SBJ/19980629/This Weeks Issue

Great souvenir, but no way to get rich

When die-hard fan Lee Campbell bought 10 shares of common stock in his beloved Boston Celtics, the shares were trading around $15 each.

A decade later, the stock trades at almost $21. If Campbell had put that money into Walt Disney Co. instead, his $150 investment would be worth about $1,200 today.

Campbell is the first to admit that’s no way to get rich.

“People who are buying these shares are not looking for an investment,” said Campbell, an associate professor of marketing at Bentley College in the Boston suburb of Waltham. “We want to have an emotional involvement with the team, to feel we own a piece of it.”

Indeed, he said, for years after the stock was first issued, many of the Celtics’ stockholders refused to cash their annual dividend checks.

“That drove the accountants crazy,” he said. “But fans wanted to keep them for souvenirs.”

Unlike shareholders in Microsoft or Exxon, shareholders in pro sports teams like the Celtics aren’t nearly as concerned with performance on the bottom line as on the playing field.

Good thing. The few stocks available in pro teams simply do not perform as well as the stock market at large.

For example, stock in the NHL Florida Panthers trades in the mid-18s, down from around $25 in October. The Arena Football League’s Orlando Predators offer little more than a penny stock, now trading at just higher than $4 a share, down from $5 about a year ago.

This, in one of history’s greatest bull markets.

“Owning stock in a team won’t make you money,” said Paul Anderson, assistant director of the National Sports Law Institute of Marquette University Law School. “But it can help you keep your identity as a fan. The sense is one of, ‘If the team doesn’t care about my opinion as a fan, maybe they will if I’m an owner.’”

That is an illusion, Anderson said.

“The reality is that the team will take your money,” he said, “and will continue to do business as usual.”

So let’s sum this up. The shareholders don’t care whether the team makes money, yet are willing to fork over millions of dollars now in return for virtually no control, plus a few lousy bucks a year in the future. You may even have to pressure them to cash the dividend checks.

It doesn’t take a Harvard MBA to realize that’s a good deal for almost any team.

Until recently, only the Celtics and the Panthers traded their stock on the open market. (The Green Bay Packer are owned publicly but are considered a nonprofit group. The stock can be sold only back to the team. The NFL forbids its franchises to go public.)

That’s rapidly changing. On June 8, pro baseball’s Cleveland Indians offered an IPO that sold out in one day, raising $60 million on 4 million shares. The stock is trading around $15 a share.

More teams in the NBA, the NHL and Major League Baseball are likely to follow the money. But analysts don’t expect those stocks to perform any better than the Celtics and Panthers. Indeed no analyst in the nation is even bothering to make recommendations on those stocks, according to Zacks Online Research.

The reason is simple. Unlike, say, Ford Motor Co. or Pfizer Inc., a pro sports team isn’t in position to increase sales and production, and thus revenue. No matter how successful the New York Yankees or the Dallas Cowboys are, they can’t launch a new model like the Expedition or invent a drug like Viagra.

A team is limited to how many seats it has in its stadium and how many fannies it can put in those seats, experts say. The team may supplement that income with broadcasting revenue, licensing rights and concessions sales. But in the Age of the Interactive Global Economy, that’s chump change.

“If you look at assets, except for the stadium, there’s not much there,” said Bentley College’s Campbell. “The cash goes straight into salaries.”

That doesn’t matter much to fans like him.

“If my Celtics stock falls a few dollars, I won’t even notice,” Campbell said. “Now, if that happens to my Raytheon stock …”

Rusty Cawley writes for the Dallas Business Journal.
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