Ask Wall Street Where King James is Headed

If you want to know where LeBron James will announce he is going to be playing this coming NBA season, all you have to do is ask our friends on Wall Street. Shares of Madison Square Garden Inc (MSG), the parent company of the NBA New York Knicks, have risen sharply in the month of July on the bet that LeBron will join the Knicks to begin the coming season.

Yesterday alone, shares in the company rose $1.30 a share to close at $21.57 and the volume spiked from 254,119 shares on Tuesday to 1,716,345 shares on Wednesday after news that LeBron was making his announcement on ESPN from Greenwich, CT caused traders to speculate that he would be joining the Knicks. the team has a practice facility 11 miles from Greenwich in Westchester County, NY.

This chart below, from CNBC.com, shows the roller coaster ride the stock has been on the past 5 days on LeBron James free agency speculation:



Today, however, the stock has dropped to its previous level on news that it is more likely LeBron James will join the Miami Heat with Dwayne Wade and Chris Bosh. So much for that! We all will know tonight after ESPN airs a self indulgent hour long special on the decision.

Where Will LeBron Go?

The LeBron James sweepstakes has begun. Where will he end up is anyone's guess. That he will make a lot of money wherever he goes is not a question. According to reports on ESPN, he is planning to meet with two teams a day until he makes his decision. He met with the Nets and Heat today already.

LeBron James wants one thing, to win. He will make a lot of money no matter where he goes, so he isn't as concerned with that as he is a ring, if you believe comments he's made in the media. The hiring of Byron Scott to be the coach of the Cavaliers puts an interesting wrinkle into this whole situation. Who wouldn't feel bad for the new coach if LeBron goes elsewhere? Talk abut missing the boat...

The Cavs can win, they are built to win, but they need him to do it. The Knicks can sign two top level free agents, reports suggest they are targeting Bosch and James. The Nets can also sign two as well. The Heat can sign all three, so can the Bulls, according to various reports. The Cavs are serious about winning, they are serious because they need to show that to keep the most popular player in the league who also happens to be the most important player in the history of their franchise.

Of course this, just like any other report, is pure speculation. the only guy who knows what he wants to do is the man himself. Maybe he just wants the Cavs to sweat it out. He's from Akron, Cleveland is his town. Though he is a huge fan of Michael Jordan and New York; and close friends with Jay-z (part of the Nets ownership group), he might just decide to stay home for a few more years. It's not like this will be the last FA contract he signs.

John Wall's Lottery Ticket

With the number one pick in tonight's NBA Lottery Draft, the Washington Wizards are expected to select John Wall, the guard from Kentucky. In doing so, they will make Mr. Wall a very rich young man. Though Reebok has already made him wealthy with a 5 year-$25 million endorsement deal with two of his own shoe lines, it is his play for the Wizards that will eventually make him fantastically wealthy.

If history is a good barometer for what type of money Wall can expect, he should do alright. The last 5 number one picks signed the following rookie contracts:

2009: Blake Griffin (LA Clippers) 3 years, $16,071,840 (RealGM)
2008: Derek Rose (Chicago Bulls) 3 years, $12,961,200 (HoopsWorld)
2007: Greg Oden (Portland Trail Blazers) 3 years, $12,529,100 (MyNBADraft)
2006: Andrea Bargnani (Toronto Raptors) 3 years, $12,097,100 (HoopsWorld)
2005: Andrew Bogut (Milwaukee Bucks) 3 years, $11,665,000 (NBA)

According to HoopsWorld, this year's rookie scale contract is broken down as follows:

1st year: $4,286,900
2nd year: $4,608,400
3rd year: $4,929,900
4th year: $6,216,603 *estimate: Option year, must increase salary by at least 26.1%

John Wall will live a very comfortable life unless he turns into Latrell Sprewell. Enjoy your night Mr. Wall, the rest of your life begins in the morning.

LeBron to Knicks would add $150MM to Team's Value?

