First off Wyc doesn't own 100% of the Celtics. I doubt he owns 50%. Wyc owns a plurality of the shares of BBP.
With this plan it is really really likely that Pagliuca is buying out Wyc's shares.
Wyc ownership group planning to make Celtics available for sale
- Thread starter ThePrideofShiner
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With this plan it is really really likely that Pagliuca is buying out Wyc's shares.
I think he was referring to the rest of the family. He’s the face of the Celtics ownership group and stands to lose the most from a social and self-importance(?) view. The rest of his family aren’t affected in this manner.
Who knows though. My Uncle passed at age 99 and the year prior to his passing he forced his daughters to sell their waterfront Florida condo which they had for decades despite each of the daughters wanting to keep it. You never know what people are thinking or how certain medical conditions affect their thinking.
It is probably not Irv so much as the rest of trust letting their preference be known.
If Irv passes Real Soon Now, he and Anne inherit (I imagine), but then they have an immediate taxable event with a massive bill and probably equally massive litigation over it once the IRS takes a look, the NBA wants to avoid the whole mess, and Anne (so Red Averages says) wants to get out of the whole business anyway since it's not her passion. But suppose that gets resolved somehow - he then, as the team's Governor, still has to somehow manage the necessary cashflow injection of the coming luxury tax bills. We know he doesn't have the outside sources of cash to do so. He might be able to issue new shares to Pags to get him to cover it, but it's possible doing so would make Pags the new majority owner. But the sale now actually solves several problems at once:
1. Team cashflow for luxury tax
2. Anne wants out
3. Minimize estate-tax / gift-tax planning
4. What valuation would you issue new shares at anyway, and would Pags like it, and would the NBA clear it? Would that result in a change of control?
...while still giving him a chance to continue as Governor, at least for a while. So yeah, in theory he could still end up a minority partner here and continue on in ownership, as is his passion. But without Irv owning the majority stake and letting Wyc manage the team without actually owning it, he doesn't have the juice to keep doing that. So if Irv decides he needs to sell, Wyc is no longer really in a position to move ahead. He probably could, if he really, really insisted on it and talked his dad into it. But it's cleaner to do it this way, and the process doesn't have to result in him being turfed out entirely, not necessarily.
Irv clearly knows that him passing right now would mean chaos for Celtics ownership. So selling right now is, in his view, the correct thing to do. Wyc is just managing the PR and natural consequences from that decision, while Irv remains behind-the-scenes. And I have to say, I don't recall seeing Irv in person at the moment of triumph for his $5B+ asset, nor at the parade. You'd think that a majority owner, even one that is very hands-off, would at least show face for that and enjoy some of it. So my conclusion is, Irv probably isn't well enough to travel to see the team, even in a moment like this. Who knows what his personal timeline is like, but it can't be all that pretty a picture, imo.
of course he doesn't own 100% or... 50%
When Wyc says "51% now 49% in 2028", he is probably talking about the Grousbeck family stake
I find the speculation of Irv's assets, estate planning, including existing trust provisions, for a guy nobody knew about 2 weeks ago, fascinating and funny as hell.
You didn't know of Wyc before the Championship? I guess he isn't as front forward as Kraft or Henry but he is definitely more active than a majority of sports owners. I have had the good fortune of meeting him professionally after the Big 3 win and I immediately knew who he was and we spoke a bit about the Celtics in our limited interaction.
As mentioned above, he's among the most famous business professors. He invented the search fund, which became a career for several of my friends. I knew about him via B school before I even knew he owned the Celtics.
There's what we know - the partners in BBP, the fact that Irv is the plurality holder at the very least. The Pallotta buyout. The estimated valuations.
There's what insiders here have heard, such as what RA said about Anne, or that Pags is the owner who is actually worth a lot and has serious assets outside of the Cs.
There's the public statements they've made about estate planning, and Pags saying he expects to be a bidder.
And then there's what we can infer, from knowing some of the tax consequences and considerations common to these kind of situations - e.g., people were linking to case studies upthread of where they screwed up the owner succession planning, like with the Broncos I believe. We may not have the Grousbecks Family balance sheet on hand, but we're not starting from zero knowledge.
