I have long found sports and investing a pretty fascinating blend.
It’s not long ago that sport was hardly even considered within this framework, but today most would refer to it as its own niche within the all-encompassing term that is “alternative assets”. To discuss this intriguing world of sports and investing, I chatted with Kyle Fox of KRF Capital, an independent advisory firm that invests in various asset classes, including sports.
When it comes to the sports world, there is no shortage of material here. The English Premier League is perhaps the most interesting, and something we covered extensively. Just this morning, reports emerged that Qatar is looking at buying an interest in Tottenham Hotspur. Manchester United and Liverpool are currently for sale. Newcastle was recently sold to the Saudi Arabian sovereign wealth fund. Things have changed in football, and they have changed quickly.
A lot of these nations don’t pursue what conventional investors would refer to as a disciplined valuation process, however, with other reasons beyond financial for investing in these sports clubs – something which is glaringly obvious when assessing how some of the clubs are run post-takeover.
We talk about the mystifying process that is the valuation of a professional sports team, the paradox of running a football club like a business (something I published a deep dive on regarding Manchester United and the Glazers here) and the benchmark that is the recent sale of Chelsea.
Kyle and I also discussed the difference between the European and North American sports model, with the latter featuring franchises with salary caps, no relegation and leagues built around the idea of parity, with the worst team receiving the best draft pick the following year. European sports are a whole different ball game (pardon the pun), and this also has implications on profitability and valuation.
Finally, we also discuss the potential implications of the metaverse on sports and sports valuations, and the constantly changing landscape of technology and what the knock-on effects could be, and whether there is anything of note here to consider surrounding cryptocurrency.
If you are interested in sports and investment, then this episode may be something you enjoy.
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