Liberty Media plans to spin off the Braves into an independent, publicly traded entity

Liberty Media’s John Malone announced Thursday that the company’s board of directors authorized management to pursue a split from the Atlanta Braves and its real estate development project. The move, according to Liberty Media President and CEO Greg Maffei, will better highlight the strong value of the Braves franchise.

In an Investor Day presentation, Maffei speculated about a higher valuation or potential buyer interest in the team.

“You may have noticed that there is a high demand for sports assets. Money is flowing into the ecosystem, with new players of all kinds driving demand,”

“Among baseball teams, it is said that Baltimore and Washington are considering a sale. We would say, I think with some reason, that the Braves are a much more attractive asset,”

According to the Hollywood Reporterthe spin-off will occur “by repurchasing the existing common stock of Liberty Braves from Liberty Media in exchange for common stock in a newly formed company to be called ‘Atlanta Braves Holdings Inc.’

The holdings would include all business assets and liabilities currently attributed to the Braves Group, including Braves Holdings LLC.

While the actual move isn’t expected to occur until the first half of 2023 (i.e. no later than June 2023), it could have multiple key implications for eventual Braves ownership.

The first and most obvious change, one that requires no speculation, is that the Braves are currently represented by a “tracking stock,” which is a quirky financial instrument that theoretically goes up and down in value based on performance. financial position of the entity he represents. But, this move will essentially see current holders of said follow-on stock redeem it for “real” stock, i.e. stock that vests ownership of the Atlanta Braves and their business assets.

The second is that the Braves will become, for some definition of the word, “independent”. No one has announced any plans as to exactly how the split will work, in terms of how much ownership of the newly formed, now “independent” company Liberty Media might retain. For example, as part of the spin-off, Liberty Media could retain any amount of shares, ranging from zero percent to nearly 100 percent. John Malone and his friends could retain a little more than half of the shares and remain majority owners of “Atlanta Braves Holdings Inc”, or not.

If this move goes as announced, the Braves will become the only MLB team to be publicly traded as a low-profile sports franchise in this manner, and will likely be the only North American sports team whose ownership, independent of other unrelated assets. , is traded on some kind of large stock exchange. (Although, again, it remains to be seen exactly how much of the team’s ownership is actually traded. For more on somehow public teams, see this the wall street journal article.)

If you want to know why this is happening, a useful thing to read might be this letter of Breach Inlet Capital. While it’s unclear if said letter actually told Malone, Greg Maffei and their staff something they didn’t already know, basically the perception in the market was that the tracking stock wasn’t making a adequate work to reflect the value of the Braves franchise and their various related business assets. Whether that was because it was follow-on stock or because the Braves were still entangled in Liberty Media’s corporate quagmire is unclear – but as we can see, the stock of Current tracking of the Braves is rallying this morning, so the market is buying that interpretation for to some extent.

One of the key takeaways from the early talks, however, is that this could be (and probably is?) a precursor to a Braves sale, albeit in a somewhat odd way. Rather than selling the unit as a whole right now, it allows John Malone to see how the market values ​​the Braves as an asset, without the complications and potential implications of a trailing stock. Then Malone and Liberty Media could (assuming they do indeed retain a majority stake in independent Braves) sell the rest of their shares to an interested party, or something similar. Or, maybe if they don’t hold onto the shares, a large institutional investor could just step in and essentially buy the shares and take over the private Braves. Who knows? There is a lot to explore.

Part of what will be interesting is how this conflicts with MLB’s current “owner’s club” owner transfer rules, which require most if not all owners to sign a team sale. Is it because Malone wants to sell to the highest bidder, and that may be an institutional investor who hasn’t kissed the other owners’ rings enough? Or is that not a concern at all, and the Braves split now gives Malone more insight into a proper valuation, especially since the Angels, Nationals and Orioles will likely all be sold as the Braves have a real, publicly traded stock going?

Either way, stay tuned. Things will slowly, but surely, intensify in this regard.

Cathy W. Howerton