All told, I think we know enough to speculate, so long as we're clear that it's (half-informed) speculation.
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I know who the man is and how he made his money.
My post was about the financial speculation in a Celtics forum among fans most of whom had never heard of the guy until his son Wyc made public the family's desire to sell its stake for estate and planning reasons a couple of weeks ago. Unless you're one of the family's lawyers, accountants or assets managers its unlikely you know how the Celtics investment is divided among the family or how it has been structured.
Is Pags like rich rich enough that we should never have to worry about ducking under the tax when the team is competitive? I know he's not Ballmer rich, but below that I have a hard time differentiating all the investment guys.
If you go by Cuban's comments - and apologies because I have referenced them here before but it felt like they flew under the radar - around the timing of the Mavs sale, Pags isn't wealthy enough:
It really feels like ownership of these teams will be less concentrated going forward just given their overall values.
Ah my bad. Well his dad could be considered one of the founding fathers of Silicon Valley with the creation of Search Funds.
Yes. Also I don't think Pags will go it alone. My guess is a lot of BBP will stay on board. I wonder if Bonderman needs to get out because the Vegas franchise will want to use his arena.
My guess is his dad, in his position and connection at Stanford has made gazillions with a first look/first bite at early stage stuff in in Silicon Valley
Do you remember when Shaughnessy used to mock Paul Gaston as ThanksDad mercilessly? I'm surprised he hasn't resurrected that.
BTW, everyone seems to be quoting as fact that Wyc owns less than 2% of the team. But, is that actually confirmed? We have Shaughnessy saying "okay if I say you have less than 2%?" but did Wyc actually reply?
BTW, everyone seems to be quoting as fact that Wyc owns less than 2% of the team. But, is that actually confirmed? We have Shaughnessy saying "okay if I say you have less than 2%?" but did Wyc actually reply?
The only reason that Paul Gaston wasn’t considered one of the worst NBA owners in his time was because of one Donald Sterling. Not even Shank can criticize Wyc.
Have not seen that confirmed anywhere.
It's an interesting comparison to the NFL, where there's been no diversification of ownership or alternative models brought about be the new labor contract, or even MLB, where the luxury tax has much less bite. Pretty clear this trend in the NBA is being driven by the luxury tax structure and how punitive it is. These guys like their vanity investments but they also like spreading around the financial risk and pain to others.
Most MLB teams are owned by partnership structures similar to that of the Red Sox. The reality is that professional sports teams do require significant cash outlays to operate, and can go a few years with real operating losses. While those losses are more than offset by the essentially tax-deferred appreciation of the asset and other tax write downs, there is still significant capital required to actually operate a team.
Felger and Mazz were ripping him pretty hard yesterday. They had a bit of a point where Wyc has been talking about how it's all about banners, not about making money and then we learn:
1) It wasn't really Wyc's money
2) They are now selling before the tax bills come due (or at least start to come due)
Exactly. They actually said it makes the championship less exciting for them.
Given all the apron/repeater tax stuff Ive listened to on multiple podcasts, from a higher level it really seems to me at it's simplest Wyc (and Id bet 99% of owners in general) either doesn't want to pay a $200 million roster $375 million*, or be the one to break that roster up. I dont really blame him.
*ive seen various iterations of what the team will cost after a repeater tax, so just used simple round numbers to reflect the larger point.
Their point is so bad it's really not worthy of a response. But, here goes:
1.) Anyone that bothered to do 5 seconds of internet research would learn that the Celtics are owned by a partnership with a myriad of investors, including Irv and Wyc Grousbeck. They would also learn that Wyc is the only one listed as "Lead Owner and Governor".
2.) The timing of the sale is for estate planning purposes. Tax payments have literally nothing to do with it. Read this thread to understand why.
Truly the most insufferable people on the planet. I can't imagine living day-to-day like that.
this is one of the dumbest things I’ve ever read.
they are now less excited after the fact because the owner wants to sell to avoid tax bills? Who gives a shit!
