Investing in Sports

8 minute read · Issue Number 113 · March 25th, 2022

Hey!

In finance, you’ll often hear people say, “make sure you know where you’re investing your money,” – which means doing some actual research on the industry/sector/company, their operations, financials, management, growth potential, etc.

If you’re reading this – you probably already know a lot about the sports industry.

So what if you’d want to invest in it? Is it possible? And if so – how? In what?

Grab some pancakes while I introduce you to the world of sports investing 🥞

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Investing in Sports

It is possible to invest in sports, although it’s different from investing in other industries like technology, retail, materials, financial institutions, and others.

The main reason?

Only a few big sports organizations are trading in public markets, and unless you have deep pockets and know the right people, it’s unlikely you’ll have any other choice.

For example, you can’t directly invest in the Dallas Cowboys or Tottenham – they’re private companies.

You could buy a team if they get put up for sale, but you’d need a LOT of money.

So, where/how could you invest? What are investments in sports available for the public investor?

1. Stocks

The easiest way to invest in sports is by buying shares of publicly traded companies available to the general public through different stock exchanges.

Some examples are:

• Teams: Manchester United, New York Knicks, Atlanta Braves, Juventus, Toronto Blue Jays, Borrusia Dortmund, Ferrari

• Sports Apparel: Nike, Puma, Lululemon, Adidas

• Sports Retail & Accessories: Dicks Sporting Goods, Footlocker

• Technology: Peloton, Catapult Sports

• Media: Formula 1 (through Liberty Media), The Madison Square Garden Company, ESPN (through Disney), CBS (through Paramount), Fox, Comcast

• Betting & Entertainment – Draftkings, the WWE, MGM Resorts, Penn National Gaming, EA Sports

Some advantages of investing in publicly traded companies are high liquidity, relatively low risk, ease of access, and availability of information.

The disadvantages are the limited alternatives and return potential.

2. Venture Capital / Early Stage investments

The idea behind venture investing is to find startups developing technology or solutions for the sports industry and invest in them early to help them grow.

Some of the most popular funds that invest in early-stage companies in sports are:

• Elysian Park

• leAD Sports

• Raine Group

• KB Partners

• SeventySix Capital

• Stadia Ventures

• Courtside Ventures

The advantages of investing in VC are high asymmetric return potential and a broad set of alternatives/opportunities in diverse sports sectors.

The disadvantages are the high barrier of entry (i.e., you need more money), low liquidity, high risk, and there isn’t much information on the companies either.

3. Private Equity

Private equity firms invest huge amounts of money and have access to diverse investment opportunities related to sports.

Investments here are more distinctive – from funding a specific sporting event, acquiring a stake in clubs and leagues, or even getting a share in media rights deals.

Some PE firms in the space are Arctos Sports, Dyal Capital Partners, RedBird Capital, and Sixth Street.

These investments are even harder to access than VC, but they offer some exciting opportunities in sports to those who can afford them.

The Bottom Line

There are a few ways to invest in sports that depend on your budget and interest; however – as you probably realized, there are many gaps in the market.

What if you wanted to invest in the future of up-and-coming athletes? What about investments in youth sports teams or leagues? Or sports facilities? Cities hosting Olympics/World Cups?

Blockchain technology is helping with that, but I’d expect new technologies to enable more and different investments in sports to the general public sooner rather than later!

🔗 Learn more:

1. The Pros and Cons of Investing in a Sports Franchise

2. Private equity invaded sports in 2021 with nearly $2 billion in deals, and the NBA was in high demand

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