Buying an NBA team on a margin loan lol, but maybe that’s how rich people always operate

“…whereas Ishbia just has a bad business problem. Ishbia doesn’t need the cash because UWM has paid a quarterly 10-cent dividend since it went public, and with Ishbia and his family owning nearly all outstanding shares, he has received more than $6 billion in distributions over the last five years, almost exclusively from dividend payments.”

Life sure is grand, huh?

This article also talks about how Ishbia and his family have received over $6b in distributions over the past 5 years which seems like it should help just a bit.

They could if they wanted to, but they probably will not if he’s still paying the note without issue.

They would most likely tell him he’s gotta sell the team before it became a problem for them.

He prob has a lot of cash and other investments bc the company has paid a dividend for his whole life, since his dad founded it and gave it to him. He wouldn’t have been approved by the other owners if he wasn’t liquid. Having said that, the fact that he will still be rich even if his company goes under and all his other shareholders get wrecked should be a matter for his board of directors, who are supposed to represent shareholders but instead are probably just his friends.

Between this story the LA Lakers/Dodgers owner and even the Kawhi situation in some, but what is going on with owners currently are we in like some billionaire sports bubble? Are some of these team owners just fakers. I am an idiot so what do I know. All of these stories coming out are just weird.

I love how fucked up the finances for multiple sports team are, just imploding all at the same time. Signs of a stable country

He doesn’t have liquidity issues.

He has received roughly 6 billion in distributions from UWM since 2023.

He will add additional collateral and be fine.

Betteridge’s Law of Headlines truly in effect here.

The best owner the NBA ever had was the Ontario Teachers Union Pension Fund when they owned the Raptors. No drama or even general awareness that they owned the team. Also felt good knowing my money was funding Mrs Carson retirement.

Outside of Steve, how many of these guys are borrowing at an insane rate to the average man that one downtown or catastrophic economic event that they have to sell?

It’s shit like this that makes Silver LOVE Ballmer because that man’s money is real and when he says he’ll pay something he’ll pay something (and even overpay to an extent that is raises questions)

They were talking about this on the Bill Simmons podcast the other day. Apparently his company would be doing just fine if he wasn’t personally extracting $600 million in profits for himself every year.

So we find out that him and Mark Walter’s can’t afford the teams but were somehow still able to buy them. That privilege is strong.

Somewhere it was reported that he has been taking $600 million from the company every year. He’ll be fine, just not as wealthy as he’d like. If push comes to shove, he can sell a portion of the Suns. But right now he buying out the minority owners.

/r/wallstreetbets would be proud

WallStreetBets is impressed

Uhhh what

The writer of this article tweeted, saying “make sure to read the last paragraph before judging” kind of thing.

This entire economy is a stack of soggy cards.

I think it would require him to find the “cash” since the collateral wouldn’t cover the team

Margin Call was a great movie.

When we live above our means it’s a moral failing.

When they do it’s just business

That is an optimistic take. No clue how bad it really is, but when your company voluntarily puts out a press release saying that the owner’s finances are fine, he won’t be forced to sell his NBA team, don’t worry about it, the actual message is kind of the exact opposite.

If he had a lot of spare liquidity, he’d have used it to avoid the Oaktree deal, which is horrendous for him. He put in 150M himself. But he had to take 1.5B of Oaktree’s money and give up a ton of control over his company, which you know he hates. So we can infer that he had 150M to deploy, but not 1.5B.

5-6B in dividends over 5-6 years is a lot of money, but he’s probably put >2B into the Suns in cash, on top of the margin loans. 1-1.5B would be taxes. He spends a lot of money. He’s sharing that money with family (it’s not 100% his). He’s not going to be poor, but he’s not so rich that this isn’t a huge problem. Selling shares in the Suns is an option, but it looks bad. He just finished buying out the rest of them; turning around and selling again is about the clearest “I don’t have liquidity” signal you can send, and he really doesn’t want to send that signal right now.

The Suns have appreciated by a good bit since he bought them, which helps a lot. But hard to say what exactly happens if JP Morgan decides to pressure him. He pledged ²⁄₃ of his UWMC shares. He’s probably had to pledge the rest of them to make up the difference. The company’s market cap is 2.3B. If he owes much more than 1B to JPM, he’s on the edge of where he needs to put up more assets. Which means the Suns.

wow just looked at their financials. good lord they are cooked. negative cash flows and absurd amounts of debt

Interesting.

As much as I hope so, I doubt it.