EDIT: just to make it clear I am talking about Felger and Mazz, not you.
Or maybe it’s, we *can’t* pay a $200M roster $375M.” Even still, the fact that Wyc and Co. assembled this team over a long stretch, put the right pieces in place—to my understanding anyway—paid luxury taxes to do it all, and then locked all the key pieces in for the foreseeable future, it’s hard for me to find any path to being bitter short of Wyc desperately selling Huizenga-style to a buyer who pays top dollar to immediately break the team up. And we have no reason to believe he’s doing that.
I think the estate planning is a primary driver (though I'm pretty sure that the estate planning discussions have been ongoing for some time - I can't imagine that the Grousbecks are going to have a massive, unplanned tax bill come due if Irv were to (god forbid) suddenly have something happen to him.
However, the tax payments must be a real issue for them and I think the tell is that Wyc wants to try to stay on as governor to 2028 to try to ride along with this core until it becomes untenable financially.
The "can't" part is a really important point. Thanks for adding it on.
And @Auger34 while I appreciate the clarification it wasnt necessary. Any time F&M and "dumbest" are close together, I always assume it's about them!
It's amazing these guys (Felger & Mazz) work in the sports biz and don't understand where sports ownership is going.
The composition of the Celtics, player extensions, and pending taxes has screamed "new owners/capital infusion" long before Wyc's announcement (it's been discussed in the Cellar pretty regularly since Cuban roped in the Adelson's).
Decent chance that they fully understand. That's not relevant. What makes good "angry Boston fan radio" is the goal, not facts and vibes and shit. And they're good at that.
Haha. If I were in their shoes, I would. It must be hard to come up with new things to rile up a happy fanbase.I suspect one of Felger or Mazz has started trolling the Cellar/this thread
They know where the $ is. Stephen A. Smith isn't getting a $90M extension by putting out reasonable, well-researched, and statistic-driven information.
POINTZ and HOT TAKZ - where the $ is.
Holy crap. 90MM.They know where the $ is. Stephen A. Smith isn't getting a $90M extension by putting out reasonable, well-researched, and statistic-driven information.
POINTZ and HOT TAKZ - where the $ is.
Even here we have people who watch or listen to these shows, so it's easy enough to understand how they make their money. Everyone knows that professional wrestling is fake too, but it still makes buckets of money. The heart wants what the heart wants.
Agree it's easy to understand. Someone said not that long ago here on SOSH (I can't even remember which forum and I don't think I could find it) that the best part of sports is the emotional part of living (and dying) with your favorite team. I hadn't really ever thought about sports that way until it was mentioned.
I guess I'm weird because to me the best part of sports is to watch great athletes and the strategy part of trying to win a competition. That's why I'd much prefer watching someone break down film than listening to someone rant.
This is exactly where I sit. The general impression I get is that Wyc is trying to have his cake and eat it by staying onvolved in the short term and then getting out when things inevitably get ugly from a luxury tax standpoint. And to be clear, I don't really begrudge him for that; it's a business and he can do what he wants, and he's been a terrific owner so far. But it's not too hard to connect the dots.
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Agreed----what they need is people listening and engaging and repeating their schtick. So let's not buy in, it lowers the overall discourse level to pretend they are trying to analyze anything.
As Bill Belichick might say behind a mic, ".........Jesus Christ."
As if either of those things are necessarily at odds with winning banners. If he makes some money while winning banners, is that a crime? Can we agree an owner doesn't have to be a saint and a pauper to earn some praise? If he's being the steward of his dad's money, and chooses to focus on banners rather than maximizing the financial ROI, who cares? I know I'm preaching to the choir here, but this is some dumb, dumb shit.
I can't wait for them to come for the Krafts (for something other than the handjobs). Yeah, sure, you won 6 titles and made 9 super bowls and empowered the best coach in history and kept it all together for 20 years in a hard salary-cap era and are now the most accomplished dynasty in NFL history... but what have you done for us lately?