According to a report in Crain's New York Business, the signing of LeBron James could add $150 million dollars to the market cap of Madison Square Garden Inc, the parent company of the New York Knicks. Every time the mention of him signing with the Knicks comes within a wiff of the stock market, it's ticker jumps. The stock is so sensitive to the possibility of LeBron heading to NY that it jumped 12% when the Cleveland Cavaliers, his most recent team, lost their playoff series against the Boston Celtics.

Currently, the Knicks are one of the worst teams in the NBA. The past couple of years have not been kind to their fans as they shed the outsized contracts of players like Stephon Marbury, Jared Jeffries, Jerome James, Allan Houston and others that took up more space on the bench, disabled list and the payroll than they did on the stat sheet or all star team. The shedding of those contracts has provided the team with $35 million in salary cap room, more than enough to sign King James or two other top tier free agents.

For a fan base used to winning and expecting it every year this was a shock to the system. Fans stopped going to games and stopped watching the team on their MSG Network. The team disappeared from national telecasts it used to be prominently featured in just as quickly as it slid out of playoff contention.

The thought is that anyone, not just LeBron James, anyone signed to a contract representing an improvement over the current collection of players that would be on the island of misfit toys, were this a Christmas special, would represent an upgrade and cause more cash flow into the team. Higher TV ratings would mean more advertising revenue; more competitive games would mean more people in the seats at the Garden; eventually they could even raise ticket prices when they make the playoffs. A planned $850 million dollar renovation will also help bring fans into the outdated arena for at least a season. In addition to 78 new luxury suites, there will be 40% more points of sale for concessions that should add t to the bottom line.

That would be great for MSG shareholders, but signing LeBron would be like investing in an exploratory oil drilling company shortly before it makes its first big find. Currently, according to Forbes, the franchise is valued at $586 million. That value could rise as high as $736 million should LeBron come to the Knicks says Patrick Rishe, a professor of economics at Webster University and director of consulting firm Sports Impacts. This would come in the form of an immediate $10-$20 million boost in revenue and the rise in TV ratings that having the most dynamic player in the NBA on the team would provide. Not to mention that boost in advertising inside the arena because of the increased exposure of the team being on national TV again as well.

In summary, the gains would come from sponsorships, higher ticket prices, playoff games, eventual subscriber fee increases from cable and satellite operators—and rocketing ad rates on the MSG Network, the company's main source of profits according to Crain's.

Overall, according to Crain's, the company has performed reasonably well considering the difficulty of the Knicks to field a competitive team. In its first quarter since it was spun off from Cablevision Systems Corp., the new company's revenues rose 9% over the year-earlier period to $307 million. It had net income of $17 million, compared with a loss of $2 million in the first quarter last year. Its stock has risen 16% since its February debut, closing at $21.48 on Friday.

The arena bills itself as the "World's Most Famous Arena" has no real competition just yet. Not until the Nets move into the Barclay's Center in Brooklyn anyway. That's when they will need a star like LeBron to draw the crowds investors in MSG Inc will expect, new Nets owner Mikhail Prokhorov is playing for keeps.

The High Cost of Being Reckless

When the average guy is reckless it usually only costs him a nominal fine or maybe a marriage. To them of course it is a big deal, but it is a bag of shells compared to what it costs a big time athlete. These guys pay a much higher price.

Tiger Woods, as anyone who hasn't been living in a cave for the past year knows, took recklessness to a whole new level. Though not condoning his behavior, it is one thing to have an affair, its another to have slept with the amount of women and to go to the lengths he did while married. The public will at first act disgusted with your behavior when they learn of an affair, but once you start winning again all is generally forgotten. In Tiger's case his indiscretions cost him not only his family, but a list of endorsement deals longer than most people knew he had.

