The Brooklyn Nets were Sold but Not Really
Alibaba co-founder spends over a billion dollars for a minority stake in the Brooklyn Nets
In this Friday edition of Rich People Buy Expensive Things, Joseph Tsai, the co-founder and executive vice chairman of Alibaba, a Chinese e-commerce company that is a mix between Amazon and eBay.
The Nets current majority stakeholder in the team, fellow billionaire Mikhail Prokhorov, bought 80% of the team back in 2010 for $200 million and is now selling 49% to Tsai at a current valuation of the team of $2.3 billion (with a B). That means that the team went from being worth $250 million at Prokhorov’s time of purchase to $2.3 billion — a 920% increase in value. 49% of 2.3 billion is roughly equal to $1.13 billion dollars — a pretty penny, even for someone of Prokhorov’s wealth.
The NBA is the hottest league in the world right now, and the one where all the new-money tech guys are interested in buying in and are actually able to (most NFL and MLB teams are owned by old-money families that have been reluctant to sell in recent years).
While the Nets have been mostly terrible since the Russian oligarch took over (just two winning seasons in seven years), he did show good business acumen in understanding the timing of his purchase. With the league continuing to expand internationally, and Brooklyn being in the NYC market, Tsai must believe that he is getting a great deal here.
When Prokhorov bought the team, he moved the team from New Jersey to Brooklyn, promised to “take over the city” from the Knicks and their owner, “little man” James Dolan, and promised to win a NBA title within 5 years. That didn’t exactly go as planned. The team mortgaged their future in trading for over the hill veterans in Paul Pierce and Kevin Garnett, giving Celtics their first-round draft picks from the last two years and this one’s (which has subsequently been traded to Cleveland in the Kyrie Irving trade).
While Prokhorov is partially cashing out right now, he’ll still remain in charge of the team, as well as the arena that the Nets play in — Barclays Center, as he owns that as well. There is an agreement that in 4 years, Tsai will be able to buy out the rest of Prokhorov’s stake and attain the majority owner title. Only coming to a couple of games a year, it doesn’t seem like Prokhorov will miss the team all that much anyway.
Currently, the Nets under newer management with GM Sean Marks and assistant GM Trajan Langdon, have acquired a collection of solid young players, including former #2 overall draft pick D’Angelo Russell from the Lakers in the Brook Lopez deal this summer, who has looked significantly better on the court than his days in LA. Add in some cast-offs that the team has been developing in Spencer Dinwiddie, and Trevor Booker, young prospects in Caris LeVert and Jarrett Allen who have impressed early on, as well as DeMarre Carroll who the Toronto Raptors flipped to get under the salary cap, and there’s an organization of a competent NBA team.
They’ve installed a modern NBA offense, reminiscent of the Houston Rockets, where they get up and down the court in a hurry and shoot a ton of 3-pointers and layups at the rim. Through five games this year, they have the league’s sixth-best offense despite not having an established superstar, a 3–2 record, and great hope for the future. Though they don’t play a ton of defense — ranked 27th in the league, they will steal a bunch of wins this year, play hard, and remain competitive in most games this year. More importantly, they’re building a winning culture, which is perhaps the most difficult piece of the puzzle in professional sports. For more information on how they built this year’s team, check out my previous piece on their transformative offseason.
Hopefully when Tsai does eventually take over the Nets in full, let’s hope he doesn’t meddle like Prokhorov once did, and the team can continue in their forward-thinking ways. Tech guys buying into the NBA have had mixed results (see Vivek Ranadive and the Sacramento Kings), so perhaps he will break that trend. With his net worth of about $9 billion, let’s hope he can find some other shiny things to purchase while the team tries to turn around their fortunes. Maybe he’ll see how beautiful the Brooklyn Bridge is and try to buy that next. With that type of money, nothing’s off the table.
