Is this not the highest multiple that you have ever heard of? I haven't gotten to look at the financials, but 7.3x revenue is out of this world. I assume this seems out of place in part because of high margins, but still, how much growth can you realistically price in? One thing I don't understand about paying for growth upfront, is that rapid aggressive growth now becomes your benchmark.
Let's break this down for a moment. Say they have 50% EBITDA margins (astronomical) on revenues of $300MM ($2.15bn paid / 7.3x multiple) then EBITDA is $150MM. Even if you take out a measly $40MM in taxes, that's $110MM of free cash to the firm. Day one, that's an annual unlevered return of 110/2150 = 5%!
The article in the journal cited real estate and a new TV deal, but that is still one hell of a multiple. Obviously there is growth built in here but even if revenues double, that's a 10% return. If its that easy to increase the top line, why hasn't it already been done?
Do people think this is a group of investors who really see aggressive growth on the horizon or is this just a case of people getting dividends of happiness when they own a sports team (like those idiots who buy Packers stock). If you want to see this phenomenon in action, talk to an uninformed investor. Maybe they just rode apple up 30%.
Me - "Mom, what a great call! What made you pull the trigger?"
Mom - "I knew it was a great company. The stock had to go up. Plus the stock had decreased the month before I bought it. I lovvvee my ipad!"
....yea that's right Magic Johnson and Mark Walter. You invest like my mom.
No one buys a sports team because they think it's a great investment.
I just did a deal for a sports team and it was all about the caché of sports team ownership. We spent about 5% of the time talking about operating income, but 95% of the time was spent comparing the qualitative factors of the teams (age of stadium, on-field performance, viewership, headline contracts). If you try to justify sports team ownership with expected economic returns then you'll fail almost every time except for some NFL teams which have been priced fairly in recent history.
That being said, baseball teams typically price around 2.5-3.5x revenue, while NFL teams are around 4-5x revenue. I understand that the Dodgers are a "storied franchise," but $2 billion seems excessive especially since the Cubs, another nostalgic team, just sold for $800-900M a few years back.
http://www.ocregister.com/sports/mccourt-346800-dodgers-deal.html
LOL @ "you invest like my mom"
Think about the non-operating potential of the deal, you're missing high growth assets in your valuation analysis
About a billion of that is Clayton Kershaw, the bastard. Go Giants.
You're buying a monopoly.
interesting article on bloomberg about the valuation....
http://www.bloomberg.com/news/2012-03-29/yankees-value-is-2-85-billion-…
How can you seperate a Yankees valuation from the YES! network if you are going to include TV revenue for the dodgers?
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