North American franchise valuations continue positive momentum after a strong 2023.
Sports franchises in the Ross-Arctos Sports Franchise Index (RASFI) representing the “Big 4” North American leagues continued to see valuation growth of 4.8%, or 20.4% on an annualized basis, in the first quarter of 2024. As such, the market continues to pace above long-term trends: the 20-year trailing RASFI return was 12.0% per annum, or just 2.9% per quarter.
This comes off the back of a near-record calendar year RASFI performance in 2023 of 27.9%, surpassed in recent memory only by a 29% achieved in 1998.
Year-to-date performance has lagged the overall U.S. equity market, which continues to be driven higher by the “Magnificent 7” AI stocks (AAPL, GOOGL, MSFT, AMZN, META, TSLA, and NVDA). U.S. small caps generated a more modest 5.2% year-to-date (quarterly) total return.
Big 4 valuations continue to climb primarily due to (a) continued re-expansion in local revenues since the end of the COVID-19 disruption; (b) continued enthusiasm and optimism for upcoming television rights agreement negotiations, especially for the ongoing NBA national media agreements, reflected in higher multiples; (c) strong (but slowing) control transaction frequency for sports assets. In Q1, transaction frequency dropped: the only major control transaction added to the index in Q1 was the Baltimore Orioles sale to David Rubinstein for $1.725 billion, announced in January, though this represented supportive pricing and was a meaningful signal of continued momentum in the sector.
Disclosure: The Ross-Arctos Sports Franchise Index (“RASFI") is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any security. RASFI includes data sourced from third parties and reflects market trends and economic forecasts which Arctos Partners, LP ("Arctos") and Stephen M. Ross School of Business at the University of Michigan (“Ross”) believe to be reliable; however, no independent verification has been conducted, and neither Arctos nor Ross warrants the accuracy, fairness, correctness, or completeness of any information provided. Certain statements included herein may be considered forward-looking and involve risks and uncertainties; actual results could materially differ from those projected. Historical trends indicated in RASFI do not assure or imply the continuation of such trends in the future. RASFI estimates historical sports team valuations based on a series of statistical models that may introduce sources of error. While we believe RASFI reflects past estimates of sports team values, they should not be seen as indicative of future performance or profitability. The benchmarks and indices provided herein were selected by Arctos and Ross for illustrative purposes only. Selection of such benchmarks or indices is inherently subjective and others might select other benchmarks or indices based on their assessment of the market. Actual results may differ, perhaps materially, from the trends presented herein.