Dear Mrs. Winfrey,
I'm disappointed that you couldn't buy the LA Clippers. I am sure you would have made a great owner and you would have been the perfect response to the Donald Sterling debacle. However, I am delighted to inform you that I have found a better opportunity for your billions.
First, let's start with a refresher. How did the Clippers get away? It's probably mentally destabilizing knowing you couldn't buy something. The press coverage of the LA Clippers has focused on its gargantuan sale price and its highly publicized list of celebrities, billionaires, and crowdfunding projects that have expressed interest in buying the LA Clippers. In the end, it was your pal on the Bloomberg Billionaire list, Steve Ballmer, the 39st richest man in the world, who bought the team with his $2 billion bid. This represents 10% of Mr. Ballmer's net worth and turns out to be an expensive asset diversification strategy. Unfortunately, Mrs. Winfrey, there was a good chance you were going to overpay when Frankie Muniz (Malcolm in the Middle) announced he wanted to buy LA's B-Team. The circus might be explained in part by the $2 billion sale price. That price is very mesmerizing since the Clippers spent the last three decades rotting in the shadow of the glamorous Lakers until recently thanks to Chris Paul and Blake Griffin. Also, for $2 billion, the Staples Center is not included since it's owned by AEG (don't worry Mr. Ballmer, Sterling negotiated a good cheap lease).
Forget the Clippers, a better place for your savings is to look at the Madison Square Garden Company (NASDAQ:MSG), which owns the New York Knicks and has a stronger underlying business. MSG is more than just "The World's Most Famous Arena", it's an entertainment juggernaut that contains a diverse collection of trophy assets and iconic brands such as Knicks, The New York Rangers, the Rockettes, the Radio City Christmas Spectacular and a variety of other entertainment assets. The best part is that the sports teams are not even the most valuable part of the business. There's also a very lucrative media division that's throwing off of lot of cash. Buying a fractional interest of the MSG Company is a much better investment than throwing your hard earned billions at the Clippers.
(Side note to Oprah: The NYR are battling for Lord Stanley's Cup. Please note that I'm not jumping on any bandwagon and this is not a cheerleading article. I'm not a Knicks or a Rangers fan, I'm a Habs fan).
While the sale of the Clippers is making headlines, the MSG Company is under the radar. The purpose of this research is to demonstrate that MSG is currently undervalued. A sum-of-the-parts approach suggests that MSG is worth much more than the current market price. I believe the market understates MSG's cash flow potential and its collection of trophy assets.
Based on my valuation, the implied intrinsic value of the Madison Square Garden Company is in the range of $6.4 and $7.5 billion, or $84 to $97 per share, this implies a potential upside of 50% to 74% from the current price of ~$56.
There are many catalysts that could unlock the value. A combination of increasing free cash flow generation, a "new" renovated Garden, issuing a regular dividend, announcement of share buybacks, a championship run, a new superstar, higher sports media right fees, extended labor peace, a growing international business, a buyout offer, a spin off of the real-estates or different segments, or a take private transaction could fuel the MSG Company upward. Also, the sale of the Clippers should be beneficial on the valuation of all the NBA teams, especially an iconic team like the Knicks. It's in the best interest of the NBA and its owners to have immense sale prices. That helps drive up the sale of the next team.
Oprah, with MSG trading at approximately $56 a share, it's a nice entry point to stash your billions. Today, you can buy a fractional interest of MSG via Class A shares on the open market without having Justin Bieber in the way. However, there are other people in the way. In case you decided to buy the entire company, you might have to wrestle for power from the Dolan family since they still control MSG via super-voting shares (they own all the Class B shares). I saw your show and what you are capable of doing. If you can work with Lance Armstrong, I'm sure you can also stage a sit-down interview to loosen him up (James Dolan) to the possibility.
In its annual report, the Madison Square Garden Company is described as a fully-integrated sports, media and entertainment business. The company is comprised of three business segments: MSG Sports, MSG Media and MSG Entertainment. The divisions are strategically aligned to work together to drive the MSG' overall business which is to create, produce, and present content and distribute it through its programming networks and other media assets. Click to enlargeSource: MSG 2013 10-K, Page 4
- The MSG Sports segment owns and operates the New York Knicks, the New York Rangers, the New-York Liberty, and the Hartford Wolf Pack. MSG Sports also presents other live sporting events.
- MSG Media includes MSG, and MSG+, MSG HD, MSG HD+. Fuse was recently sold to SiTV/NunoTV (backed by Jennifer Lopez) for $226 million in cash and 15% equity.
- MSG Entertainment has a live entertainment portfolio, such as concerts and special events. The segment also operates leading venues such as the Madison Square Garden, the Radio City Music Hall, the Beacon Theatre in Manhattan, the Wang Theatre in Boston, the Chicago Theatre and the Forum in Inglewood, Calif.
MSG was spun-off from Cablevision Systems Corporation (NYSE:CVC) on February 9th, 2010. The spinoff made sense since MSG is its own distinct company, its own business focus and investment characteristics. The transaction had the effect of unlocking value that was "trapped". Each Cablevision shareholder received shares of MSG.
The chart above displays MSG since the spinoff, gaining a whopping 180%, crushing the Russell Midcap, the S&P 500, and also its former parent company Cablevision.
Before getting deeper into the valuation of MSG, I think it's important to have a general overview of the sports valuation field. In recent years, professional sports team transactions seem to defy normal traditional valuation techniques, almost like sport valuation is its own independent separate skill and trade. As you will see later, Forbes and company seems to always underestimate the value of a professional sports team. Sports valuation is an interesting topic and it's certainly more of an art than a science.
