Professional Sports Franchises as Publicly-Traded Companies: An Introduction (Part 1 of 3)

Professional sports franchises exist in many cities in the United States.  They are at times a very important part of the community.  A professional sports franchise is unique in the sense that it is a business which community members across many ranges of demographics have a strong connection.  Perhaps unlike other businesses, a sports franchise's product may change entirely,i.e. teams continualy get new players, and lose old players, yet consumers will not usually change brands.  Despite such consumer loyalty, a majority of sports franchises have ignored what is seemingly a lucrative opportunity to raise capital and possibly increase profits.[1]  That is, these franchises have opted to refrain from "going public" and instead have remained private companies.  This is the first in a series of articles which will discuss the public corporation form as it pertains to professional sports franchises.

There are a variety of issues which arise if a franchise deicides to go public.  First, each major sports regime (the National Football League, Major League Baseball, the National Baseball Association, and the National Hockey League) has adopted varying stances on whether they would allow franchises to go public.[2]  Each league's policy will be discussed.  Also, there are a variety of different public ownership schemes which a franchise may decide to adopt.  Thus, this series of articles will evaluate each type as it would pertain to sports franchises. 

Ultimately, this series of articles will show that public ownership is most likely not as beneficial to a sports franchise as it may be for other businesses.  This is due to a number of factors, included league impediments to going public, team control problems that may arise from going public, monetary costs of selling shares to the public, and the legal obligations unique to a public company.  These factors make public ownership of sports franchises unattractive to current owners.  There also does not appear to be any strong incentive for sports franchises to go public.  Future articles (October 9, 2006 & November 6, 2006) will develop the issues presented in this article.

Sources:

[1] See generally Brian R. Cheffins, Playing the Stock Market: "Going Public" and Professional Team Sports, 24 Iowa J. Corp. L. 641 (1999) (identifying sports franchises which have opted to sell publicly traded shares).

[2] See generally Ryan Scaffer, A Piece of the Rock (or the Rockets): The Viability of Widespread Public Offerings of Professional Sports Francises, 5 Va. Sports & Ent. L.J. 201 (2006) (discussing the varying stances of professional sports leagues, and arguing that public offerings for shares in a sports franchise is viable).

Comments

[Manchester United]

Manchester United is the most successful Premier League club having won the title 10 times. It all began in 1993 when manager Sir Alex Ferguson ended a 26-year wait to lift the Premier League circlet.

[Bryan Apolskis]

Just what I was looking for. I remembered the rash of sport franchises that went public and wanted to see if they were still listed. Do you think stadiums could go public?