What a time to be a billionaire

Bill Simmons made a good point in his pod, if Ishbia is short on cash, he can just sell % equity of the suns

he probably is seeing what is happening with mark walter loll

This headline annoyed me more than it should lol but it’d be a collateral call not a margin call. Margin is a totally different thing 

Man I feel like the NBA needs to be vetting these owners a little better.

IM TELLING YOU, THIS IS IT! - Jeremy Irons

Yes. And I guarantee the financier is itching to do it. A team in a margin call l-o-fucking-l

He’ll prob sell a piece of the team and be fine

One of us! One of us!

This league has turned into a money laundering/ponzi scheme. 

These teams are too god damn expensive. I just don’t believe they’re worth these insane amounts.

We need to get NBA teams back in the hands of those in the capitalist class who truly deserve them like dudes who own car dealerships, potato chip factories and gas stations. I’m talking REAL business, none of this speculation-perhaps-I-have-the-money if stonks go brr.

The ultra-rich will eat this nouveau riche asshat alive and make this squeeze happen so that they can trip over themselves to pay \(8 to \)9 billion for the Suns, they love the idea of putting their money into NBA teams now that there’s in effect a salary cap, plus the socialist/communist aspects of public funding for stadiums and infrastructure, revenue sharing, salary caps.

Another interesting piece of this is that if his company is sold, the likely buyer could be the current Cavs owner.

i guess it’s not a problem as long as the value of teams are going up but once it starts going down even a little surely some of these owners are fucked

No, next question.

Probably happened quite a few times before that the public doesn’t know about 

What happened was Ishbia, in all his genius, had UWM place a \(21 billion bet on interest rates going down and they didn't. The loss from that bet cost UWM to go from expected quarterly earnings of a few hundred million to a loss of over \)400 million, freaked out investors and plummeted the stock price. The underlying mortgage business, while struggling compared to its peak, is still profitable and no the economy is not tanking (at least until the AI bubble pops).

UWM was looking to purchase this REIT which has \(21 billion in mortgage assets on its books. UWM a) wanted the deal to get done fast and b) was worried about interest rates going down because then homeowners re-finance at lower rates and thus less interest income for UWM. So to hedge against the lost portfolio value if the the \)21 billion in mortgage get lower rates, they placed a massive bet on interest rates going down. So if interest rates go down, yea homeowners can re-finance and pay less interest BUT that is offset by winning your bet that rates would go down.

Now where they fucked up is major. 1) You’re only supposed to make a bet the size of the total interest rate exposure of the REIT like 1:1, which was ~\(1.6 billion. So a \)1.6 billion bet can be placed. UWM, however, did not go 1:1 with the REIT’s interest rate exposure but 1:1 with the TOTAL VALUE OF THE MORTGAGES. In other words, they were 13X over-hedged!! Being THAT over-hedged they NEEDED interest rates to go down and they could win big on the bet.

But 3 disastrous things happened to them (well they did to themselves):

1. Interest rates did not go down. They lost the bet and hundreds of millions of dollars.

2. The REIT’s shareholders rejected the deal. At least if the deal went through some of their losses from the bet could be offset by higher interest rates (i.e. more mortgage interest income). However, UWM was not offering cash for the REIT but it was an all-stock purchase. Problem is the share price of UWM was already falling so the value of those shares was down and it was no longer a good deal for the REIT’s shareholders.

3. And this is where Ishbia is personally at risk: They NEVER disclosed the bet in any reports or earnings calls before earlier this month’s earnings call where the earnings report was a total disaster! Keeping your own shareholders in the dark needless to say is a MAJOR no-no. I fully expect a class-action lawsuit and either a win at trial for them OR an expensive settlement for Ishbia.

Finally what further fucks Ishbia is his lawsuit with his minority owners that is headed to mediation. He’s going to have to buy them out. He rejected the \(825 million buyout (at a \)6 billion valuation) for their stake in the Suns when they offered that earlier, believing the Suns were worth less. Well now that the Lakers have appreciated 25% in a year and NFL franchises per Sportico jumped 27% on averages, there’s a good chance the mediator assess the valuation at well over the $6 billion figure the minority owners were demanding earlier. tldr he’s an idiot. Not the bigot Sarver is, but the bigger moron unfortunately for Suns fans.

He’s cooked

I mean whenever the cost is getting this insane for sport franchises I’m kind of not surprised to be honest.

This kind of thing is exactly why you see so many investment groups instead of individuals owning NBA teams.

This man had to take out a loan against his assets to buy a team because he didn’t want to sell those assets and take the capital gains tax hit. Teams are too expensive most billionaires.
Which is a crazy thing to imagine
A lot of these owners may be worth billions, but they don’t have $4 billion sitting around in cash to buy a pro team.