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Prokhorov said to be exploring sale of valuable but unprofitable Nets (or is it more for Ratner?)

Well, Russian billionaire Mikhail Prokhorov is reportedly trying to sell the 80% of the Brooklyn Nets he owns--or maybe not.

There are numerous murky aspects to the reports, and we should remember the history: Bruce Ratner was not selling the Nets, until he was.

It's also possible (as suggested on NetsDaily) that Prokhorov's retention of the firm Evercore Partners is aimed to help Ratner and Forest City Enterprises--who've already retained Evercore--sell their 20% of the Nets, especially since Forest City must sell by year end to convert to a real estate investment trust (REIT) and had said it wanted the sale of the team to be accomplished by the end of 2014.

The value of the Nets should be stratospheric--well over $1 million, and maybe close to/over the $2 billion the Los Angeles Clippers sold for, if there's a hoops-loving billionaire available. And an imminent sale of the Atlanta Hawks should help establish current values.

Still, anyone estimating Prokhorov's profit would have a complex calculation (and I haven't yet seen it). The calculation includes the cash he paid for the team (and arena share), the losses he agreed to absorb before moving to Brooklyn, and the losses--on the league's most unprofitable team--he's experienced since moving to Brooklyn.

It's fuzzy math: the Nets, as a scarce commodity in the league's top market, with an expected increase in revenue from TV contracts and other sources, still lose money. But the team value continues to rise, even as the team's prospects, given aging, expensive "stars" and a lack of flexibility in future NBA drafts, seem narrowed..

Is that sustainable? Perhaps Prokhorov wants to get out before the newness of the Nets--which haven't come close to winning the championship he promised in five years--wears off on the market. As far as I can tell, the Nets find it harder to fill the arena, with announced attendance not close to gate count, and lots of discounts.

Prokhorov, whose ruble-denominated assets have plunged in value in recent months, may need the U.S. dollars, as well.

The story breaks

Bloomberg had the scoop yesterday:
Russian billionaire Mikhail Prokhorovretained Evercore Partners to sell the National Basketball Association team he bought in 2010, according to two people with direct knowledge of the matter.
...“As we have been saying for many months, team ownership is open to listening to offers,” said Ellen Pinchuk, a spokeswoman for Prokhorov. “That’s just part of the business. There is nothing imminent in terms of the sale of any stake in the team.”
Bloomberg stated that "Prokhorov paid about $220 million for his share of the Nets, which according to ESPN lost $144 million last season." That leaves out other operating losses.

The New York Times reported:
Rather than brooding about the team, and the many millions he has lost in owning it, Prokhorov may now see an easy way to cash in for perhaps $1 billion in profit. He could also be looking to discard a valuable United States asset at a time when the Russian economy is in turmoil as it copes with Western penalties, the falling value of the ruble and tumbling oil prices.
...This is not the first time Prokhorov has been said to be interested in selling the Nets. Last fall, there were reports of a complex deal in which he would have combined his assets with those of the investor group that owns the Los Angeles Dodgers. It was, at best, in an embryonic stage of negotiations when news of the discussions leaked, and the transaction never came to fruition.
The Daily News reported that a "source close to the Brooklyn Nets" said the Bloomberg story was misleading and that Prokhorov was simply exploring options.

The Wall Street Journal reported that Prokhorov was looking to sell the Nets and his share of the Barclays Center, which other sources said was not up for sale. The Journal reported:
As recently as November, amid reports that he had met with potential minority investors, Prokhorov said he would “not give up control of the team.” But now his position appears to have changed, perhaps because the declining Russian ruble has lost considerable value against the U.S. dollar recently on account of falling oil prices and economic sanctions against Russia.
Retaining ownership of the Nets could be a sensible way to insulate himself from the struggling Russian economy, although the Nets did lose a reported $144 million last year while paying out an NBA record $197 million in payroll and luxury taxes.
The Nets’ luxury-tax bill will be significantly cheaper this season, but they still have a league-high $90 million payroll.
The Journal offered some context on the arena:
Forest City reported the arena lost money in the first nine months of 2014, when debt expenses were factored in. It reported $29.5 million in operating income, slightly less than the $30.1 million in interest expenses, the company said in securities filings.
Company executives have previously said they are working to curtail expenses while bringing in more money from events. Indeed, revenues in the first nine months of 2014 were $85 million, up from $76 million in the first nine months of 2013.
NetsDaily offered a round-up, noting:
Two team insiders told NetsDaily, "old story." But [the Times's Richard] Sandomir added that Prokhorov was "actively" seeking bids.


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