willbcocks wrote:You're referring to this as Ozanian's expert breakdown: "They cannot pay James with MSG stock because it would violate the league's collective bargaining agreement. But there is nothing to stop James from buying shares of MSG with his money. This would allow James to in essence work for himself and capture the upside in revenue from higher ratings on the MSG RSN, a soon-to-be renovated Madison Square Garden and much higher profits he will bring to these platforms." .....?
If there's any complicated economic or legal analysis, I missed it.
I am not a lawyer, but Lebron would put himself at risk if he purchased a lot of MSG stock immediately before signing. The risk would be both legal (insider trading) and PR--this would make him look very cynical and be another punch to his already reeling image.
He could certainly purchase stock after signing. And the stock could make him a lot of money. But there's no reason to suspect it would make him any more money than if he purchased an S&P 500 index fund. The fact that his play could increase the value of the stock is not an advantage exclusive to him -- anyone else can invest in MSG as well. And since investments are speculative, the value of the stock, and the price LBJ would have to pay to purchase it, would increase immediately upon him signing with NY. For Lebron, as for anyone, investing in MSG will carry the same risk/reward as any other stock (unless he pulls a sketchy deal by purchasing stock before signing).
I am a finance professional (have worked at 3 investment banks) and this statement is incorrect. The point is not whether the stock would outperform a spydr or any other security, the point is whether it is worthwhile for james to gain EXPOSURE to the risks and rewards that pertain specifically to MSG stock. It's irrelevant if everyone on this board can buy the stock the same time James does. It's irrelevant because if 1000 of us purchase the stock the same day james does, then out of the 1001 people who buy the stock, only James is gaining exposure to risks and rewards that he himself can drive, both directly (i.e., winning championship) or indirectly. None of us can say that and thus none of us benefit from the exposure as much as Lebron. Simply put, Lebron can exert much more "control" over this exposure than we as the average investor can. In other words, we are by default passive participants, Lebron is by default an ACTIVE participant. In theory it would behoove the rest of the knick roster to buy stock as well, since they share the exact same criteria.
Lebron would be diverting some of his salary/savings into MSG stock if he decides to purchase it. Many average Joes do the same thing, or rather they are forced to do this by the company, which gives them benefits in stock. Companies don't do this because it makes employees richer than giving them cash. If it did, companies would keep the stock themselves. Moreover, they force employees to hold it for a certain number of years or until retirement, precisely because employees might be tempted to sell it as they gain no particular advantage from holding their own company's stock. Companies create these programs because it makes employees invested in the company. They want to work harder and make it succeed.
It depends on the company. Majority of the companies that offer stock options to employees don't offer it for "motivational" purposes but rather because stock compensation is quite different from outright salary expense, particularly when it comes to cash expenses. If you're a company, would you rather pay your employees 1 million in salaray/cash, or pay them in stock options worth 1 million? the choice is quite obvious. Holding onto a stock is also a moot point because there are literally dozens if not hundreds of financial instruments that allow you to trade exposure of one asset for another. therefore if james really wanted to he could buy the stock, decide he doesn't want the exposure, and instead of selling it he simply enters into a contract where he gives the counterparty exposure to the knick stock in exchange for exposure in something else.
Lebron could buy stock as a motivational tool, but that's about the only effect I can see coming from this.
False. As mentioned above, the msg stock is just as speculative as any other stock. But lebron cannot directly influence the value of wwe stock or shares in warner brothers. if lebron invests $100 in msg stock in january and $100 in WWE stock in the same month...which one does he have more control over in terms of risk/reward exposure? Fast forward to July and the Knicks have won a championship, having extended MSG ticket sales, merchandise, etc. from April into June, whereas Wrestlemania (which occurs in March/April) generates a disappointing revenue gate...which one creates more wealth as a result of James' direct involvement? In which scenario can James exert maximum effort to minimize his risk? This is just a specific example but I chose the timing of two different significant events (wrestlemania for WWE stock, NBA playoffs for MSG ticket proceeds) to illustrate my point in a general sense.
There's no qualification or reasoning that you have given to support this statement.More money, however, will not come from MSG stock.