The value of a business is based on its future potential earnings. So how come that sports team valuation seems to be so off? One hypothesis is that a sport team is not a business in the traditional sense. Using the income approach doesn't give you the full picture. Of course, higher revenue drives a higher price, which is why a NFL team is worth more than a NHL team. But there are other factors at work that influence valuation.
A major sports club should be approached like a rare prestigious art piece. It's an "alternative asset". It's the law of demand and supply at work, except there's no supply. There's only so many Picasso works of art, and trust me you are not spending $31.5 million for the talent. You are buying it because you want to have the only one available. Your rich friends can't have the same one. There's a feeling of power attached to owning it. People want what they can't have. It's the same rational for buying a collectible edition Ferrari. You want one because there's an 18-month waiting list.
If you can't have something, that creates a desirability effect. The same forces are at work with sports teams. There's a very limited supply, they are rarely on sale, and there's an almost unlimited demand. The imbalance creates high prices, and high prices fuel higher prices. You have the money? Great. But that doesn't mean you can actually buy a team. There's nothing drives the elite more than knowing they can't have something, so they end up over spending.
An example of the dynamic above is the recent sale of the Milwaukee Bucks. Forbes has an article on the two hedge fund managers, Lasry and Edens, who bought the team. The partners made their fortune buying damaged assets at rock bottom prices. The Bucks might be a damaged asset, but they didn't pay rock bottom prices when they paid at least $50 million more than anyone else was considering paying. The hefty premium runs counter to how the two partners made their fortunes. This is because we look at a sport team as a traditional business. It's true that some owners are in to make money, but the reality is that most of them are playing with their latest toy that doesn't seem to depreciate. Do you think Lasry and Edens filled their house with undervalued damaged art pieces? In the art world, the more expensive it is, the sexier it is. The whole point is having the privilege of saying "that's my team". That phrase comes at a premium. If they wanted to make serious money, they would buy something else or stick to the business that made them wealthy in the first place.
It seems that only a few specific teams can command sky high prices. These teams are usually located in metropolitan areas with a lot of billionaires and benefit from a strong brand. An example is the LA Dodgers. When the Dodgers went up for sale, Forbes' most recent valuation was $800 million. The Dodgers actually sold for $2.2 billion, or 175% more than their valuation. The main factor behind the high price was media rights. Fox Sports and Time Warner Cable competed against each other before securing an $8.35 billion TV contract from TWC. Nate Silver's 538 has an interesting article on the correlation between the rate of increase in franchise value and the number of billionaires in a metro area. Sounds like inflation for the wealthy, too many billionaires chasing too few goods.
When it comes to valuing current teams, there's also a lack of information and understanding. When you hear about a certain person buying a team for a certain amount, it's not really clear-cut because you don't know how much all the other assets are worth and how they contributed to the sale. You also don't know how the sale was financed. Most transactions are private and details are rare.
As I mentioned above, you can't simply apply an income approach to the earnings or cash flow of the team because we are dealing with a special assets class. Most of the time the "investment" is not necessary based on maximizing profit. The power of owning a sports team is the initial driver of value. Owning a team creates subjective personal value, and there's no formula that I know of that could measure that.
With its many divisions, a sum-of-the-parts (SOTP) technique is the proper approach to value the Madison Square Garden Company.
For MSG Sports, I started my valuation using Forbes' numbers and I adjusted them. For MSG Media, I used market comparables to determine the proper multiple to apply to an adjusted operating cash flow (AOCF), and for MSG Media I used a multiple of sales. I also valued some of the real estate at the cost of the renovation.
MSG Sports owns and operates the New York Knicks, the New York Rangers, the New York Liberty, and the Hartford Wolf Pack. MSG Sports also features a wide variety of live sporting events, including professional boxing, college basketball (The Big East Tournament, Jimmy V Classic, post-season NIT Finals and, on occasion, Duke University games), gymnastics (American Cup), track and field, professional bull riding (rodeo), the Harlem Globetrotters, Red Hot Hockey (Boston University vs Cornell University), the PSAL Championships, tennis (The BNP Paribas Showdown), and WWE events, as well as the NFL Draft.
MSG Sports' revenues is primarily driven by higher event-related revenues from professional sports, ticket sales, sponsorship, signage revenues, inter-segment broadcast rights fees, suite rental fee revenue and other live sporting events. The 2013-2014 season marked the fourth consecutive year Knicks season tickets have been sold out and the seventh straight year Rangers season tickets have been sold out. For the 2014-15 season, MSG has announced that they were not raising ticket prices for the regular season.
MSG Sports, probably the most "popular" and recognizable division of the company, has steadily seen its revenues increase over the past few years, even with the lockouts. Revenues were at a record high of $470 million for fiscal 2013. MSG Sports is expected to deliver another record year with estimated fiscal year 2014 revenues of $482 million. With the Rangers in the Cup final, it's possible that they beat the forecast.
The AOCF hovers around 5% of revenues. MSG Sports is certainly not the most lucrative in terms of cash flow, but it uses its assets to enhance other divisions, such as MSG Media. Without MSG Sports, MSG Media wouldn't have the numbers it pulls today.
If a team makes it to the playoff it makes big money, it's definitely big money as the table below demonstrates. The players are already paid from the regular season and obviously the more playoff games are played, the higher the revenues. In 2012, there was an increase of $35 million in playoff related revenues. That year, both the Knicks and the Rangers were in the playoff. The Rangers reached the conference semifinals against New-Jersey and the Knicks got crushed in the first round against the Miami Heat. Now that the Rangers are battling for the Stanley Cup, I expect Q4-2014 numbers to be really good.
