Members of notorious (David) Koch family said to be seeking 10%-15% of Brooklyn Nets & arena company. If valuation is $4.8B, then Joe Tsai will have scored.

Joe Tsai, owner of the Brooklyn Nets and the Barclays Center operating company, finally might cash out from the continued rise in value of the team-plus-arena-company--and without having to sell the team or lose control.

And if he can sell a 10%--or maybe-15%--stake in those BSE Global holdings at a valuation of $4.8 billion, that would not only mark an astonishing rise in value, most recently estimated at under $4 billion, that $480-$720 million would more than make up for some of the losses he's absorbed running the arena (and the team).

As I reported in October, for the last fiscal year, Tsai had to put up $18 million to bolster the arena's finances, while he contributed $38 million in FY 2022 and $52 million in FY 2021.

In FY 2022, the New York Post said the combined loss, on the arena and team, was between $50 million and $100 million combined. The overall loss on the Nets is more murky.

What's it worth?

Sportico in December valued the team and arena company at $3.98 billion, a significant gain over the estimated $3.3 billion that Tsai paid, but noted a relatively modest rise since the Nets lost their superstars. But the NBA as a whole will gain from media rights and other growth.

Note: the Nets owner doesn't own the arena outright but rather the operating company. It's a common but erroneous shorthand.

Tainted owners?

It's no shock that the reported new stakeholder, like the team's current and previous owners, might not just want to make money, but also hope sports team ownership helps cleanse a less-than-pristine  reputation. (More fodder for TrueHoop's periodic coverage of NBA billionaires?)

Reports yesterday from Bloomberg. Sportico, and the New York Post (see NetsDaily roundup) indicate talks with the family of billionaire Julia Koch, widow of David Koch, whose fortune, more than $60 billion, derives from the privately owned conglomerate Koch Industries, which has an extensive oil and gas business, and produces consumer goods.

Note: none of those reports have attribution, so they also could be leaked to help with negotiations.

The Koch brothers also became notorious for funding right-wing causes, though David Koch's philanthropy in New York City and elsewhere surely kept them viable in elite circles. (Their name is pronounced "Coke," and they're not related to former New York City Mayor Ed Koch.)

This would be part of a trend in which minority investors--remember, sports teams are a scarce commodity--help bolster the fortunes of owners. As ESPN reported in December 2022:"

A few weeks ago, the [NBA] Board of Governors approved a rule change that allows sovereign wealth funds to buy stakes in teams in addition to other institutional funds, such as endowments and pension funds, a change first reported by Sportico and confirmed by ESPN. 

Tainted funds?

David Koch, Jr., just 25 and a big basketball fan, is reportedly the impetus behind the family investment vehicle's pursuit of the Nets.

As the New York Post reported, "A 2021 Duke grad with a BA in political science and government, Koch Jr. actually worked under Jim Dolan as a Membership Experience Executive for Madison Square Garden Sports."

He's not his dad, who with brother Charles seeded the Tea Party, libertarian movements, and created a network of right-wing funders.

But the money surely has some taint. As the New Yorker's Jane Mayer wrote in an August 2010 profile of the brothers:

The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests.

In the Nation, Jasmin Banks of UnKoch the Campus wrote in August 2021,The Radical Capitalist Behind the Critical Race Theory Furor:

Why is the Koch network so dedicated to this cause? It is a prime example of how the network has built up an alliance between the three pillars of the right wing: the Republican Party, rich corporate elites, and conservative white and evangelical voters opposed to racial progress.

Some fan dismay

On NetsDaily, some Nets fans reacted with dismay, while others pointed to hypocrisies.

One wrote:

Basically sounds like the following:
"The current circumstances are mostly Tsai's fault, he's a terrible owner. We need a new owner."
"Well not THAT new owner!"
Lol.

Another:

What a stinking piece of news to read. It's almost a middle finger to the borough of Brooklyn, which is one of the bastions of anti-conservatism in the country, to have the Kochs come in, buy a big stake in the team, and piss on the fans with a smile.

Another:

[Mikhail]Prokorov buys team with Russian blood money: OK

Tsai buys the team with Chinese blood money: OK
Koch buys the team with American blood money: UNACCEPTABLE!
I root for the Nets. The rest is just noise.

Then again:

Nets continue rolling out a line up of Bond villains in the ownership box:

* Real estate mogul using the team to claim eminent domain
* Russian oligarch who forgot where he parked his yacht
* Chinese tech billionaire with shady business ties
* The literal fucking Koch family https://t.co/9qoNOxhqzg

— Russell And Fro (@RussellAndFro) February 22, 2024

Philanthropy and more

From Sportico:

Koch and her family are worth $60.6 billion, according to Forbes, making her one of the wealthiest women in the world. The family inherited 42% of Koch Industries when David Koch, brother of Charles and Bill Koch, died in 2019. She runs the Julia Koch Family Foundation and has become a prominent philanthropist. Earlier this month, the foundation donated $75 million to NYU Langone Health to build a medical office tower in West Palm Beach.

In the New Yorker, Mayer was a little skeptical about David Koch's "spectacularly large donations to the arts and sciences," given that, while "casting himself as a champion in the fight against cancer, Koch Industries has been lobbying to prevent the E.P.A. from classifying formaldehyde, which the company produces in great quantities, as a 'known carcinogen' in humans."

Moreover, the David H. Koch Hall of Human Origins, at the Smithsonian’s National Museum of Natural History, offered a message skeptical of climate change, with ideas that "uncannily echo the Koch message."

"The Kochs have long depended on the public’s not knowing all the details about them," observed Mayer. Owning a sports team might be fun--owners' box!--and supply a partial halo, but it also might increase scrutiny.

Path to full ownership?

Does this mean that the Koch family could someday fully own the Nets and the arena company?

The New York Post's Brian Lewis tweeted that sources said the potential Koch investment does not leave a path to majority control.

But the Kochs have a lot of money, and surely could afford to pay Tsai a premium.

And "projects change, markets change" is a famous part of the Atlantic Yards lexicon.