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Volume 21 No. 1
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Braves’ public stock offering brings tough questions from analysts

At the end of a 94-minute investor call for the newly public Atlanta Braves last Thursday, an analyst asked executives if they were managing for profits or wins.

Therein lies the rub that historically has grounded the shares of public sports teams in this country: They don’t peg into the Wall Street square of profits, losses, quarterly earnings and cost certainty.

“We don’t expect a baseball team to be trading on traditional media metrics,” Chris Shean, chief financial officer of Liberty Media, told investors last week. “A lot of people value MLB teams as multiple of revenues.”

Liberty Media owns 20 percent of the new Liberty Braves, which is a spinoff from the larger entertainment company that has owned the franchise since 2007.

Of course, no stock analyst worth his or her salt values shares by coming up with a number to multiply against revenue; that’s not how it’s done, even if so in sports. So the analysts peppered the Liberty executives on the call with repeated questions on how exactly to value the enterprise.

Braves executives cited the team’s new ballpark and adjacent development as new financial drivers for the team.
The Braves, whose stock began trading April 18 under the ticker BATRA, responded that the Braves are part of a much larger real estate play, and a healthy part of last week’s presentation revolved around the team’s ballpark opening next year and the adjacent mixed-used development. That makes the Braves’ offering unlike those of previously seen publicly held sports teams, such as the Boston Celtics or Florida Panthers, who were public in the 1990s and early 2000s and which were largely club-only businesses.

Ballpark villages are not new, but they more commonly spring forth years after the opening of the venue. In the case of the Braves, when SunTrust Park opens next April, hundreds of people already will be living near the site in high-end apartments. A 274-bed Omni hotel is going up, as is a nine-story Comcast office building.

Braves executives were not entirely successful keeping the focus of last week’s call on their larger financial picture. At one point, a Braves executive joked that the call was not the place to drill down to whether the team needed a new left-handed pitcher. Unamused, Barton Crockett, an analyst with FBR Capital, proceeded to question the team about its payroll, which is on the low end in MLB. The concern would be that if payroll were to increase, profits might tighten — given that the Braves’ cash flow last year was $3 million and negative $6 million in 2014, according to the Braves’ investor presentation during the call.

The team’s response was that MLB payrolls range from $280 million for the Los Angeles Dodgers to $60 million on the low end, a response that didn’t answer the question. Management then noted that by 2017 the Braves should have payroll flexibility, but they did not offer a number that Crockett was seeking for where payroll would go.

Additionally, as much as the team wants to emphasize mixed-use development and ballpark suites, a major increase in player costs not accompanied by wins could wipe away any non-baseball financial gains. And the analysts may not have been happy with the answer to that question of whether the Liberty Braves will manage for wins or profits.

Said Terry McGuirk, CEO of the Braves in response: “Wins and value.” Profits, he said, is not one of the metrics.