The main direct operational expenses are primarily due to a higher NBA luxury tax, and NBA and NHL revenue sharing expense, and team personal compensation. The cost of operating a team is going up every year, not just payroll cost but operating cost to run the team in general.
As members of the NBA and NHL, the Knicks and Rangers, respectively, are also subject to annual league assessments (% of regular and playoff ticket revenue). The Knicks are subject to revenue sharing agreement and a luxury tax. The Rangers don't have a luxury tax, but are subject to revenue sharing.
If you try to analyze past numbers, take into consideration that both the NBA and NHL had a work stoppage in the last three years. The Knicks played 66 games (2011-2012) and the Rangers (2012-2013) played 48 games instead of the regular 82.
To better understand this division, I will break down the main assets of this division.
The New York Knickerbockers
The original Knicks logo used from the inaugural 1946-47 Credits: NBA.
The New York Knicks certainly don't need an introduction. Cablevision assumed full control of the Knicks in 1997 (this also includes the NY Rangers and the Garden) and was spun-off with the rest of the MSG assets in 2010.
Recent sports deals conclude that wins and losses are not the main factors driving sports teams' prices. The Knicks, over the last ten years, despite their mostly poor play over the past decade, saw their franchise value appreciate by 11 percent per year, according to Forbes. Interestingly, the most valuable sports teams in the world are far from having the best record (e.g. Dallas Cowboys, and the Toronto Maple Leafs). The NY Knicks have been pretty much an embarrassment. No Knicks team has won an NBA title in 41 years, and New York finished nine straight seasons with losing records between 2001 and 2010. The Knicks are a mess and they hired legendary 11-time NBA Champion Phil Jackson for the cleanup. Quick fact: Phil Jackson was on the team the last time the Knicks won the NBA Championship (1970, 1973). Jackson signed a five-year $60 million contract. Mr. Jackson's role is clearly to reboot the franchise. In terms of measuring success, well it will be hard to be worse. Oprah, if you buy the team you inherit Phil Jackson's contract and brain, and that's an excellent asset to have that's not on the balance sheet. You had Mr. Jackson on your show and it seems that you two could work very well together.
My point was that terrible performance doesn't seem to reflect on the team's valuation, according to Forbes. Forbes attaches a value of $1.4 billion to the Knicks, an increase of 27% from 2013, thanks to a conference semifinals playoff appearance in 2013. In comparison, the 2012 valuation jumped 41% due mainly to a $980 million renovation of Madison Square Garden, according to Forbes.
I started my valuation using Forbes' data. Below is a historical table of the New York Knicks valuation over the last ten years.
Here are some of the factors that could boost this team's valuation. 1) A playoff or championship run, this increases your team's visibility and it's also very profitable because you are done paying your players, 2) The addition of a superstar to boost the franchise, 3) higher revenues from the renovated Garden, concessions, sponsorships, media rights, 4) a boost in TV ratings, and 5) international growth
When the LA Clippers sold for an extravagant amount, the purchase price is more than any prevailing estimates. It won't just elevate the fortunes of the team's owners; it also raises the valuations of every NBA team, including the Knicks. A group taking advantage of this is Forest City Enterprises, run by Bruce Ratner, which decided to sell its 20 percent of the Nets and has valued the team at the $1 billion figure.
This is how Forbes breaks down the $1.4 billion dollar Knicks value in January 2014.
If the Clippers sold for $2 billion, what does that say about the value of the Knicks? I tried to compile a history of the past transactions in the NBA. Please note that the information is based on various sources. I relied a lot on Forbes, newspaper articles, and obviously Google search. The data below might not be 100% accurate since we are dealing with private transactions. Also, in the purchasing prices it's never clear what it includes or not. Use the table as a guide since I was trying to paint a picture. The numbers are also not adjusted for inflation.
Past Transactions Notes: There were two teams that sold below the Forbes' valuation. The Charlotte Bobcats were sold to Michael Jordan below the expansion fee of $300 million. Different sources report different selling prices from $175 million to $275 million, including the debt. They are now valued at $410 million. The Philadelphia 76ers is the other team that traded below valuation. The value of the 76ers has quickly rebounded under the new owners to $469 million.
The latest transactions seem to suggest that valuations are surging and that the least valuable team is worth at least $500 million. Common sense suggests that the Knicks are worth considerably more than the Clippers, especially with an arena included. For the numbers, I removed the stadium value from the Forbes' valuation. Then I applied a 50% to 75% premium over the adjusted value. As a result, the range of the implied intrinsic value of the New York Knicks is approximately $1.4 billion to $1.7 billion. My value calculation looks low when you compare it to the LA Clippers. It might also mean that Mr. Ballmer overpaid for the Clippers. Although, if there was an auction of the Knicks, it's reasonable to assume that it will fetch much more than my valuation. To prevent "overshooting", I believe these numbers are conservatively reasonable.
The Clippers' deal is part of a series of mega sports transaction in North America. The sale of the LA Clippers ($2b), the LA Dodgers ($2.1b), and the Toronto Maple Leafs ($1.3b) all have something in common. Except for maybe the Clippers, you are not just buying a team with players. The Dodgers and the Maples Leafs all have a strong ecosystem. The deal generally includes an arena, content, parking, merchandise, concessions, a strong brand, TV rights, and much more.
