Thread
He missed out on $797 Million-
because he didn't understand equity.
Here's the story of the greatest business deal in history.
because he didn't understand equity.
Here's the story of the greatest business deal in history.
In the 1970s, there were two main professional basketball leagues in the United States.
The NBA & the ABA.
The two leagues co-existed for over a decade but the ABA was always the little brother of the NBA.
The NBA & the ABA.
The two leagues co-existed for over a decade but the ABA was always the little brother of the NBA.
The ABA caught on with fans because it had a free-flowing game and things like the 3 point shot.
But by the mid 1970s, with the lack of a television contract, the league struggled.
Things came to a head with the 1976 ABA-NBA merger.
But by the mid 1970s, with the lack of a television contract, the league struggled.
Things came to a head with the 1976 ABA-NBA merger.
The ABA agreed to be absorbed by the NBA.
At the time of the merger, the ABA was home to 7 teams.
Four were absorbed by the NBA:
Denver Nuggets
Indiana Pacers
New Jersey Nets
San Antonio Spurs
One (Virginia Squires) folded.
And the remaining two were offered buyouts.
At the time of the merger, the ABA was home to 7 teams.
Four were absorbed by the NBA:
Denver Nuggets
Indiana Pacers
New Jersey Nets
San Antonio Spurs
One (Virginia Squires) folded.
And the remaining two were offered buyouts.
The Spirits of St Louis & the Kentucky Colonels were offered $3M to fold their teams.
The NBA didn't want to absorb them but wanted to offer the owners money to accept the merger.
The Kentucky Colonels accepted the buyout.
Ozzie & Daniel Silna (owners of the Spirits) declined.
The NBA didn't want to absorb them but wanted to offer the owners money to accept the merger.
The Kentucky Colonels accepted the buyout.
Ozzie & Daniel Silna (owners of the Spirits) declined.
Instead the owners of the Spirits negotiated an equity deal:
1) $2M for the players on their team who would eventually get picked up by NBA teams.
2)A % of the TV revenue of the 4 teams that were absorbed.
1) $2M for the players on their team who would eventually get picked up by NBA teams.
2)A % of the TV revenue of the 4 teams that were absorbed.
Because there were 7 teams at the time of the merger, the Silvas negotiated to receive 1/7th of each of the absorbed teams television revenue.
But the genius of the deal?
They would receive that in perpetuity.
But the genius of the deal?
They would receive that in perpetuity.
The NBA exploded in popularity.
The Silna's hatched this deal before Magic Johnson or Larry Bird or Michael Jordan.
And the TV rights for the NBA exploded as well.
The Silna’s had struck the dealF of a lifetime.
The Silna's hatched this deal before Magic Johnson or Larry Bird or Michael Jordan.
And the TV rights for the NBA exploded as well.
The Silna’s had struck the dealF of a lifetime.
By 2014 the Silna's had received over $300M in TV royalties.
What started as just a tiny share of equity has ballooned and made the brothers a fortune.
(All this for a team that never played an NBA game)
What started as just a tiny share of equity has ballooned and made the brothers a fortune.
(All this for a team that never played an NBA game)
With a new TV deal on the horizon, the NBA and their owners wanted to negotiate a final buyout of the Silva's.
Many owners found the deal unfair and wanted to end it.
The agreed final buyout?
$500M
Many owners found the deal unfair and wanted to end it.
The agreed final buyout?
$500M
Unfortunately the Silna's had invested a portion of their wealth with Bernie Madoff.
They would never say how much but did admit that they lost everything they invested with him.
They made it very clear that despite that, they were well diversified.
They would never say how much but did admit that they lost everything they invested with him.
They made it very clear that despite that, they were well diversified.
There are other examples of equity deals over the years.
Beyoncé with Uber.
50 Cent with Vitamin Water.
Kobe with Bodyarmor.
Beyoncé with Uber.
50 Cent with Vitamin Water.
Kobe with Bodyarmor.
Equity can grow without any input from you and is the key to generating wealth across industries.
When anyone comes to me wanting to know more about personal finance, I try to send them something about equity and ownership.
When anyone comes to me wanting to know more about personal finance, I try to send them something about equity and ownership.
TL;DR
In 1976 the SIlna's were offered $3M for their folding ABA team.
They didn't take the deal.
They negotiated equity.
And they were paid out $800M over the lifetime of the deal.
In 1976 the SIlna's were offered $3M for their folding ABA team.
They didn't take the deal.
They negotiated equity.
And they were paid out $800M over the lifetime of the deal.
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I'm Chris.
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👉 @chrisxmunn 👈
I send my community 2-3 threads a week similar to these.
Come along for the ride.
👉 @chrisxmunn 👈
