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The Board of Directors of the National Basketball Association (“NBA”) has voted to allow sovereign wealth funds, pension funds and college endowments to invest in NBA teams. The major US sports leagues have traditionally restricted who they allow as franchise owners, not only for managing general partners, but also for limited partners. But two years ago, the NBA became the first major US sports league to allow private equity investment. Now, as franchise valuations continue to soar, the NBA is widening its range of potential investors. With so many Americans with enough money to buy franchises selling for billions of dollars, the NBA realized it needed to expand its pool of potential buyers.
Sovereign funds can already invest in most international soccer and basketball clubs, but American leagues, especially the NBA, the most globally popular of America’s professional sports leagues, have a world of their own. It has a charm of its own. A potential investor with cash could drive the value of the franchise even higher, benefiting every team in the league.
The new rules limit investment by sovereign funds to 20% of the franchise and limit the total team assets held by the fund to 30%, restricting these investors from being controlling. The new rules follow the NBA’s expansion into the Middle East in new ways earlier this year, including opening an NBA store in the United Arab Emirates and hosting preseason games in Abu Dhabi for the first time this October. Given the predominance of sovereign wealth funds in these wealthy Gulf countries, to have a “more transparent underlying objective.”
Of course, there are ethical, political and public relations concerns about allowing certain sovereign wealth funds to invest in the NBA. The NBA doesn’t want to be accused of participating in the “sportwashing” of international soccer and golf in recent years. When Mikhail Prokhorov became the first international majority owner of an NBA franchise in 2010, he underwent a league approval process that took much longer than the league’s normal approval process. rice field. The NBA has said that “human rights” and “geopolitical status” will be considered in the approval process before accepting any investment from the fund.
The bottom line, though, is that these new rules could boost the ratings of NBA franchises, putting pressure on other major U.S. leagues to follow suit soon. Major Leaguers interested in investing in his team may soon find an incentive to invest.
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