The thing is, the tax payments are now going to be factored into any sale (full or partial) of the Grousbecks' interests in the team. They change the numbers, the amounts changing hands... they don't have to change the substantive outcome. He basically committed the team to keeping all the players, at whatever-the-cost, for at least 2 more years, and now is saying to the investing public, "given all that - and the fact that I'm going to be here to ensure they stay together and win some more banners or at least make trades for good value and for extending our competitiveness into the future - come tell me what you'd be willing to buy the team for".
It's a bit like what some VCs and PE guys have told me about potentially eliminating the carried-interest loophole and making them pay higher (most would say "fair") rates of taxes: "look, all this does is re-scale the scoreboard. It doesn't change our relative positions on it." Same with whether the team is valued at $X without luxury tax, or $Y < $X when incorporating the expected luxury-tax bills for the next 3-4 years. Just re-scales the scoreboard, and says to the world that Wyc places a value on banners, one that is higher than ($Y - $X).
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In some respects this is a portfolio management and risk management issue .
Lets assume for sake of illustration, the Groesbeck family has 51% for control and that 95% is owned by Irv and Wyc 5%. Irv's basis in the Celtics is probably around $175M (360M X.51 X .95) At the time of purchase in 2002, that $175M might have represented some 30-35% of his investment assets (primarily from his equity stake in Continental Cablevision which was sold in the US West merger in 1996) which appears to be around $470M. Lets further assume that the wired in Silicon Valley Irv made some dough in tech from 1996-2002, (tech was a rocket in the late 90s) and round up his net worth to $500M-$600M. (ALL SPECULATION) So $175M in the Celts represented about 35% of his real net worth then. High, but not crazy and given the track record of ever increasing sports franchise values, not a terrible risk.
Today that $175M at FMV may approximate $3B or more and would totally dominate Irv's portfolio risk/return parameters. Prudence would seem to dictate this isn't a bad time to seek diversification and liquidity for the family, given Irv's age and what might be reduced cash flow from operations (ie the taxpayer status) that seems likely to reduce profitability and or the ability to generate dividends for owners.
This might be a case of asset rich, cash poor. (its all relative)
Lets assume for sake of illustration, the Groesbeck family has 51% for control and that 95% is owned by Irv and Wyc 5%. Irv's basis in the Celtics is probably around $175M (360M X.51 X .95) At the time of purchase in 2002, that $175M might have represented some 30-35% of his investment assets (primarily from his equity stake in Continental Cablevision which was sold in the US West merger in 1996) which appears to be around $470M. Lets further assume that the wired in Silicon Valley Irv made some dough in tech from 1996-2002, (tech was a rocket in the late 90s) and round up his net worth to $500M-$600M. (ALL SPECULATION) So $175M in the Celts represented about 35% of his real net worth then. High, but not crazy and given the track record of ever increasing sports franchise values, not a terrible risk.
Today that $175M at FMV may approximate $3B or more and would totally dominate Irv's portfolio risk/return parameters. Prudence would seem to dictate this isn't a bad time to seek diversification and liquidity for the family, given Irv's age and what might be reduced cash flow from operations (ie the taxpayer status) that seems likely to reduce profitability and or the ability to generate dividends for owners.
This might be a case of asset rich, cash poor. (its all relative)
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Yeah, every time that "Woah is me, no free agent will ever sign with the Celtics" came up I'd always point out the fact that for most of the free agent era (in the NBA) the Celtics were owned by Sterling East. Thanks Dad! was despised by NBA agents.
(semi-pedantry)
Wait, doesn't this analysis assume that the value of Irv's BBP stake has gone up 15-20x in the last 20 years, while the value of his portfolio in silicon valley startups (which might be much of the rest) has stayed constant? Wouldn't we assume that he's done at least as well in the markets and in startups as he's done in his sports ownership? Assuming no dividends, $175M to $3,000M (=17x) in 21 years is a 14.5% CAGR. In that same time horizon (last 21 years), the S&P has gone up 450%, or 10.5% annualized. If he's able to get himself into decent VC funds - and why wouldn't he - Sand Hill Road has done as good or better than 14.5% over the last 20 years (though perhaps not once adjusted for fees). So maybe the Cs have gone up from 30-35% of his portfolio to 40-50% of his portfolio, but it's probably not 80-90%, right?