I will use the Toronto Maples Leafs as an example. The Leafs have demonstrated that you can be terrible and still manage to have the highest valuation of the NHL. The key is to leverage your assets outside the sports business. The Maple Leafs were able to leverage their assets and to build a strong lifestyle brand. Immigrants arrived in Toronto and started wearing Maple Leafs gear without even knowing what hockey was. Aside from your hardcore fans, being a Maple Leafs fan is a lifestyle choice.
Maybe hockey is not your sport. Then let's talk football. How do you explain the Dallas Cowboys being labeled as "America's Team" which also happens to be the most valuable NFL team? They certainly didn't get there because of their "on the field" success. I'm pretty sure the Cowboys cheerleaders contributed more to increasing the team's value than Tony Romo did. Owner Jerry Jones has turned "America's team" into a revenue machine by building the brand. Keep repeating that same message that you are "America's team" and eventually people will start believing it. The Cowboys are all about being larger than life (e.g. the hottest cheerleaders, the biggest stadium, the biggest TV screen in the world, the biggest bus, the most profitable, etc…) The Cowboys is such a strong brand that their sponsors use the Dallas Cowboy brand to leverage their corporate initiatives. Pepsi uses its sponsorship of the Dallas Cowboys to make themselves look cool. That's sport business for you.
The New York Rangers
Click to enlarge New York Rangers Win The Stanley Cup - 1994 Source: NYT Store
The 2nd most valuable asset in the MSG Sports segment are the New York Rangers (NYR). At the moment of this writing, the NYR have eliminated my team, the Montreal Canadiens to move on to fight the LA Kings in the Stanley Cup final. Like their corporate sister team the Knicks, the Rangers are a team that has been mostly terrible on the ice while managing to sell out every game. The Rangers have one Stanley Cup banner in the last 74 years, and that includes an era when there were only 6 teams. Either way, this hasn't stopped the fans from filling the Garden. The recent team success in the playoff is really good for the bottom line. Below is a graph of the NYR ticket sale price.
Regarding the graph above, I want to clarify that the indicated ticket prices are for all the Stanley Cups playoffs, not just the finals. In this case, the game 6 they are referring to is Montreal vs New York. If the Rangers make it deep in the Stanley Finals, I expect the numbers above to be smashed. Below is a table that displays ten years of valuation.
The latest number enterprise value of $850 million dates from November 2013. I am sure if the partial lockout of the 2012-2013 season didn't happen it would have been higher. I also find that Forbes underestimates the value of the Garden. I am sure it will be revised next fall.
Aside from the Stanley Cup run, other long-term factors could influence a higher team valuation.
- First, the NHL has a new long-term collective agreement in place with its players. We can expect peace to remain over several years.
- Second, NBC is paying the NHL $200 million per season until the 2020-21 season for broadcasting rights. It's obviously pocket change compare to the other big three major leagues, but this was a major breakthrough for the NHL to get the sport more "mainstream".
- Third, the NHL reached a 12-year $5.2 billion agreement with Rogers Communication (RCI.B) for the Canadian broadcasting rights. The deal starts next year for the 2014-2015 season.
- Fourth, the NHL negotiated a hard salary cap with the players. The salary caps move in function of the league's revenue. Hockey related revenues are expected to be shared 50%-50% between owners and players.
- Fifth, the NHL is growing in North America and internationally. Big events such as outdoor games (Winter Classic) and NHL games played overseas have contributed to the growth of the league.
Aside from being one of the Original 6 (the gems of the NHL), there are internal related factors that could affect value of the team. It's been since 1994 that the Rangers can actually put on a show. They have a good core of players that could carry them in the future. Every playoff game is a lot of cash in MSG's pocket since the players regular season salary is paid off. The success will also increase their visibility in a crowded sports town. The Rangers is one the most recognizable brand in sports.
The only past transaction I could use for the NYR is the Maple Leafs sale in December 2011. A consortium of Rogers Communication and BCE bought the Leafs for $1.3 billion. At the time of the transaction, the Leafs were valued at $521 by Forbes, this represents a 149% premium. The NYR has increased in value since, including 48% the year after the Maple Leafs transaction. If the NYR were going to hit the market today, they could command a valuation over $1 billion. For my valuation I applied a 50% to 75% premium over the current valuation (excluding the Garden).
Like the Knicks valuation, this is a conservative number. In a private sale, I believe the Rangers could go for much more.
I believe a value in the range $881 million to $1.0 billion is a reasonable estimate for the New York Rangers.
MSG Media is a leader in production and content development for multiple distribution platforms, including content originating from the MSG's venues. MSG Media's television networks consist of regional sports networks, MSG Network and MSG+, collectively referred to as MSG Networks; and Fuse, a national television network dedicated to music. MSG Networks also include high-definition channels, MSG HD and MSG+ HD, and Fuse includes its high-definition channel, Fuse HD.
MSG Media is a regional sport network (RSN). MSG Media covers games of the Knicks, Rangers, Liberty, the New-York Islanders, the New Jersey Devils, the Buffalo Sabres, and recently the Red Bulls. This provides a strong basis for recurring revenue.
MSG Media is largest revenue contributor to MSG. For fiscal 2014, MSG Media is expected to achieve approximately $723 million in revenues, almost 50% of the total revenues of the estimated $1.5 billion. The Media division AOCF is approximately $350 during the last twelve months, which is also half of all the AOCF.
I have valued MSG Media based on its market comparable. MSG provides AOCF that I will use. Below is a table of the comparable and EV/EBITDA multiples.
It's estimated that MSG Media will generate $350 million of AOCF for fiscal 2014 (one quarter left). To this number I applied an average market multiple of 10x to 12x to the AOCF. I did not make any adjustment for the sale of the Fuse network since it's relatively materially small.
