Rockets, Alperen Şengün agree to 5-year, $185M deal

Stone had no psychological advantage with Fred and Dillon before he met them.....but he sees guys like Alperen every day almost.

We always say that Morey is lowballing players but Stone and Morey worked hand in hand and Stone was already on the Rockets for a very long time.

 

Leverage.

Stone had to overpay when he was negotiating from a position of weakness. Stone had leverage in this situation.

Also, multiple things can be true at one time. Stone did a good job not overpaying and Sengun wanted to be here and wanted to get this over with.

But Stone absolutely played "hardball" here. That shouldn't even be in question. For one, these deals (or similar deals) have been on the table for a while. Sengun and Jalen absolutely would have taken the Max if offered it or if Stone would have caved. There's no shot that they both said "nah, we don't want the max...We'll sign this deal instead"...

They didn't spend months with these deals on the table with Stone trying to convince them to take the max and the players trying to convince Stone to offer less than the max.

There's a reason that the deal went all the way up until the deadline. It's because the players either had to take it or leave it.

 

Ok so we went from " nearly every team" losing money to basically the Clippers.

The whole theme of the Pro Publica article on the Clippers is that Steve Ballmer is reporting fake amortization losses on the Clippers as part of a tax avoidance scheme - literally the opposite of what you are saying.

The clippers themselves were of course making money and will now make even more with their new arena (even if they magically turn it into a tax loss)

What Ballmer does is take the Clippers profits - in the 10s or 100s of millions - deduct some portion of the purchase price , in the billions - and declare it a tax loss.

 

If I buy a tech company for $100, it loses $10 a year every year, and then I sell it for $500 3 years later, is it a “trophy asset?” The extremely obvious answer is no.

The nets were the only NBA team that wasn’t profitable in 2023. Does that mean the nets are not an appreciating asset? The extremely obvious answer, is no.

Every NBA team sale in the last 40 years has yielded significant risk adjusted year over year profits, even accounting for (if any) operating losses.

Using a 2024 financial statement to prove NBA teams aren’t valuable assets is like using the daily rain forecasts from 2022 to predict onion future prices in 2030.

 

Leverage, smeverage. I know this may come as a shock to finance bros, but deals get made all the time where both sides feel good about it and legitimately so. There's no ironclad law that requires someone to get royally screwed.

 

The Nets, Clippers, and Bucks were not profitable. The remaining teams that are close to being profitable from operating income perspective, likely are not profitable as well because that is before interest expense. I think many of you have missed the original response and only saw all of the back and forth and didn't bother to go back and read what the response was to. The response was to someone claiming every nba team has been profitable for decades from an operating perspective. I mentioned the gain comes from the sale of the asset. If you really think every team has been profitable for decades from operations, you are mistaken. A Trophy asset does not mean it does not have value, it just means there are not traditional reasons for the value, as in there is not enough cash flow to support buying the business and supporting it w debt like other cash flowing businesses are. You are not accounting for the cost of debt, or if buying cash what that money would return in another cash flowing business. A traditional tech company would rely on future cash flows of the business eventually making up for the lack of cash flow early on. If you do the math on an NBA team today, your money is better off just about anywhere else.

For example, Tilman's other businesses typically would have a 20% IRR in hospitality, that is what PE wants at a minimum. Using the Knicks example since their financials are available, you'd be investing $10B to return $50M annually. Say you wanted to operate the Knicks +Rangers for 4 years and sell them in year 5 and lets be extremely generous and say this massive bull market we have had just continues (GS and others say it will not), and lets assume the Knicks+Rangers value just sky rockets to $15B in year 5, your annual return is like 8.8%. Your risk free rate is 5%, and your other investments return 20%, so that is why it is not an investment you make to make money, its an emotional one.

We can even use the Rockets if you want and make some assumptions. Tilman bought them for $2.2B in 2017, lets assume a similar profit margin as the Knicks, and assume the team would sell today for $4.4B in year 7 which is what they are valued at. That is an annual return of 11%, which is well below the 20%-30% that Tilman would look for in a hotel investment, and he would not make a deal on a hotel with this type of return. You could just throw that money into an index and the S&P would have a better return over that time period.

A Trophy asset can provide a return, it is just a return that you know is going to be far lower than something with far less risk. Having a non cash flowing or minimal cash flowing asset that appreciates in value does not provide a return above the market and it definitely does not provide the types of returns the people who buy teams made their money in are use to, like Tilman. Cash flow is important to return, especially in a high rate environment.

 

wow a few guys just showed the world how to destroy a great news post for the fans to enjoy by discussing unrelated stupid things within the post. any mods here? hello?

 

Can someone tell me what happened to him?

He's playing like Enes Kanter right now.

 

Boy for all the money they just handed to Sengun maybe they should've checked with the coach who keeps benching him in the 4th period for stylistic reasons.

 

TRADE SENGUN NOW