Liberty Media’s John Malone announced Thursday that the company’s Board of Directors has authorized management to pursue a split-off of the Atlanta Braves and its real estate development project. The move, according to Liberty Media President and CEO Greg Maffei will better highlight the strong value of the Braves franchise.
In an Investor Day presentation, Maffei speculated about a higher valuation or potential buyer interest in the team.
“You may have noticed there’s high demand out there for sports assets. Money is flowing into the ecosystem, with new players of all sorts driving demand,”
“Among baseball teams, Baltimore and Washington are rumored to be contemplating a sale. We’d argue, I think with some reasons, that the Braves are a far more attractive asset,”
Per The Hollywood Reporter, the split-off will take place “through the redemption of Liberty Media’s existing Liberty Braves common stock in exchange for common stock of a newly formed company to be called “Atlanta Braves Holdings inc.”
The holdings would include all of the business assets and liabilities currently attributed to the Braves Group including Braves Holdings LLC.
While the actual move is not expected to take place until the first half of 2023 (i.e,, no later than June 2023), it could have multiple key implications for the eventual ownership of the Braves.
The first and most obvious change, one that requires no speculation, is that the Braves are currently represented by a “tracking stock,” which is an oddball financial instrument that theoretically moves up and down in value based on the financial performance of the entity it represents. But, this move will essentially see current holders of said tracking stock redeem it for a “real” stock, i.e., one that confers ownership of the Atlanta Braves and their business assets.
The second is that the Braves will, for some definition of the word, become “independent.” No one has announced any plans as to exactly how the split-off will work, in terms of how much ownership of the newly-formed, now-”independent” company Liberty Media could retain. For example, as part of the split-off, Liberty Media could retain any amount of stock, ranging from zero percent to nearly 100 percent. John Malone and friends could retain just over half the stock and remain majority owners of “Atlanta Braves Holdings inc,” or not.
If this move goes down as announced, the Braves will become the only MLB team to be publicly-traded as a discrete sports franchise in this manner, and will likely be the only North American sports team whose ownership, independent of other, unrelated corporate assets, is traded on some kind of major stock exchange. (Though, again, exactly how much of the team’s ownership is actually traded remains to be seen. For more on kinda-sorta-publicly-owned teams, see this Wall Street Journal article.)
If you want context as to why this is happening, one useful thing to read could be this letter from Breach Inlet Capital. While it’s unclear whether said letter actually told Malone, Greg Maffei, and their staff anything they didn’t already know, fundamentally the perception in the market was that the tracking stock was not doing an adequate job of reflecting the value of the Braves franchise and their various related business assets. Whether that was because it was a tracking stock, or because the Braves were still enmeshed in Liberty Media’s corporate morass, is unclear — but as we can see, the current Braves’ tracking stock is rallying this morning, so the market’s buying this interpretation to some extent.
One of the main takeaways from early chatter, though, is that this could be (and probably is?) a precursor to a sale of the Braves, albeit in a somewhat strange way. Rather than selling the unit as a whole right now, doing this allows John Malone to see how the market values the Braves as an asset, without the complications and potential value-depressing implications of a tracking stock. Then, Malone and Liberty Media could (assuming they actually retain a majority stake in the independent Braves company) sell the rest of their shares to an interested party, or something similar. Or, perhaps if they don’t retain the shares, some large institutional investor could just swoop in and essentially buy up the shares and take the Braves private again. Who knows? There’s a lot to explore.
Part of what will be interesting is seeing how this conflicts with MLB’s current “owner’s club” owner transfer rules, which require most if not all owners to sign off on a team sale. Is this being done because Malone wants to sell to the highest bidder, and that may be an institutional investor that hasn’t kissed enough of the other owners’ rings? Or is that not a concern at all, and spinning off the Braves now just gives Malone more information about an appropriate valuation, especially given that the Angels, Nationals, and Orioles will all likely be sold while the Braves have a true, publicly-traded stock going?
In any case, stay tuned. Things will slowly, but surely, get more intense in this regard.