Sold (for) vs. Valued (at)

Big news today as the L.A. Lakers “sold” for $10 Billion - making them the most valuable organization in sports - ever.

So if you are like me; I read that headline and initially read it as $10B was exchanged between two or more parties for the team.

But in actuality the Lakers were sold at a $10B (paper) valuation.

The team was last valued (per a transaction) in 2021 at $7B - meaning that today’s deal transpired at a valuation $3B higher.

So that means the Sellers made $3B, right?

Nope.

We are dealing with “Venture Math”:

Prior to this deal the Buss Family Trust owned 66% of the Lakers. After the deal their shareholding falls to 15%.

66% - 15% = 51%

and …

10B - 7B = 3B

So that means the Buss family received 3B in exchange for selling 51% of their shares, right?

Nope.

We are dealing with “Venture Math”, remember?

51% x 10B = 5.1B

5.1B is indicative of the value received by the Sellers aka The Buss Family Trust.

Their new “papered” shareholding is:

15% x 10B = 1.5B

The gap between the cash money less “post-money paper value” is:

5.1B - 1.5B = 3.6B

So …

The sellers took 3.6B cash off the table.