Even the wave of 11 first-inning runs last night—10 of them surrendered with two outs en route to a 15-3 loss to the Los Angeles Dodgers—can’t wash away the fact that the Atlanta Braves are two games from their their first World Series appearance in 21 years. The Braves have been fan-pleasers, with (usually) shut-down pitching and a stout Freddie Freeman-led offense. For shareholders of the publicly traded club, however, the season feels like an also-ran. Braves stock is down one-third this year while the rival Mets, who finished in last place, are selling for almost double what Mister Market says the more successful Atlanta nine are worth.
For investors, the Braves are the purest way to play a North American sports franchise. The team is actually part of John Malone’s Liberty Media conglomerate, acquired as a tag-along asset in deals involving the Ted Turner media empire. Malone reconfigured Liberty’s shares in 2016 into three tracking stocks—one for the Braves, and one each for its Formula One and Sirius XM arms. The aim was to make it easier for Wall Street to value the individual businesses. If investors really have a clearer vision today of what the baseball team is worth, then Wall Street is a lot more skeptical of sports-team values than most.
Closing at $21.60 a share yesterday, the stock market gives the Braves a market cap of $1.3 billion. By comparison, the last team to sell privately, the Kansas City Royals, fetched $1 billion—and that’s a franchise in a market less than half the size of Atlanta. The Braves’ value slump isn’t new, either. Braves shares were issued at $36 in April 2016 and promptly slid to an all-time low of $14.23 that month. Even as shares have slowly worked higher in the years since, peaking at $30.16 in January, they have tumbled back again during the pandemic. The problem for Braves shareholders, it seems, is that it’s easy to find one billionaire to overpay for a sports team, but a lot harder to get thousands of stock investors to pay a higher premium for a piece of America’s oldest continually operating baseball team.
“There is almost no price a franchise can sell for now that we can be shocked by at this point,” said Victor Matheson, a professor of sports economics at College of the Holy Cross. “But it does seem that franchises sell for well more than the fundamentals would suggest.”
Many investors seem to own Braves shares in hopes that Liberty chairman John Malone will eventually decide to sell the team to a private investor. Gabelli Research equity analyst John Tinker even maintains a private market value for the Braves. In his latest report, from June, Tinker says the team would fetch a valuation of $44 a share, or $2.64 billion, if Malone offered it up for private ownership. Tinker declined to comment for this article. A representative for Liberty didn’t return a request for comment.
The Braves aren’t the only sports team considered to be undervalued in the public market. Madison Square Garden Sports owns the New York Knicks and Rangers and has a market cap of $3 billion. That’s well below what the Knicks alone would get in a standalone sale, according to a sports business executive who has a billionaire client eager to buy the franchise. The executive asked not to be named because he has business dealings with some of the teams named in this story.
“Think of teams like ego-maximizers or fame-maximizers” for their billionaire owners, said Matheson. “If you believe there’s always the next guy who wants to be famous, you can overpay for your team now and assume you can find some other guy to overpay for it later.”
Yet while it’s easy to say the Braves are undervalued compared to a theoretical sale, it’s not necessarily correct to claim the stock market has undervalued the squad. For one, based on the Braves’ 2021 projected $54 million of EBITDA (earnings before interest, taxes, depreciation and amortization, a favored metric for valuing companies of any stripe) the team is pricey. At a market cap of $1.3 billion, the Braves are trading now for about 42 times EBITDA. By comparison, the average S&P 500 stock is trading at a multiple of 22.
Plus, while people point to hedge fund billionaire Steve Cohen’s pending purchase of the Mets for $2.4 billion as indication that the Braves should be worth more, the Mets valuation includes assumption of around $400 million of team debt, according to the sports business executive, who is familiar with the transaction. Atlanta carries debt of $718 million. Add that to the Braves market cap and the franchise is valued at more than $2 billion—not far off from the Mets on an apples-to-apples basis.
Still, there is one small comfort for both Braves fans and Braves shareholders. Historically teams owned by corporations tend to underperform on the field, from the Chicago Cubs’ long run of twentieth-century futility under the Tribune Co., to the Toronto Maple Leafs’ five-decade run without a Stanley Cup as part of BCE Inc., to the Knicks and Rangers’ mediocrity under Madison Square Garden Corp. It’s probably because companies are more interested than egotistical owners in maximizing profits instead of wins, noted Matheson.
The Braves may not have won a World Series since before Ted Turner was sporting a rally cap in his box seat, but they’re still among the best teams in the league.