Forbes lists Kings Franchise as #11 in League

According to Forbes, the Kings are the 11th best value in the league. Now, I'm no economist, but in the Forbes report there are a few numbers that I find worth thinking about. From what I've heard about speculative bubbles, sports franchises are the anomaly that is the rule; we've never had the professional sports bubble bust on investors. Anyone who has bought in has--regardless of how much they made or lost in the meantime--been able to sell at far above their own buying price. I'm fine with that but when I see a 75% increase in the team valuation from 2012 to 2013, there are some flags that go off. That is to say, in 2012, according to Forbes, our beloved Kings franchise was worth all of $300,000,000. In 2013, it's now worth $525,000,000. I'll let you decide what that means.

The other glaring number from this Forbes report is the debt/value number. It's currently listed as 19%. What this says to me is that

(debt)/(value) = 0.19

So, logically, we can do some 8th grade algebra and plug in some variables:

(debt)/($525Mill) = 0.19

Which would then mean that Debt = 99.75 (or $99,750,000). From what I recall the Maloof's debt is a bit higher than this. From what has been reported before here, the Maloofs owe some $205Mill. If we accept the buying price of the team--which is in all reality what it's market price is, regardless of what we think or apparently what people like Forbes have thought in the past--plug that into Forbes' analytic, and we end up with this:

$205Mill / $525Mill = 0.39

That suggests that the team is carrying a 40% debt level. That would place the Kings somewhere between the Toronto Raptors and the Phoenix Suns at debt burden. The Raps are at 21st place in value, the Suns at 13th; this in and of itself doesn't make the Kings franchise a bad buy.

But let's pretend you're the Maloofs. And let's think through the logic of their team in 2012 terms. If we drop that team value to its 2012 amount, which is what must have been listed on their collateral in any loan agreements--and note that at no point in the last 8 years has the team value risen above $400Mill. Then that debt/value equation looks much different:

$205Mill / $300Mill = 0.68

This means the Maloofs are have refinanced their sports franchise at a 68% clip. That debt/value ratio is second only to the Atlanta Hawks, currently valued at ... $318 Mill, carrying a 75% debt/vale ratio. While the Kings do make a profit each year, that profit is ambivalent in NBA terms: $2.6Mill before taxes, interest, etc. This means that the Maloofs are running a deficit each year on a team that is already mortgaged at 68%.

They absolutely have to sell. They do not have a choice at this point. In the long run, if Sac can get a higher bidder, they should have a legitimate chance to purchase the team. It might take something ridiculous like $570Mill, but the Maloofs need cash money. They have no income from the casino; they sold their beer distributorship to float that casino ownership(now gone). They're broke as fuck. Bidding a higher price should have some sway here.

Ultimately, it seems to me that Forbes made the team's stats look better online to help facilitate the sale, make the bills seem less significant. In short, the 11th value rank is quite generous, curiously so.

(This is a FanPost from a member of the Sactown Royalty community. The views expressed come from the member, and not Sactown Royalty staff.)

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