MSG Media is the biggest piece of MSG. It provides the majority of the revenue and earnings. The value of MSG Media is in the range of $3.5 billion to $4.2 billion. A private sale of MSG Media would probably command a higher multiple. Also, using 2014 estimated AOCF of $378 million would have also increased the value of MSG Media.
It's MSG's smallest segment with $252 million in revenue in 2013. At the moment, MSG Entertainment remains mostly cash flow negative. The main drivers behind the revenues is more MSG Entertainment-promoted events, event-related revenues at the re-opened Forum, and higher venue related sponsorship and suite rental fee revenues. The Rockettes's new show, Heart and Lights, is postponed until 2015. The Radio City Hall is getting ready for the new large-scale theatrical production. MSG Entertainment creates or presents content at these venues: The Madison Square Garden, The Theater at Madison Square Garden, Radio City Music Hall, the Beacon Theatre, the Forum in Inglewood, CA, The Chicago Theatre, and the Wang Theatre in Boston, MA.
MSG Entertainment is on track for $300 million in revenues. Since its not profitable and its growth segment of the company, it will value it 1x revenues. This is slightly generous considering that Live Nation Entertainment (NYSE:LYV) is trading at 0.71x sales.
The MSG Company has a nice portfolio of prime real estate assets with the Madison Square Garden as its main property. MSG's filings do not disclose much regarding their real estate properties. Below is an overview of their most important venues:
The Madison Square Garden
To prevent double counting, I have excluded the MSG's property value from the sports team (Forbes' numbers seem to be low, see Knicks section above). Separately, I would peg the value of the Garden at $1 billion, which represents the cost of the renovation. I also valued the development rights-air rights separately at $750 million, based on external research. The Garden now has three new premium seat products: 68 lounge club seats re-branded by Anheuser-Busch, two group hospitality lounges with 28 fixed seats each that bookend the new lounge seats and Chase Bridge seating platforms that overhang the Garden.
You might have heard that the World's Most Famous Arena's operating permit is up for expiration in ten years and that the Garden might have to move to redevelop Penn Station. Why would a private building stop operations? According to the city, venues with a capacity over 2,500 seats need an operating permit. The Garden does qualify.
The City Council voted (47 to 1) to renew the Garden's permit for ten more years. The Dolan family wanted an operating permit renewed in perpetuity. The vote was the easy part. The hardest part will be to get the funding and all the parties involved. There's no viable plan. Ten years sound like a very long time, but combine bureaucracy with multiple government departments and ten years is nothing, especially a massive public infrastructure project in New York.
City Council speaker Christine Quinn on the subject:
"This will require the participation of all the major stakeholders -- the City, the State, the Federal Government, the MTA, Amtrak, the community boards, local businesses, the commuting public, and, obviously, Madison Square Garden itself."
So far this seems to be very political and overblown. It's not the first time the City tries to move the Garden. A plan to move the Garden a block west to rise within the stone walls of the Farley Post Office Building in 2008 fell through. A lot of questions remain unanswered. I am not sure how a move would work given that the Garden is privately owned. Can the city seize it? Wouldn't that be expensive? Can Vornado get involved? And more importantly, the big question is where is the city going to find the money to move the Garden and build the new Penn Station?
The MSG moving is certainly a risk but I wouldn't read too much into it. There's no guarantee, at this point, that they will ever be forced to move from the current site. It's highly possible that their operating permit is renewed for another 10 years.
There's also some cash oriented risk. There's pressure on the Garden to pay property taxes of $17.3 million annually. The Garden is currently exempt from paying property tax since 1982 when the city's finance was terrible and it feared losing the Knicks and Rangers. The property tax exemption is up to $54 million a year that's because the Garden's recent $1 billion renovation increased the building's value.
The City Council passed a resolution urging the state to end the controversial tax exemption. The city can't get rid of the tax break without the approval of the state Legislature and governor.
The Forum is located in Inglewood, a city adjacent to LA. The Forum used to be "famous" when the LA Lakers and LA Kings called it home. They both moved to the new Staples Center. In 2012, MSG bought the forum for $23.5 million. MSG hopes to turn the Forum into a top-tier concert site by spending $120 million renovating it. The Forum opened on January 15 with 6 shows by The Eagles. The Eagles are managed by venture Azoff-MSG Entertainment. The goal is to steal business from the Staple Center.
Radio City Music Hall
MSG (Cablevision) acquired the Radio City Music Hall lease in 1997 and plowed $70 million to completely restore the building. The lease expires in 2023. MSG has the option to renew the lease for an additional ten years by providing two years' notice prior to the initial expiration date. The Radio City Music Hall is mostly known as the home of the Rockettes and the Radio City Christmas Spectacular. The venue also hosts the NFL draft.
The Beacon Theatre
In 2006, the theater commenced a 20-year lease with Cablevision. It is one of New York's leading live music and entertainment venues with 2,800 seats. The theater was renovated for $17 million in 2008. The theater is often the site of the Tony Awards which are broadcasted on CBS.
The Chicago Theatre
MSG purchased the theater in 2007. The theater is a highly attractive destination for concerts, comedy shows and other live events. The Chicago Theatre is the eighth highest-grossing entertainment venue of its size in the world, based on Billboard Magazine's 2012 full year rankings.
The Wang Theatre
MSG has a booking agreement with the Wang Theatre in Boston. Under the booking agreement, MSG has been utilizing their production and entertainment experience to maximize the quantity and diversity of performances staged at the Wang Theatre. The booking agreement expires in 2019 with the option to renew the agreement for an additional ten years.
