Ben Bernanke, the head of the Fed, can just start buying a bunch of stock (or selling) when he has inside information on how the Fed will treat interest rates a week before they have a meeting? A few years ago when the market was crashing the Fed met to decide to lower interest rates. Ben KNEW the market would take off after he slashed interest rates. He could have used leverage and literally made hundreds of millions of dollars. Do you think that is legal? No way....even though Bernanke had no inside information on the company himself, he knew how the market would react and had he tried to capitalize on that information he would have been arrested and prosecuted to the fullest extent of the law.

The SEC doesn't mess around right now.

1. If you think LeBron would have a HUGE impact on the actual stock then

2. If you think LeBron wouldn't be heavily investigated by the SEC then

I think people VASTLY overrate LeBron's impact. Berkshire Hathaway is a financial/billion dollar titan that is directed by one of the greatest financial minds of all-time. Even if they HEAVILY invest in a company, that companies' stock doesn't blow-up....for if it did, Hathaway would be 1,000,000 times bigger than it is today. So if BH alone doesn't make a huge financial impact, what makes you think LeBron would?

I don't see how the Bernanke example is relevant...don't they put their assets in a blind trust when working for the Fed anyway? Look, which law does this violate? How is it insider trading, when LeBron is not an "insider" for MSG?

Regarding how it will impact the stock price...there was a recent estimate that the value of the Cavs would decrease by $150 million with LeBron gone. Given the larger relative market of the Knicks, there is no doubt that MSG stock would greatly increase. Double is perhaps an exaggeration, but it would skyrocket.

[Joyeuse]

A much more awesome thing to do would be to short the Knicks' stock then sign with the Nets. Just as illegal, but way, way cooler.

[BR0D1E86]

Regarding how it will impact the stock price...there was a recent estimate that the value of the Cavs would decrease by $150 million with LeBron gone. Given the larger relative market of the Knicks, there is no doubt that MSG stock would greatly increase. Double is perhaps an exaggeration, but it would skyrocket.

The estimate I read was 100m. The Knicks are worth more, so it would probably be a lower bump proportionately. Regardless, he’s not buying stock in the Knicks, he’s buying stock in MSG. The Knicks are a small part of MSG.

It would go up, but it wouldn’t explode.

[watewate]

without delving into the intricacies of the CBA, King James won't make a whole lot of money from buying stocks on the open market for the following reason:

1. there are 62M shares and only about 400K shares trade daily. you simply CANNOT build up a significant position in the company without moving the price up. the volume/liquidity isn't there for the stock for someone to build up his position without an upward push in prices.

2. if you intend to buy a significant share of the company (rules vary), you *must* declare your intention publicly at some point. he'll be able to buy a small portion of the company without making such declaration, but once a party decides to become an active investor and/or acquire significant stakes in a security, such intention must be publicly announced. this would drive up the share price (if at all - more on that later) before he'd have a chance to acquire a significant stake.

3. Knicks contribute only a small portion of the value of the MSG. even if King James were to significantly push up the value of the Knicks franchise (say, by 20% in 2 years), that would only amount to $100M or so -- which is less than 9% of the current market cap of the MSG as a whole. This, while pretty good considering the relatively small proportion the knicks represent to MSG, isn't earth shattering imo esp. considering the time frame.

4. afaik, there's not much room for growth via gate receipts (other than price increases). if i'm correct, (part or all of the) proceeds from sales jersey (and merchandise?) are distributed amongst teams based on a certain formula. so the incremental earnings to Knicks, the franchise itself, isn't as great as some may think.

the real value in King James lies in cable and the Knick's cut of merchandise/jersey sales (if they are able to keep a significant portion of it -- i'm not certain how this works). king james tv = new subscribers = higher ratings = higher rates for ads = better earnings for MSG in the future = price of MSG would go higher in anticipation of the foregoing.

then again, a significant number of games would likely be on national tv (i presume, at the expense of being shown on MSG's own stations), so i'm not certain how much the Knicks would receive for such nationally televised games. this is important because if the Knicks were on MSG's own tv for the most part, people would be compelled to subscribe to MSG. this in turn would have increased the subscriber base and thereby increase the value of MSG. however, if many of the games can be see on basic cable, not as many people would sign on, and dilute the benefits of signing King James.

****
basically, Lebron could own a small part of the Knicks -- but he'd be buying into all other MSG businesses that he probably doesn't care all that much about. thus, for the same money, he could have bought a more significant portion of any other franchise (by not buying into other business units like one would with purchase of MSG shares). if he truly cared about increasing the value of his investment, why would he not buy into a franchise ONLY somewhere else and reap all the benefits % for %? basically, a 20% increase in his stake in hypothetical team Z = 20% increase in money vs. something much less at MSG due to other business units that are not impacted by his arrivals. he would need to convince himself that going to knicks would enhance the value of the franchise at a much greater scale than he would if he were to have gone to another one.

if he were really business savvy, here's what he should do:
buy a stake in the clippers from sterling. why? it's got the best market size/franchise value ratio of the cheaper franchises. it's in LA and when Kobe slows down in a couple years, the city will be his... and he'll reap the benefits of his investment.

basically, buying MSG shares makes would be for vanity ONLY.

[BubbaTee]

While it may be legal for a player to own stock in a company that owns an NBA team, a player can not legally buy shares in said company, then shortly thereafter sign with the team that the company owns, causing the stock to skyrocket.

Not unless that player wants to go to LeJail.

Where exactly does it say this in the fine print?

