It’s yet more evidence that the shocking, upward spiral in NBA franchise valuations has a ways to go.
Joe and Clara Wu Tsai have sold a 15% minority stake in BSE Global, parent of the Brooklyn Nets, New York Liberty and Barclays Center to members of the Koch family, led by Julia Koch. She’s the widow of David Koch Sr, co-owner of Koch Industries until his death in 2019.. The family is one of nation’s wealthiest ... and among the most controversial.
Neither Koch Industries U.S. conglomerate which Julia Koch co-owns, nor Alibaba, the Chinese e-commerce and technology company headed by Tsai, played a role in the sale. Instead the transaction was between the two families’ investment vehicles, Blue Pool Capital for the Tsais and 1888 Management for the Kochs. Word of the sale was broken Tuesday by Sportico Rumors of the sale were first reported last February by Bloomberg News
Control remains with the Tsais
First things first. The Tsais will retain complete control of the teams, including basketball operations and arena operations. The Kochs’ investment is passive meaning there is no path to ownership — as there had been when Tsai bought a 49% minority stake from Mikhail Prokhorov in 2017. However, should the Tsais decide to sell in the future, the Kochs would have the first option to buy full control, per Sportico.
“One note about our organizational structure: it will not change,” Joe Tsai wrote in his letter to BSE employees, explaining what’s new and what will remain the same. “I will continue to serve as the Chairman of BSE Global and Governor of the Brooklyn Nets, and Clara will continue as Vice-Chair of BSE Global and Governor of the New York Liberty. The business and basketball operations of BSE Global will continue to be managed by professional management led by group CEO Sam Zussman, Nets GM Sean Marks, and New York Liberty CEO Keia Clarke and GM Jonathan Kolb.”
Tsai also told BSE employees “the investment came after extensive and collaborative discussions between our two families about our shared commitment to supporting many community programs and institutions across New York and to bringing the very best of sports and entertainment to the borough of Brooklyn.”
Koch will not be named an alternate governor. The Nets already have four alternate governors, all of them close to the Tsais.
A very big price tag, perhaps even historic
Sportico reported that the $6 billion would be among the highest valuations ever for any sports team in any transaction. The NFL’s Washington Commanders sold last year for $6.05 billion. The BSE Global valuation also includes beyond the two teams and the arena the Long Island Nets, HSS Training Center and the NetsGC gaming crew.
The price tag — as much as $900 million in cash and debt relief— is not just a big boost for NBA and its teams, but a major coup for the Tsais. The sale at that price gives BSE Global a legitimate valuation just outside the top tier of NBA franchises: the Golden State Warriors, Los Angeles Lakers and the crosstown rivals, the Knicks whose most recent estimated valuation was put at $6.1 million, just south of the Nets new number. Of course if the Dolans ever put the team up for sale, the price tag would no doubt be higher than the Nets.
The NBA and WNBA boards of governors will both have to approve the sale because the Liberty is part of the deal. It appears a done deal, reports Sportico’s Scott Soshnick and Eben Novy-Williams. The NBA’s advisory finance committee has reviewed the transaction and recommended that it be be approved by league governors who must vote by Monday, Sportico added.
Benefits for both sides
Both sides come away ahead of the game.
The Kochs get a piece of an NBA team in New York with all the wealth and glamour that can bring. Not to mention a chance to change the image of the family and the company it is named after. It is not unfair to call the $115 billion company one of the most controversial businesses in the United States, its reputation built on his conservative and libertarian lobbying efforts on crucial aspects of American life.
The Tsais will cash out of a stake in their holding company and make a huge profit. It will no doubt solidify their already significant standing in New York, the NBA and with business leaders around the world. Virtually no one predicted as big an evaluation so it’s a business coup as well as a basketball coup. It won’t hurt the Tsais standing with fans either. It shows that ownership continues to push, find new sources to improve the team.
The biggest winner: the NBA
The big winner, however, is almost certainly the league. The sale is just the latest in a series of a surprising and big moves over the past few years. The best example, in fact, may be the Nets’ last 20 years when the value of the franchise jumped 30-fold, from $200 million or so in 2004 to $6 billion in 2024.