The Brooklyn Bowl Las Vegas
In March 2014, the Brooklyn Bowl opened a new venue in Las Vegas. The Brooklyn Bowl is music venue, bowling alley and restaurant. In 2013, Rolling Stone named the Brooklyn Bowl in New York the 20th best music club in America.
For the valuation exercise, I have attributed a value of $1 billion to the Madison Square Garden and $120 million to the Forum, which represents the cost of the renovations.
I am not too familiar with air rights. I actually didn't know anything about them until I started my research on MSG. It seems to be a topic only New Yorkers are experts at.
If you are not a New Yorker, below is an introduction to air rights:
Basically, it's the air above your roof. To be more precise, air rights is the difference between the actual size of a building and the maximum size allowed by existing zoning regulations. If developers want to build higher than their zoning permits, buying air rights from another building is often an option. It's a legal loophole that allows developers to build higher than zoning regulations would otherwise permit.
On the topic of New Yorkers, Donald Trump seems to be an expert at it. He bought a lot of air rights to build some of his massive towers. He appears to be the "go-to" guy but he's hard to reach. Oprah, you might have more luck than me reaching him since he's not returning my calls.
I had to rely on third party research to help me put a value on the air rights.
The MSG Company doesn't discuss air rights that deeply with a single mention on page 12 of their 2013 10-K report:
We own the Madison Square Garden Complex, the platform on which it is built and the development rights (including air rights) above our property. Madison Square Garden sits atop Pennsylvania Station, a major commuter hub in Manhattan, which is owned by the National Railroad Passenger Corporation (Amtrak). While the development rights we own would permit us to expand in the future, any such use of development rights would require various approvals from the City of New York. With the expected completion of the Transformation in 2013, The Garden will, once again, seat up to approximately 21,000 spectators for sporting and entertainment events. The Garden, along with The Theater at Madison Square Garden, contains approximately 1,100,000 square feet of floor space over 11 levels. - MSG's 10-K Page 12.
This above statement really indicates that MSG is not disclosing much about the value of their air rights or its intentions. The main catalyst in this department appears to be Vornado Realty Trust which owns essentially half the neighborhood surrounding the Garden. Speculation indicates that getting their hands on those air rights is very important to Vornado. With the air rights, they would be able to build numerous new towers in the area. In 2005-2009, Vornado was trying to convince the Dolan family to move the Garden, where they would build them a brand-new arena. I can't really comment on this story other than it's a highly speculative concept. At the time of the story, MSG was still inside Cablevision and the Garden didn't have its $1 billion renovation.
A comparable transaction is the air right over Manhattan's Hudson Yards was leased for 99 years, for $1 billion from the Metropolitan Transportation Authority.
What we know is that air rights seem to have a lot of value, but how much? Since I am not going to hire a New York real estate appraiser I need to rely on third party numbers.
There are an estimated 5.4 million square feet of development rights-air rights attached to the Garden. I have seen numbers ranging from $250 million to $1.3 billion. Mark Boyar from the Boyar Value Group estimates the air rights to be worth approximately $750 million. I will rely on that number. Mr. Boyar has done extensive research on MSG and that figure is a reasonable "middle of the pack" number.
MSG is a big holding company with a lot of different operations, as the table below indicates. The table is provided by MSG and there's no description of activities with it. There's even an insurance company in the group, the Eden Insurance Company, but I can't find any valuable information on it.
Aviator Sports and Recreation LLC (4.82%)
Continental Road LLC
Eden Insurance Company, Inc.
FUSE Holdings LLC - Recently sold majority stake
FUSE Networks LLC
FUSE Programming Inc.
Garden Programming, L.L.C.
LNE Holdings, LLC
MSG Action, LLC
MSG Aircraft Leasing, LLC
MSG Aviator, LLC
MSG Boston Theatrical, L.L.C.
MSG Chicago, LLC
MSG Eden Corporation
MSG Eden Realty, LLC
MSG Flight Operations, LLC
MSG Forum, LLC
MSG Holdings Music, LLC
MSG Holdings, L.P.
MSG Interactive, LLC
MSG National Properties LLC
MSG Publishing, LLC
MSG-StarGames Tennis, L.P.
MSG Songs, LLC
MSG StarGames Tennis, ULC
MSG Tennis, LLC
MSG Training Center, LLC
MSG Vaudeville, LLC
MSG Winter Productions, LLC
Madison Square Garden CT, LLC
New York Rangers Enterprises Company
Radio City Productions LLC
Radio City Trademarks, LLC
Rainbow Garden Corp.
Regional MSG Holdings LLC
The 31st Street Company, L.L.C.
The Grand Tour, LLC
Other notable investments:
In September 2013, MSG acquired a 50% interest in Azoff-MSG for $125 million. This is a new joint venture with music mogul Irving Azoff that will manage artists, own music-publishing rights and dabble in marketing and television production. Mr. Azoff has long managed acts, including The Eagles, Van Halen, Christina Aguilera and Steely Dan, and will continue to do so. Azoff stepped down from Live Nation Entertainment Inc. and took his superstar roster with him.
In March 2014, MSG acquired a 50% interest in Tribeca Enterprises for $22.5 million. Tribeca Enterprises owns and operates the Tribeca Film Festival and certain other businesses. The Tribeca Enterprises was co-founded by Robert De Niro in the wake of the 9-11 terrorist attacks.
In April 2014, MSG sold Fuse for $226 million with a 15% minority stake in the purchasing company. The transaction is expected to close in the first quarter of 2015.
