Investors in sports teams are often fans looking to mix business with fun. Some may be savvy investors looking to diversify. But the obvious approach of becoming a majority owner of a major sports team may be out of reach for all but the wealthiest. However, less wealthy accredited investors may participate in private equity deals that offer ownership of teams large and small, while publicly traded teams can offer similar opportunities to public investors.
If you want to invest in professional sports teams, a financial advisor can help you determine how this investment fits into your overall portfolio.
Investing in professional sports teams with your brokerage account
Investing in professional sports teams through a brokerage account is one of the easiest ways to get into the sports industry. There are many publicly traded companies that own or manage sports teams, and any investor can become an owner of a team by purchasing shares. Here are four examples from US and European exchanges:
Madison Square Garden Sports Corporation (MSGS): Madison Square Garden Sports Corporation, traded on the New York Stock Exchange (NYSE) under the ticker symbol MSGS, owns and operates several professional sports teams, including the New York Knicks of the National Basketball Association (NBA) and the New York Rangers of the National Hockey League (NHL). The company derives revenue from team performance, media rights, and corporate sponsorships, providing investors with exposure to multiple sports markets. Manchester United PLC (MANU): One of the world’s most iconic soccer clubs, Manchester United is a public company traded on the NYSE as MANU. Man U offers investors the opportunity to capitalize on its storied history and global fan base, while also tapping into its extensive revenue streams. The club derives revenue from broadcast rights, merchandise sales, and ticket sales. Juventus Football Club SpA (JUVE): Another well-known football club, Juventus is listed on the Italian Stock Exchange under the symbol JUVE. With a strong presence in European football and a loyal fanbase, Juventus is known for its consistent performance both on and off the field. Investors can benefit from the club’s commercial partnerships, sponsorship deals, and success in domestic and international competitions. Olympique Lyonnais Group SA (OLG): A well-known French football club, Olympique Lyonnais is traded on Euronext Paris under the ticker OLG. The club has a reputation for nurturing young talent and competing at the highest level of European football. Investors can benefit from the club’s revenues from player transfers, broadcasting rights, and match-day revenues.
Private equity firms investing in professional sports teams
For those with a higher risk tolerance and the means to qualify, investing in professional sports teams through a private equity firm is another option. Private equity firms raise money from investors to acquire stakes in sports franchises and related businesses. These investments are usually part of a larger portfolio, allowing investors to diversify their risk while gaining exposure to alternative assets.
To participate in these investments, you usually need to be an accredited investor, which means you need to meet certain income or net worth criteria set by regulators. In the US, an accredited investor must have annual income of at least $200,000 for the past two years ($300,000 if married) or a net worth of more than $1 million, excluding the value of their primary residence.
Private equity investments in sports teams can bring big rewards, especially if the team grows in value, lands a lucrative broadcasting contract, or performs well in the league. However, these investments are also riskier because they are often less liquid than public stocks and require longer-term commitments.
Understanding the financial situation of professional sports teams
A sports team’s financial health is driven by factors such as the team’s performance, revenue streams, market size, and ownership structure. As with any business, a team’s balance sheet, income statement, and cash flow statement help investors assess the team’s profitability and long-term sustainability.
Special considerations in the sports business include revenue from ticket sales, broadcasting rights, merchandise and sponsorship deals. Teams often have a steady income from a loyal fan base. But a team’s performance on the field can change everything, so it’s essential to consider the team’s competitiveness and chances of success. Investors should also look at a team’s debt levels and capital structure, as high debt levels can pose risks, especially during economic downturns or poor performance.
Another important aspect is the valuation of the sports franchise. Teams in larger markets or with a strong brand presence often have higher valuations. The enthusiasm for sports investing makes it difficult to identify opportunities that are not overpriced relative to the expected returns.
Conclusion
The sports industry offers two primary avenues for portfolio diversification and growth potential: buying shares in public sports companies or, for accredited investors, participating in private equity investments. Investing in professional sports teams offers both financial opportunity and personal involvement to both public and accredited investors. As with any financial investment, you should understand the financials and associated risks before committing capital. When an investment has an emotional element, like a sports team, due diligence becomes even more important.
Investment planning tips
If you want to build an investment portfolio, a financial advisor can help you analyze your investments and manage them to help you reach your various goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors in your area, and a free introductory call with your matched advisor helps you decide which advisor is right for you. If you’re ready to find an advisor to help you reach your financial goals, get started now. If you want to figure out how much of your portfolio should be invested in sports businesses or other assets, you can use SmartAsset’s asset allocation calculator to develop a strategy based on your personal risk tolerance and time horizon.
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