Developer Bruce Ratner bought the team in August 2004 for roughly $200 million from the last ownership group in New Jersey, businessmen Lewis Katz and Ray Chambers. It was difficult deal that required some significant financial engineering to succeed. Five years later, Ratner and his Forest City Ratner sold 80% of the team and 45% of the then unbuilt Barclays Center to Russian oligarch Mikhail Prokhorov for $200 million in cash and the assumption of team debt. Prokhorov later bought out Ratner. That pushed the value of the franchise to nearly $1 billion. In April 2018, the Tsais first purchased 49% percent of the team and Barclays, before acquiring complete control from the Russian oligarch in October 2019 for $3.2 billion. Since then, the rising tide of NBA valuations has lifted all boats and with this transaction, BSE Global is now valued at $6 billion.
The NBA and its governors will now have to reset their assessments of team valuations. Expect other teams to now ask for bigger returns.
The wealth effect
Julia Koch is Indeed very rich, among the 25 wealthiest people in the world according to Forbes. Obviously, the NBA likes rich owners for a number of reasons, particularly at this juncture in the league’s dramatic growth. The league’s new ownership structure permits team governors — aka owners — to more easily sell off passive minority stakes in their franchises. That new rule, enacted in December 2022, has now proven successful with the agreement. The rule permits hedge funds, sovereign wealth funds, pension funds or other big investors wowed by the NBA and WNBA’s growth to get involved. The league hopes dramatic increases in sale prices will be eye-openers for other financial decision makers around the world, driving prices even higher.
Julia Koch, widow of Koch Industries executive vice-president David Koch Sr. and their three children, Maria Julia, David Jr. and John, had been looking to buy into the NBA for the last several years. She has the necessary assets. Forbes and Sportico both report that with a net worth of $65 billion, she is the third richest woman in the world. If Koch was the majority owner of an NBA team, she’d be the second wealthiest owner behind only Steve Ballmer of the Clippers.
Koch now becomes an even bigger player in New York’s arts, cultural and now sports scenes. Her philanthropic work includes Lincoln Center, which Clara Wu Tsai has also supported and the Metropolitan Museum of Art, She and her husband’s charities have donated hundreds of millions of dollars to the city’s heath care providers including the Memorial Sloan Kettering Cancer Center, on whose board she sits; the NewYork-Presbyterian Hospital and NYU Langone.
The female effect
The NBA also has to be happy to see another woman enter the ownership ranks even if as a minority stakeholder. The NBA’s most recent sale of a majority interest saw Marc Cuban sell a majority of the Dallas Mavericks to the interlocked Adelman and Dumont families. Miriam Adelman, widow of hotel-casino mogul Sheldon Adelman, is not the Mavs new governor, aka principal owner — that’s the subject of some controversy this week — but she controls 69% of the team stock with her family.
Women are majority owners and/or governors of five NBA franchises. In addition to the Mavericks, women officially control the Denver Nuggets, Los Angeles Lakers, Portland Trail Blazers and New Orleans Pelicans. Women are also owners of a significant slice of the Utah Jazz and Washington Wizards’ holding company. Although Clara Wu Tsai holds no official title with the Nets — she’s “co-governor of the New York Liberty — she has become a key player in the WNBA and NBA as well as the city’s cultural life. Wu Tsai also is heavily involved in liberal social justice efforts and technology causes and has worked closely Nets and Liberty players and their causes.
A very expensive training program
One reason for the Koch family’s interest beyond the NBA’s rising valuations is that the 25-year-old David Koch Jr. reportedly wants to run an NBA team in the future.. So don’t be surprised if he lands a job or a series of them at BSE where he can learn the NBA trade. Koch Jr. worked for the Knicks as a ticket rep — officially a “membership experience executive” — two years ago. Indeed, back in February when news of the Kochs’ interest first made headlines, Brian Lewis and Josh Kosman of the Post quoted an “industry source” as saying 20 years from now, “David Jr. could very well end up owning an NBA team.”
The league is biased towards prospective owners who have been minority partners elsewhere. Rick Schnall, the new co-Chairman and governor of the Charlotte Hornets, had previously been a minority stake holder in the Atlanta Hawks. So a minority investment is now recognized as a pathway to full ownership.