A year ago today Tiger had endorsement deals with Nike, EA Sports, Gatorade, Accenture, GE, AT&T, Gillete, Tag Heuer, American Express and many others. Since then he has been dropped by Gatorade, Accenture, GE and AT&T; He is no longer appearing in ads for Tag Hauer or Gillette even though they still sponsor him; AMEX has put him on the bench as well. This cost him about $25 million last year, according to CNBC. It also cost IMG, his management firm, $4.6 million. Not to overemphasize how much damage Woods has caused, but a study by UC Davis estimated the loss of market capitalization of the firms he sponsored to be upwards of $12B

He still was able to keep his most valuable endorsements with Nike ($30 million), Gillete ($15 million), EA Sports ($8 million), the values according to NowPublic.com. Other endorsements he still has with Golf Digest, NetJets, Tag Heuer, TLC Laser Eye Centers and Upper Deck in tact according to his website. Fnancially he will not ever be in trouble unless his soon to be ex-wife, Elin Nordegren, is able to win the $750 million she is seeking in a divorce settlement.

While Tiger will still make a considerable chunk of change this year, it will be nowhere near the $100+ million he enjoyed the past few years. At least he may still have Rachel Uchitel.

Gilbert Arenas was the best and most popular player on the Washington Wizards. He was, in fact, one of the most liked and talented players in the whole NBA at one point. He then decided it was a good idea to bring guns to an NBA arena and point them at teammates during an argument. Even Tiger Woods shook his head at Gilbert the day that news broke. In a recent pole taken by Forbes, Gilbert Arenas ranks among the top ten most disliked people in the sporting world by Americans. He is on the same list as Ben Roethlisberger, Michael Vick, Tiger Woods and Alex Rodriguez.

He probably will not lose his contract, but he was suspended indefinitely without pay. This will cost him $147,200 per game and a total of $9,429,505.41 for the rest of the 2009-2010 season, according to ESPN. NBA commissioner David Stern said "Although it is clear that the actions of Mr. Arenas will ultimately result in a substantial suspension, and perhaps worse, his ongoing conduct has led me to conclude that he is not currently fit to take the court in an NBA game. Accordingly, I am suspending Mr. Arenas indefinitely, without pay, effective immediately pending the completion of the investigation by the NBA."

Michael Vick, though not losing the most money, has to be the worst offender on this list. He didn't cheat on his wife, he isn't married; he didn't bring guns to an NFL stadium, though he was caught with marijuana in Miami's airport. His actions didn't even really destroy people and companies either. He brought only himself down, and maybe Arthur Blank's Falcons. When he signed a 10 year, $130 million contract with the Falcons in 2004 he became the most highly compensated player in league history.

He repaid Arthur Blank by smoking pot, giving Falcons fans the middle finger while walking off the field and running Bad Newz Kennels, a dog fighting ring. He was the lead trainer, financier and exterminator. He had friends with him, but he clearly ran the show. In exchange for shooting, electrocuting, drowning, choke slamming and fighting dogs to death after their birth via forced rape on a rape stand he received an indefinite ban from the NFL, the voiding of his contract and an 18 month prison sentence. He also lost endorsement deals with Nike, EA Sports, Coca-Cola, Powerade, Kraft, Rawlings, Hasbro and AirTran, according to Wikipedia.

To add insult to injury, he had to repay $20 million of the bonus money he received while with the Falcons because he admitted using it to fund gambling on the dogs his organization trained. In the US, professional athletes are banned from gambling because of the potential detrimental effects caused by gambling that were exhibited by the 1919 Black Sox.

Michael Vick subsequently declared bankruptcy and ended up having to accept a 2 year contract worth $1.6 million the first year, $5.2 million the second year and with $3 million in incentives according to ESPN. Shortly after he signed an endorsement deal with Nike that was then refuted by the company in spite of his agent announcing it.

Michael Vick clearly lost a lot of money, well over $100 million dollars. He did it because the exhiliration of dog fighting and abuse was more inviting than the on field rush that would be enough for most people. He is the only person discussed here to spend time in jail for his actions. That he is in the NFL is a blessing for him and hopefully he appreciates it much more this time than he did the first time around.

What will all these lessons do to stop future philanderers and potential criminals from losing their massive contracts and endorsement deals? Probably not much if you look at the likes of Ben Roethlisberger, Alex Rodriguez and David Beckham.