James Dolan probably smiled when he heard the news.
The executive chairman of Madison Square Garden Sports Corp. is one of the indirect beneficiaries of Jeanie Buss selling majority ownership of the Los Angeles Lakers to TWG Global CEO and Los Angeles Dodgers owner Mark Walter at a record franchise valuation of about $10 billion. Like the Lakers, the New York Knicks are one of the most storied franchises in sports and saw their valuation boosted by the West Coast rival setting a new benchmark.
MSG Sports, which owns the Knicks and the New York Rangers, saw its shares jump 7% the day after the Lakers sale news last week.
Wall Street, however, still trades the parent company cheaply compared with the team prices calculated by Sportico in its most recent NBA and NHL franchise valuations. The current enterprise value of MSG Sports is currently $6 billion, 47% lower than the $11.5 billion combined for the Knicks ($8.3 billion) and Rangers ($3.25 billion).
“MSG still trades at a great discount (compared) to all these team valuations,” MSG analyst David Joyce of Seaport Research Partners said in a phone interview. “The question is, what is Dolan going to do about it?”
The combination of the Knicks coming two games shy of their first NBA Finals appearance in 26 years and the Lakers’ record sale could put pressure on ownership to shake things up as the persistent valuation gap, which has been coined the Dolan Discount, extends wider than ever.
The Lakers sale is expected to close in the third or fourth quarter after NBA approval, both parties stated on Wednesday. It comes three months after the Boston Celtics sold for a then-record $6 billion, and has made some MSG Sports shareholders more antsy about unlocking the value of their investment. Boyar Value Group, an independent equity research firm, recently penned an open letter to Dolan urging him to separate the two teams into independent publicly traded companies. President Jonathan Boyar believes that would be a clean, low-risk solution to eliminate the discount and better set up the assets for a tax-efficient sale down the line.
“This is like the minimum thing they should do for shareholders,” he said in a phone interview. “They should really consider selling a stake to private equity to help peg a value. They would get so much money and be able to reward shareholders. It boggles my mind that they haven’t done it.”
Such a move would be similar to what John Malone’s conglomerate Liberty Media did almost two years ago, when it spun off the Atlanta Braves into a publicly traded company. It wouldn’t be the first time Dolan has rejiggered his businesses. Most recently in 2023, Sphere Entertainment Co. was born from a tax-free spin-off of Dolan’s traditional live entertainment businesses. That came three years after Madison Square Garden Co. (which is now MSG Sports) spun off its live entertainment businesses to create MSG Entertainment.
It’s noteworthy that MSG Sports doesn’t include Knicks and Rangers arena Madison Square Garden, which now is operated under MSG Entertainment after the 2020 spin-off. The Lakers sale also didn’t include their home, Crypto.com Arena, which is owned by Anschutz Entertainment Group (AEG). Similarly, the Celtics sale came without a venue attached, as the team is a tenant at TD Garden. The arena exclusions give a sense of how much investors are willing to spend to own an iconic sports franchise.
MSG execs have previously stated they would be open to a minority stake sale in the Knicks and Rangers, but the Dolan family controls nearly 71% of the voting power of the teams.
“They still call the shots,” Joyce added. “They’re still paying themselves partly in the equity, so they want it to reflect what’s it worth. Jim has mentioned that he has taken inbound calls in the past. Investors must know going in that you don’t have voting control [or] much firepower.”
The Knicks are coming off their best season in 25 years, and off the court, revenues soared to record highs. MSG Sports will likely have a solid fiscal year, according to Joyce, despite the Rangers missing the postseason and revenue being offset by changes made to its local media rights agreement with MSG Networks.
The parent company, which also owns Knicks and Rangers minor league affiliates, will benefit from shared revenues when the NBA’s 11-year, $76 billion TV rights deal kicks in next season.
“I can’t say there would be a line around the block because there’s only a certain amount of people who could write this ticket,” Boyar added. “But there would be a ton of interest if they ever put it up for sale. I’m confident they would get what the Lakers got, if not more.”