SBJ/June 1 - 7, 1998/No Topic Name
USBL moves up on the scorecards of stock analysts
Published June 1, 1998
Foreign stocks are plunging. Microsoft and Intel are under assault by the federal government. The long bull run could be running out of breath.
Where is a stock investor to put capital?
How about the United States Basketball League (USBL)?
Two stock analysts recently predicted strong gains in the ailing stock of basketball's unofficial minor league, until recently the only publicly traded sports league.
But for a league that has yet to turn a profit as a publicly traded company and averages just over 1,000 fans per game, why the bullish predictions?
"The company should experience explosive growth through expansion over the next several years," answered Martin Meyerson, chairman of MH Meyerson & Co. "We believe the company is currently negotiating a major licensing agreement, for merchandising with a large apparel company. The result of this alliance could improve the company's marketability on a national basis." The USBL would not comment on Meyerson's report.
Stock of the league has floundered since its initial public offering in early 1997, now trading under $3 a share. But Meyerson said the stock could reach $6 a share in the next year to 18 months, and a report from Lanzet Securities predicted even higher gains.
Franchise fees, currently at $300,000 a team, could rise to $1 million fairly soon, predicted Stanley Lanzet, president of Lanzet Securities. This would still be a fraction of what other minor league franchises in baseball and the Continental Basketball Association (CBA) go for. But $1 million represents roughly all the annual revenue the USBL generates.
The CBA is the National Basketball Association's official minor league. The USBL formed in 1984 and has sent more than 100 players to the NBA, including stars such as Anthony Mason and Muggsy Bogues.
By focusing on small- to mid-sized cities such as Atlantic City, N.J., Long Island City, N.Y., and Camden, N.J., the 12-team league has attracted a loyal fan base, Lanzet said.
The company, which licenses the franchises to team managements, is expecting to expand its largely East Coast league to the Pacific region in 1999. Last December, the USBL hired former NBA player Rudy LaRusso to manage expansion on the West Coast.
Despite the growth prospects for the league, there are hurdles. More than 85 percent of the shares are owned by insiders in the company, meaning stock moves could be limited because there are so few shares outstanding.
The company, however, is planning a secondary stock offering to counter this problem. And if projected increases in attendance materialize an average of 1,500 fans a game is expected by 1999 the league could then charge its cable provider, American Independent Network, more to broadcast games.