My Three Cents
MakovskyThursday, June 5, 2014
It is not often that I write on the same topic three times, but there is one more thing about the Clippers Case that fascinates me and I’d like to address: how negative developments “buzzed up” the price of this NBA team from $575 million to $2 billion – a record price in NBA history.
Typically it is positive developments and promotions that shoot prices upwards (e.g., great cover stories, winning prizes, great performances, spectacular growth). But in this case there is none of that. It was summed up so beautifully in one paragraph in a sports column by Bill Plaschke of the LA TIMES:
“The Clippers. Two billion bucks. No NBA Championships. Two billion bucks. No appearances in the conference finals. Two billion bucks. No league most valuable players, no Staples statues, and no real national love until their owner became the most disliked man in America. Two billion bucks.”
So what escalated the price? I can only speculate.
First, let me relate a little story. Years ago an executive who worked in my firm decided to study ten companies in the news, five consistently appearing in the media where positive news was covered over a period of time and five where negative themes were announced and rehashed. The object was to see if the stock price of the companies with negative news rose as much as the ones with positive news. Thus, could negative news — as long as it did not mean a drought or near bankruptcy — drive the price up? The answer? Four of the five “negative news companies'” stock price went up — two at a lower rate and two at the same rate as the “positive news companies.” Anecdotal? Yes. You can hardly draw a conclusion from only ten companies. But it might be indicative — media coverage, good or bad, is better than none at all.
So back to the Clippers and my speculations. Donald Sterling’s racist remarks drew attention to a team that not only was not in the news, outside of being in the playoffs, but was suddenly thrust on the front pages of media across the land…many, many times as the story evolved day-to-day like a soap opera. The team was driven into people’s heads who never heard of them before. Notoriety once and for all! And I contend that people felt sorry for the Clippers, having to sustain the embarrassment of the anti-black remarks Sterling made. People also grew to see the team as an underdog that needed support. America loves underdogs.
Sterling talked behind his team’s back — in what he assumed was a private conversation, but one that was recorded and publically distributed. Our culture does not condone talking behind someone’s back.
The Clippers are in Los Angeles — a premium market in the U.S.. Nonetheless, the team shares Staples Center with the Lakers rather than being the primary resident, and is perceived as a second tier team, or certainly the second most popular in Los Angeles. But L.A. Teams don’t come on the market that often.
Another factor in the skyrocketing sale price may have been the immediacy and deadlines the NBA publicized, which forced the Sterling family to deal with organizing the sale, leaving potential buyers with a ‘now or never’ mentality, if they wanted to purchase.
Put all this together and you can understand how the price zoomed and Steve Ballmer, the buyer, saw this as an opportunity to become a savior and a hero…like Superman coming to the rescue. For all his great work at Microsoft, he may be most remembered for this action. While his $2 billion dollar price is over the top, he has demonstrated a principle of our country never more emphatically: we help people who have been unfairly maligned. As noted before, the USA loves underdogs. The Donald Sterlings of this world are often viewed as wealthy fools. Having bought the team for $12.5 million, he will make out like a bandit. Hopefully, he will donate or leave some of his enormous profits to the disenfranchised throughout the world.