Sold (for) vs. Valued (at)

Paper Boy is not part of Cash Money ...

Quick post here that I know some of my friends might appreciate. The rest of you will roll your 👀 👀 at my pedantry.

Big news today as the L.A. Lakers “sold” for $10 Billion - making them the most valuable organization in sports - ever.

So if you are like me; I read that headline and initially read it as $10B was exchanged between two or more parties for the team.

But in actuality the Lakers were sold at a $10B (paper) valuation.

The team was last valued (per a transaction) in 2021 at $7B - meaning that today’s deal transpired at a valuation $3B higher.

So that means the Sellers made $3B, right?

Nope.

We are dealing with “Venture Math”:

Prior to this deal the Buss Family Trust owned 66% of the Lakers. After the deal their shareholding falls to 15%.

\(66\% - 15\% = 51\% \)

and …

10B - 7B = 3B

So that means the Buss family received 3B in exchange for selling 51% of their shares, right?

Nope.

We are dealing with “Venture Math”, remember?

\(51\% \times 10\mathrm{B}= 5.1\mathrm{B} \)

5.1B is indicative of the “cash money” received by the Sellers aka The Buss Family Trust.

Their new “papered” shareholding is:

\(15\% \times 10\mathrm{B}= 1.5\mathrm{B} \)

Interestingly the gap between the cash money less “post-money paper value” is:

\(5.1\,\mathrm{B} - 1.5\,\mathrm{B} = 3.6\,\mathrm{B} \)

But …

\(3.6\,\mathrm{B} \neq 5.1\,\mathrm{B} \)