Why NBA expansion won’t save the day in Sacramento or Seattle
My stance has always been for expansion. Always. At the beginning of this story, I was the one promoting a compromise, but we are well past that now.
Sacramento is a great basketball market and so is Seattle. They both should have NBA teams, but there are a few major reasons why one won’t at the end of this whole mess.
First, the league has no interest in expansion unless they intend to contract at the same time. It’s not due to a lack of talent to fill 31 rosters, but because of a lack of successful teams in specific markets. As a tool, relocation, while unsavory and painful, is needed to put pressure on markets on the verge of NBA failure.
And because there are those teams out there needing new arenas or struggling to make ends meet, there is a potential boon for NBA owners. There is another opportunity for a Chris Hansen-type bid, especially if Hansen is the one making the offer again.
One team selling for a valuation of $525 million is an anomaly. Truly it is. No one is lining up to make another purchase like this anytime soon. That is unless Hansen and crew are turned down for relocation and they remain lions on the prowl.
The Seattle group has created an inflated market because of their dealings with the Maloofs and they may be the only one capable of living up to the new standard.
Is the NBA fretting this fact?
No way. Like I said, one sale at $525 million is an anomaly, but two sales at that cost establishes a market value and drives up the price of every franchise in the NBA.
So why doesn’t expansion work under this circumstance? Because Hansen has no intention of paying a true $550-million or even $525-million for the Kings. He intends on paying a 65-percent valuation of that price, which lies somewhere around $341-358 million.
In effect, he has established an enormous increase in value for NBA franchises that exceeds what he is actually willing to pay.
If the sale of the Kings to either Sacramento or Seattle passes, the price of expansion is no longer $300 million or even $400 million. It becomes the full valuation price of $525-550 million, some $150-175 million more than what Hansen is actually paying.
How does that work?
Pretty simple. If every team in the league is now worth a minimum of $525 million, so is a new expansion squad. And the league will clearly want to establish that price again with a second team. A $300-million expansion team would just drop the value of every NBA franchise back down to the $300-million price that Charlotte paid for the Bobcats.
If Hansen loses his bid to purchase the Kings, he has priced himself out of the market. Unless he hasn’t. Maybe he is willing to spend a true $550 million (crazier things have happened in this story).
Most likely, that won’t be the case. Most likely, he will again chase another franchise with minority owners he can leave behind. Maybe the Milwaukee Bucks, Minnesota Timberwolves or Bobcats have majority owners willing to cut bait and run for an absurd amount of money and we start this process over again next year with another fanbase fighting for its NBA life.
The right choice was always a combined expansion/sell bid. The answer has always been for Sacramento to keep its team and the Sonics to share in the cost of getting the Maloofs out of the league, with a slightly inflated price for expansion.
Unfortunately, that is not where this story has gone. Instead, we are left with the reality that one of these cities is going to win and one is going to lose. You can only hope that it isn’t your city on the short end of the stick because it’s pretty unlikely expansion will save anyone this late in the game.