The Dolans and the Capital Structure
MSG has two classes of shares, Class A and Class B. Only the Class A shares are listed on the NASDAQ. MSG's Class B shares are not listed on a securities exchange and are super voting shares. Class B shares has 10 votes per share and can elect 75% of the Board of Directors. The Dolan family owns all of the Class B shares and as a result controls MSG.
Number of votes
The Dolans are not hiding their control and influence. Below is a statement from MSG, "We are Controlled by the Dolan Family", from their annual report.
The Dolan family might control the company and that power is concentrated in the hands of Charles Dolan and his spouse. They control 41% of the total voting power of the all outstanding common stock of MSG. Charles Dolan and his spouse control approximately 59.4% of Class B shares, 1% of the Class A shares.
Also, since MSG is elected a "Controlled Company" for the NASDAQ, MSG doesn't have to comply with certain corporate governance rules. Basically, the Dolans have elected not to comply with the corporate governance rules of NASDAQ requiring a majority of independent directors on the Board and an independent corporate governance and nominating committee.
Oprah, you can buy all the Class A shares you want but you won't have control. You might need to stage an "intervention" with the Dolans. Almost everyone on the Board are Dolans or related to the Dolans. I highly doubt they have the interest of the shareholders at heart. This is run, and looks like a family business.
The Dolan directors: Charles F. Dolan , James Dolan, Charles P. Dolan, Kristin A. Dolan, Deborah A. Dolan-Sweeney, Marianne Dolan Weber, and Brian G. Sweeney.
Charles F. Dolan, 87, is the father of James L. Dolan, Thomas C. Dolan, Marianne Dolan Weber and Deborah A. Dolan-Sweeney, father-in-law of Kristin A. Dolan and Brian G. Sweeney, and the grandfather of Charles P. Dolan (27).
MSG is supposed to have three independent directors. One of them, Richard D. Parsons resigned as a member of the Board of Directors, in connection with his decision to serve as the interim CEO of the Los Angeles Clippers. MSG has until November 4, 2014 to replace him.
Fiscal 2015 should be the first full year to see full benefits of the completely renovated Garden, as well as increased sponsorship revenues and higher ticker prices kicking in and full seasons for NBA and NHL.
Fiscal 2014 estimated revenues are expected to come in at just over $1.5 billion, which represents a record year for the company. I have attached below a table and a graph with the financial data of the three segments of MSG.
The revenue CAGR is 5.4% over the past seven years. It's certainly not an impressive number. However, if 2014 numbers hit the target, this represents a 12.4% increase over last year. The AOCF has a CAGR of 30% over the last seven years. AOCF grew from $60 million in 2008 to an estimated $378 for fiscal 2014. MSG Media is responsible for the majority of that surge, thanks to revenue growth and better margins.
I also included the historical of the AOCF each segment over the past eleven quarters. It allows you to see the growth of each segment.
As you can see, MSG Media is the main driver of AOCF.
Dividends, Share Buybacks & Acquisitions
Up until now, MSG's excess cash went into the Garden transformation and some minor acquisitions. With the Garden renovations now behind, what will MSG do with all that free cash flow? The sale of Fuse will bring in $226 million. Last quarter, they had $76 million left after $242 million on Capex during the last nine months. MSG stands to benefit from all the capex. MSG also has access to a $500 million credit facility with JPMorgan Chase. I made a table summarizing the CAPEX spending since 2008.
You can see above the CAPEX exploding when they renovated the Garden. The CAPEX for the last nice months looks high considering the completion of the Garden, however the bulk of the spending came in early in the fiscal year. CAPEX for the 3rd quarter was $44 million. With the Garden and Forum renovations completed, CAPEX should normalize and as result should liberate more free cash flow.
When Mr. Ratner was CEO, we had mixed messages regarding capital allocation. I think he was juggling between a reasonable conservative approach and James Dolan's grand ambitions. On February 28th 2014, Tad Smith replaced Hank Ratner for the CEO spot.
Here's what Mr. Smith had to say on the most recent conference call (Q3-2014):
"Our objective here is to increase the value of our company's asset for shareholders over the long term. When MSG was spun off from Cablevision four year ago for example, we issued dividends and share repurchases and instead invested our capital into the Garden's transformation. A project that has been a clear success and one that the stock market rewarded. So for the time being and only for the time being, our priority is to find new opportunities that enhance our company's growth and asset value over the long term."
If I understand properly, it seems MSG is going more the acquisition route. This worries me a bit because the acquisition track record of the Dolans is a little spotty. Further in the call Mr. Smith said this:
With particular respect to inorganic or sort of external growth, a strategic growth if you will, yes, I think there is a lot of opportunity in the entertainment segment but I absolutely would not rule out sports or frankly any other segment. One of the things we started doing two weeks ago as we put a team on looking at both the internal and external strategic opportunities for the company that work is underway. And it is a little early to say more about that but certainly nothing is off the table.
Two things, 1) MSG has a team that is currently looking at potential opportunities. 2) They are looking at the entertainment segment. The entertainment segment is MSG's smallest and fastest growing segment. It's also the only one that's cash flow negative. Its fortunes might turn around in the future, but it's a risky business. It's probably not what shareholders wanted to hear. On the other hand, MSG has the infrastructure and capabilities to become an event bigger entertainment giant. I still believe the best value creation move would be to return the excess cash to shareholders. The wealth creation effect would be immediate.
