National Basketball Association (NBA) franchises are to be given the green light to sell up to 30 per cent of its shares to private equity firms.
Plans are currently being drawn up by the NBA's board of governors, who have agreed that private equity funds and other institutional investors can own up to 20 per cent in a single franchise and can own shares in up to five different teams.
The limit for equity held by investment funds in any one franchise will be set at 30 per cent.
Only Dyal Capital Partners own passive stakes in multiple teams as it stands, however, according to reports, the NBA have been exploring opportunities to relax ownership rules to allow for private equity investment into its franchises, allowing for a healthy recovery from the financial implications caused by the COVID-19 crisis.
Private equity firm Arctos Sports Partners is lined up to be the next investor into NBA franchises, once the rules have been confirmed. Dyal Capital Partners has raised $2 billion to spend on more franchises.
Last week, it was revealed that the average valuation for an NBA franchise was at $2.4 billion, with concerns among NBA officials that potential buyers are being priced out by the wealthiest investors.
Having additional potential buyers, it is hoped that there will be greater competition and therefore further rises in franchise valuations.
It has also been reported that some franchise owners are looking to sell some of their shares in a bid to free-up capital in the wake of the coronavirus pandemic.
Author: Jake Wilkin