Next steps ahead
The Tsais should be able to cover financial losses they’ve accrued in the first five years of ownership .. while still retaining a controlling stake in BSE Global. The 85% the Tsais will retain is greater than what they paid for the two teams and Barclays Center in 2019. The Tsais have shelled out $323 million in luxury taxes owed to the league and another $108 million on the arena construction bond interest.
As for the Kochs, they will get a piece of two fast growing sports franchises in the world’s biggest sports market and indirectly a small percentage of the NBA itself. The NBA’s national and international revenues are shared equally among the 30 teams. That includes not just TV rights in the US but overseas as well. Team gear sold outside a team’s home market is also the league’s to sell. NBA China and the Basketball Africa League are jointly owned. So are digital properties like NBA.com, NBATV, the NBA App, etc. The league itself is a thriving business and the Kochs will in effect own 15% of the Nets 30% interest in the league ... or 4.5%.
The Koch’s timing is also good on a local level. All the big BSE Global assets look like they’re about to make a profit soon if they haven’t already. The Kochs may lose money in the short term but will share profits with the Tsais later.
Any changes in basketball operations?
As noted, the combined wealth of two billionaire families should help the team in future years, but it is hard to see how much added benefit you get once you reach a certain level. The CBA and profit sharing are all about trying to level the playing field among the 30 teams, subtly and not-so subtly giving small markets advantages
In his letter to BSE employees Wednesday and in an interview last month in China about his focus on the Nets, Joe Tsai identified one big issue: sustainability. Virtually major decision the Nets have made the last year and a half since the superstar trades has been about the future more than the present. whether it’s drafting the two youngest players in team history last year or hiring a head coach and staff that is very development-centric this year. It also helps to have a new, big pockets investor willing to put up money.
So do not expect the S.S. Brooklyn to make some wide turns any time now and head off in another direction. “Sustainability” has become Nets latest buzzword.
As Joe Tsai said in his message to BSE employees Thursday, “both our families are committed to making the necessary investments in our franchises to build a sustainable winning culture” or as he said at the Global China Summit in Shanghai back in May, “I want to build a winning mentality and culture that’s sustainable.” Emphasis ours.
Koch’s controversies and Julia Koch
Now for the downside, the Koch family’s history which will likely gain as much attention in New York City as the deal itself. The family members buying into BSE are seen as the more open, the less controversial of the two wings of the family.
Each wing holds a 42% of the company’s private stock and Julia Koch is on the board of directors. A simple re-telling of their political giving doesn’t tell you much of their power. It’s not just money that brings clout at the highest levels of US government (although they have broken with Donald J. Trump.) It’s a product of, wait for it, decades of sustainability in lobbying, in public affairs, in influencing anyone they need to push whatever policy initiatives they see as important to them or kill some government program or rule they don’t like. It’s not illegal, far from it. It’s the mother’s milk of the political culture.
Since 1980, the family and its network of donors have been the single largest contributors to right-wing causes in the United States with estimates of their giving reaching well beyond $100 million, Most recently, the network has been financing opposition to climate control policies. Indeed, the family fortune is tied in large measure to the oil and gas industries. It has also recently played a role in financing both anti-abortion efforts and opposition to the things like critical race theory
Julia Koch may have made her name as a New York-based philanthropist even crossing paths with the Tsais on several initiatives like Lincoln Center. David Koch Jr. may be more interested in pick-and rolls than oil drilling or aviation but all of them are more likely to be identified with Koch Industries and the family, for better or worse. Those who know the family say Julia Koch is not her husband politically and David Koch Jr. is not his father. But if you want to remain low-key, why buy an NBA team in New York City where your every move is put under the unforgiving microscope? It suggests a desire for a different role.
Maria Julia Koch is a reporter covering foreign policy among other things while John is still in high school.
A note on ‘sports washing’
So what is the ultimate goal of the Kochs? Is the NBA too good of an investment to pass up, particularly with the new TV rights deals, the rise of streaming and expansion of the league? Is the training young Koch will get in running an NBA team worth all that money? Or are we seeing the Kochs engaging in the phenomenon known as “sports washing,” where a controversial billionaire uses involvement with a sports team, preferably a winner, to help “launder” any shady pasts.
To be clear, we don’t know and won’t likely have a better idea until she speaks about the sale. Her only comment was relayed by the Nets official site and it was hardly revelatory.