Insider trading is the buying/selling of stock while having access to non-public knowledge of how that stock will perform in the future. here Lebron is going to sign, AFAIK, is non-public knowledge that will affect how MSG stock performs in the future. He can't trade on that knowledge.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

http://www.sec.gov/answers/insider.htm

Lebrons Mom, best friend or Dog could buy a billion Knick shares and there is nothing the NBA could do about it.

Lebron could too, and there would be nothing the NBA could do about it. But the SEC would and they'd be in jail.

the SEC is the biggest joke around, they are worse than the nba refs...they couldnt catch madoff, despite getting complaints on him OVER A 9 YEAR SPAN

Bernie Madoff's activities were not on ESPN 16 hours a day. Nor did he have articles on Forbes.com outlining his scheme.

[BubbaTee]

So is it still "insider information" if it is a decision he is making as a private individual? It isn't as if he is a 3rd part privy to the internal workings of MSG....he is a 2nd party who will sign a contract in July. I still don't get why it is illegal to profit from that.

Hrm, so would the business analogy be Company A looking to subcontract work out to Company B, C, or D. Company A comes to the decision that it will choose Company B, and at the same time buys a big chunk of B.

Would the above scenario be illegal too? Because it happens all the time in the software world...Microsoft will have some other company develop a computer game, ends up liking it, and then buys the company outright.

Thanks in advance for any insight you can shed...

Most of those game developers MS buys are privately held companies. The buying and selling of stocks, bonds, and securities didn't really play into MS buying Bungie, because there was no Bungie stock.

Yeah, I'm no expert on securities law, but from what I recall, that was the gist of it. Insider trading is aimed towards corporate officers who are privy to material non-public info, not outsiders. But what happens when that outsider can directly affect the stock upon "joining" the corporation? Can he purchase stocks in advance? I'm sure there's case law on it.

No, charges can be brought against anyone who trades on insider knowledge.

Examples of insider trading cases that have been brought by the SEC are cases against:

- Corporate officers, directors, and employees who traded the corporation's securities after learning of significant, confidential corporate developments;

- Friends, business associates, family members, and other "tippees" of such officers, directors, and employees, who traded the securities after receiving such information;

- Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

- Government employees who learned of such information because of their employment by the government; and

http://www.sec.gov/answers/insider.htm

It just happens that most often the people with insider knowledge are those within the company, often in executive positions.

[Banks2Pierce]

I'm not buying the insider trading angle. What if Brian Scalabrine bought MSG stock before signing with the Knicks this summer? He would not move the price, but how can they discriminate based on talent? I don't see how they could take him down for this.

[LLcoleJ]

BubbaTee is spot on here. And I have to ask, what would be the biggest red flag of this stock? If some entity (unknown) out of nowhere bought 100 million dollars of stock. The shareholders would panic and it would be shorted, fast.

Furthermore, if it was sold the next day, the stock would pummel, given long holders left holding the bag.

There is no easy flip here.

If James Inc wanted to slowly invest in the company and reap the rewards long term, then something feasible could happen.

But the notion that he would use a corp to drop 10's of 100's millions in the stock only to sell it off is not.

[panthermark]

LOL!
We just had our annual "insider trading" training and this stuff just came up. Tipping included....

Yeah...Basically, Bron is all but prevented from making money on MSG stock. He would have to wait X amount of time (for us, 48 hours) before he could buy stock in MSG. He IS the "insider" because any reasonable person would know that his decision would have a major impact on the stock price.

He would have to first announce that he was joining the Knicks, the wait for the market to have a reasonable amunt of time to react, THEN he could buy stock in the Knicks. But at that time, the rest of market would have driven the price of the shares up. Also, if he ever left the Knicks...he could not sell his shares until a certain amount of time had passed...thus he would lose money on the back end.

[panthermark]

I'm not buying the insider trading angle. What if Brian Scalabrine bought MSG stock before signing with the Knicks this summer? He would not move the price, but how can they discriminate based on talent? I don't see how they could take him down for this.

A reasonable person would conclude that Brian's signing would not have any impact on the stock price. Besides...it isn't that Bron can't buy stock in MSG...it is that he can't really make money on it the way some suggest.

[Magilla_Gorilla]

Thanks to the people who actually know what they are talking about for setting the over eager fans straight.

[I am Ra]

Thanks to the people who actually know what they are talking about for setting the over eager fans straight.

Except would you take advice from Forbes or RealGM posters. I don't know anything about the market but this is an easy choice here.

Forbes mustve done good research before reporting this. They are one of the more trusted groups right? They mustve thought of every possible way this isnt true and refuted it.

[LLcoleJ]

Thanks to the people who actually know what they are talking about for setting the over eager fans straight.

Except would you take advice from Forbes or RealGM posters. I don't know anything about the market but this is an easy choice here.

Forbes mustve done good research before reporting this. They are one of the more trusted groups right? They mustve thought of every possible way this isnt true and refuted it.

From what I saw, the Forbes report said he could be a shareholder in MSG. He can. He can also make money in the long run.

Look at William Shatner. He took stock instead of money for priceline and over 10 years he made 600 million dollars.

The refuting comes from people who think he could flip 100 million dollar investment and or trade on his signing.

It would have to be a long term set up, that would rely on his overall success and in addition to the success of MSG as a company. Considering MSG is more then just the Knicks.

He would have the ability to be a shareholder and grow his wealth ( with his contract) . Not dup shareholders to double his money.

[waynedwayne]

I'm not even going to pretend like I know enough about the law. However, if LeBron is within legal limits to buy MSG stock, I really cannot see how he would pass up on that opportunity. LeBron and his team will hire the most expensive lawyer, and probably even get in contact with SEC representatives and whoever else they need to get in contact with to make sure this is within the legal bounds. If it is, LeBron to NY in 2010. And you can take that all the way to the bank.