NBA Says Sovereign Wealth Funds Will Not Control Teams, But That Doesn’t Mean The League Won’t Take Their Money

NBA commissioner Adam Silver said there is no clear path “in the foreseeable future” that would allow sovereign wealth funds to become the controlling owners of an NBA franchise. This is on the heels of the Saudi Sovereign Wealth Fund taking control of professional golf. But Silver’s statement left he and the league some clear wriggle room and doesn’t mean the league won’t accept money from a sovereign fund.

“I don’t want to say what could ever happen, but there’s no contemplation right now,” Silver said during a question and answer session at the Associated Press Sports Editors convention. “I mean, it’s very important to us, putting aside sovereign wealth funds that individuals are in a position to control our teams, be responsible to the fans, be responsible to their partners and to the players.

“It’s very important to us that there be a person [in charge], and this is independent of sovereign wealth funds. I think that in terms of the connection with the community, the connection with the players and their other partners in the league.”

This statement by Silver was really the only way he could play it. While there is likely concern from him about the presence of the Saudi Sovereign Wealth Fund, there is only so much he can do. He works for the 30 NBA governors. If they want additional streams of income, his job is to make that happen.

The language that the path is currently not clear for the “foreseeable future” means that by definition a path could become clear at some point down the line.

Saudi Money Is Already In The NBA

Last year the Board of Governors voted to let sovereign wealth funds, pensions, and endowments buy minority stakes in league teams, and the league already permits private equity stakes, limiting them to 20% for any one fund and 30% in total per team.

Now, as to a sovereign wealth fund being the controlling owner, that will seemingly happen in just a matter of time.

Once the NBA signs its new broadcast rights deal in the next year, expansion is the next item on the agenda.

Capitalism Is A Train That Is Never Late And Always On Time

In the worst-kept secret in the league, Las Vegas and Seattle are the two proposed cities for new franchises.

Two years ago, the reported expansion fee was $2.5 billion. A number Silver has said is “too low.”

Let’s assume expansion fees would be $3 billion or even $3.5 billion. The list of people in the world who could afford that and don’t already own major sports properties is small. The NBA is not a fan of consortiums either, as they are generally not liquid enough.

There are very few entities that have that kind of cash on hand.

“I don’t think there’s anything irrational at all. In part, the reason why we’ve opened up investment opportunities to private equity firms, sovereign wealth funds, is because we’re running out of individuals, frankly, who are in a position to write those kinds of checks, and especially when you’re not going to be the control owner of the team,” Silver continued.

What’s to stop a sovereign wealth fund from diverting some of its capital into an offshoot holding company with a puppet figurehead at the helm? That would be an individual with the requisite means to buy an NBA franchise. We all know who would be pulling the strings.

At the end of the day if the people behind a fund with $650 billion in assets want to control an NBA franchise, there is nothing Silver can do to stop it.

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