“Our family is honored to join the Tsai family in shaping, advancing and contributing to the shared vision for the future of The Nets, The Liberty and the broader Brooklyn community,” said Koch.
Julia Koch is already well known and respected in New York because of her extensive charity work with the city’s biggest private institutions — hospitals, art museums, concert halls, etc. But those institutions pale compared to pro sports teams with their enormous reach and generally positive vibes. If you’re trying to separate yourself or your children from the more controversial aspects of the Kochs’ legacy, their political donations, lobbying, etc. sports has a lot of reputational and financial advantages. The list of Bond villains who have become owners of pro sports teams is long and includes Middle Eastern potentates, oligarchs and businessmen of all breeds.
There’s also no guarantee it won’t backfire. Is Steve Cohen’s visibility higher than what it was before he became owner of the Mets. He had been an enormously successful hedge fund manager before being banned from handling all but his family holdings by the SEC for securities law violations. Yes he is better known as the Mets owner. but is he viewed more positively if the Metsies go into a prolonged slump leading to a lengthy losing streak. Don’t think so. More people liked Bruce Ratner the Brooklyn developer than Bruce Ratner the Nets owner. We were once told that Ratner, used to generally good press on business and real estate pages, was shocked to see a different reception in the sports section.
And maybe we are too cynical. We would admit to being skeptical. Maybe there is something else that we don’t know about, can’t fathom within our Brooklyn, New York mindset where everything has to be transactional. If it is “sports washing,” Koch’s motivation may not be cleaning up or softening the hardline edge of her company but a more personal one, building a new image for herself and particularly her children, separate from Koch corporate headquarters in Wichita Kansas.
One thing to watch is how she and her children prefer to identify themselves publicly going forward. Julia Koch prefers known as a philanthropist rather than a member of the Koch Industries Board of Directors. Will she also like to known as “minority owner” of the Nets; the Liberty, that hot new WNBA team; and/or Barclays Center, a venue for the arts and sports with national stature.
Of course, there’s always a simpler rationale. Maybe she and they just want to have fun using Koch money. There’s a longer history of that than “sports washing.” Still, no matter what she does, can she separate her corporate role from everything else. Her fortune is the result of her late husband’s dealings. Again, we don’t know. She may not want to separate the professional from the personal, She probably is proud of her husband’s legacy.
In the meantime, we will monitor what she does, not so much her company, and report on it. We don’t really have much choice.
Looking down the road
It will be a long time, years certainly, before fans can see whether this was a good move or not. whether the families will make a good match Will the Kochs continue to let the basketball operations people and the Tsais run the Nets? As one NBA executive told us, every new pro sports team owner comes in, says he or she will let the basketball professionals run the show. Some claim they don’t even have real interest. Then. added the executive, their team will falter, lose five straight and the owner will be the butt of his golfing buddies’ jokes. Quicky. things move from “trusting the process” to “It’s my team, damn it.” Will that happen here? As we say too often, stay tuned.
- NETS PARENT BSE GLOBAL VALUED AT $6 BILLION AS KOCHS LAND 15% STAKE - Scott Soshnick & Eben Novy-Williams - Sportico
- Billionaire Julia Koch has agreement to buy 15 percent stake in Nets, Liberty’s BSE Global: Source ($) - Mike Vorkunov - New York Times
- Inside The Koch Family’s $5.8 Billion Valuation For 15% Of Brooklyn Nets’ BSE Global - Mike Ozanian - Forbes
- Joe Tsai sells Nets minority stake to Koch family after eye-popping $6 billion valuation - Brian Lewis - New York Post
- Koch, children buy 15% stake in parent company of Nets, Liberty, Barclays Center - Evan Barnes - Newsday
- Nets owner Joe Tsai agrees to sell minority stake in BSE Global to Julia Koch family ($) - C.J. Holmes - New York Daily News
- With BSE Global (Brooklyn Nets, ArenaCo, Liberty & more) valued at $6B, Joe & Clara Tsai set to reap $900 million in 15% sale to #sportswashing Koch clan - Norman Oder - Atlantic Yards/Pacific Park Report
- BSE Global Announce Julia Koch and Family as New Strategic Partners - BSE Global