Not that there isn't sufficiently good reason for liquidating and/or diversifying. The needs for estate planning alone probably justify it, and the fact that team valuations are never going to be higher than with a spectacular new NBA TV deal on the horizon. But I'm not sure the Cs have done that much better than the rest of what a guy like Irv can invest in.
You can make whatever assumptions you like. I made an assumption about his making money in tech in 1996-2002, after getting taken out of Continental Cablevision for what I think was around $470M The rest of the QnD analysis was done using what public information I had on the Celts, the Groesbeck family control of the Celts and some research.
I made no further assumption about Groesbeck's VC/early stage portfolio, nor do I know any of the names he may have invested in, but I would suspect whatever early stage dough he invested, it was unlikely to be of the magnitude of the $175M I estimated he invested in the Celtics in 2002. But I suspect he may have some 20 baggers in that portfolio.
I think it hard to easily disprove his portfolio is not overweighted now in a $3B Leprechaun.
Edit: Hedge funds have massively underperformed returns of the S&P 500 (see table in linked article ) And you get to pay 2 and 20.
"25 years ago the hedge fund industry had about $300 billion of assets under management. As of the end of third quarter 2023, assets had grown to about $5.0 trillion. Given that they have persistently delivered poor performance over the past two decades and have failed to effectively hedge exposure to conventional security classes, the growth of the industry has to be the greatest anomaly in finance.
The following table provides the annualized returns of the HFRX Global Hedge Fund Index over the one-, 10- and 20-year periods ending December 2023:
https://www.evidenceinvestor.com/the-growth-of-hedge-funds-is-the-greatest-financial-anomaly/
Irv did pretty pretty pretty good with the Celts, rings and returns.
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I think you're likely correct in this, and also likely correct that it's a factor in their decision to sell (though the primary factor may just be Irv's age and the need for a clean and well-orchestrated liquidation for estate planning). I mostly just wanted to run some numbers along with you and see how he's done on a relative basis.
Out of curiosity, do people assume Wyc and co would still be selling this offseason for estate planning reasons regardless of the other team circumstances?
I get the timing makes sense with the huge lux tax issues coming up plus the sense of accomplishment with Banner 18, but in an alternate reality if Tatum/Brown flamed out and the Celtics were rebuilding and not a luxury tax team, would the family still sell now?
I guess we will never know, but I'm unclear which factor is the primary driver.
I get the timing makes sense with the huge lux tax issues coming up plus the sense of accomplishment with Banner 18, but in an alternate reality if Tatum/Brown flamed out and the Celtics were rebuilding and not a luxury tax team, would the family still sell now?
I guess we will never know, but I'm unclear which factor is the primary driver.
I don't know if this correct, but I saw the estimated tax for 2024-25 for the Celts was around $65m, a clear hit to the bottom line. But what of the prospective $ from what is expected from 2 new franchises that might total $8-10B to theoretically be available for a 30 team distribution? That special distribution might be worth sticking around for. Although any purchase price would likely capture the present value of known future payments.
My 2 scents is that Irv wants his affairs in order, and doesn't care about parades, and that if Wyc had his druthers he'd hold to see this team reach for greatness and cement his legacy. It's dads dough though.
My 2 scents is that Irv wants his affairs in order, and doesn't care about parades, and that if Wyc had his druthers he'd hold to see this team reach for greatness and cement his legacy. It's dads dough though.
My WAG is yes he would. If Anna wants out, I think it would be difficult to put the team in a trust solely for the benefit of Wyc (Anna wouldn't get her fair share) and if they didn't do a trust, the tax hit would require a huge amount of cash to pay.
But maybe if the Cs stunk, the franchise wouldn't be worth as much and the tax bill might be more manageable. Or maybe Anna would have hung around for a title.