To summarize the table above, I have used a SOTP approach to determine the value of MSG. I have individualy valued The Knicks and Rangers separately without the arena. I have valued the Garden and the Forum at the cost of their renovation. For the air rights, I have relied on the Boyar Value Group for the number, which is a middle of the pack number. I have not included a high and low value for the air rights simply because I lack in depth information to make my own opinion. The Entertainent segment is valued at 1x revenues. For the Media division, I have applied a multiple to AOCF in the range of 10x to 12x. That number is based on market comparable. MSG has a net cash position since there's no long term debt.
My approach was more on the cautious side. The Knicks and Rangers could probably fetch a higher valuation if sold on the private market, as the LA Clippers sale indicated. MSG Media could probably command a higher multiple in a buyout situation. I have apply a 20% margin of safety, which I have renamed the "Dolan family discount" risk factor. Since the company's ownership is not exactly shareholder friendly, and the lack of disclosure is a definite weight on the stock.
To summarize, I have calculated the intrinsic value of MSG to be in the range of $84 to $97 per share, which represents a potential upside of 50% to 74% from the ~$56 price MSG is currently trading at.
Comparables - Other Publicly Traded Sports Teams
I did some research on other publicly traded sports teams and there isn't much. It's definitely not a popular sector. Most of publicly traded sports teams are soccer "football for the purists" teams in Europe and do not constitute a good base. I can't really use them as comparable. In America, publicly traded companies pure plays are rare. The Rangers and the Knicks are part of a bigger company. The Toronto Maples Leafs is a small part of telecommunication giant Rogers and BCE. BCE also owns 18.4% of the Montreal Canadiens, and the Atlanta Braves is one of the many assets inside Liberty Media (NASDAQ:LMCA). Usually, the primary appeal of these stocks would be the fans since little or any control is given. Just like MSG, you are not the "real" owner.
The only pure play I found is Manchester United (NYSE:MANU). Only a small portion of MANU is publicly available and the company is controlled by the Glazer family. MANU had their IPO in 2012 at a price much lower than underwriters expected because the fan base of retail investors didn't show up. At the moment, MANU is trading around $16 a share. As a side note, this wouldn't have been the first time MANU is publicly traded. The Glazer family bought out the shareholders in 2004.
(Never publicly traded)
The graphic above is a certificate of the Milwaukee Braves, the same team that moved to Atlanta. They were never publicly traded and shares were sold to a few hundred locals. However, you can indirectly invest in the Atlanta Braves. Liberty Media Corporation owns and operates the Atlanta Braves as a part of their media empire.
The Cleveland Indians (CLEV) went public in June 1998 for $15 a share and went private again in 1999. Larry Dolan bought the team for $320 million in 1999 and offered between $22.25 and $22.75 a share. Larry Dolan is the brother of Charles Dolan, Chairman of Cablevision. Larry reportedly said to the Baltimore Sun:
"The owner of the Cleveland Indians is going to be myself. My brother, Charles, is not involved," Larry Dolan said. "What he does is his business. I did tell him, `Charles, what we need is a pitcher. If you can't pitch, we don't need you.' "
Source: Sports Finance by Gil Fried, Timothy D. DeSchrive, Michael Mondello
I must admit that's one nice stock certificate. The 1996 Florida Panthers (PUCK) went public on the NASDAQ. Florida Panthers Holdings was Wayne Huizenga's investment company. It wasn't a sport pure play since the holding was filled with real estate and entertainment assets. In 1997, the Panthers made the move to the NYSE with a new symbol: (PAW), since the NYSE limits trading symbols to a maximum of three letters. The stock had ups and downs to eventually change its name to Boca Resorts. Mr. Huizenga sold the Panthers in 2001. You can see from the table below that the Panthers had terrible cash flow.
Source: Sports Finance by Gil Fried, Timothy D. DeSchrive, Michael Mondello
The Boston Celtics (BOS) had a long public run. 40% of the team was offered to the public in 1986 at $18.50 a share. The Celtics were traded publicly until 2002 when the team became privately owned for $360 million.
The Green Bay Packers have a different ownership structure. The team is owned by the fans. The Packers sold their first shares for $5 in 1923. It's not publicly traded. There are significant restrictions on all transfers. Presentably, 364,114 people, representing 5,014,545 shares can lay claim on the franchise. Shares include voting rights but redemption price is minimal and no dividends are paid. The stock cannot appreciate in value.
Other than interesting history, it doesn't really help with the valuation of MSG. It appears that some of the investments above were novelty investments. Team owners often issue public offerings in order to monetize their holdings without losing team control. However, if MSG was ever going to break up, it might indicate that the Knicks and Rangers might be better off privately. I don't think a professional sports team should be on the stock market. The team should be owned privately by an owner that wants to win rather than focusing on beating next quarter's number.
Why Isn't MSG Trading Higher?
It's very important for me to find out what the person on the other side of the trade thinks. After all, he must be diligent, informed, and probably did their homework. Since I am invested in MSG, I can't only wear sunny glasses and it's important to see what could go wrong. I'm going to try to pretend that I wear the other trader's shoes.
The Dolan family is not exactly the best capital allocator. Instead of returning the free cash flow to investors, they could allocate it in areas that are value destructive.
Now that the Garden renovation is completed, MSG will have plenty of cash coming in. The capital allocation skills of the Dolan family are a real concern. There's inconsistent message from management on what they will do with the excess cash. Regarding terrible investments, one simply needs to look at the new defunct Vroom, a satellite TV service launched to compete with DirectTV and Dish Network. Another bad capital allocation was tabloid Newsday, Cablevision wrote off 70% one year after the acquisition.
The MSG ownership structure gives the Dolan family too much control. The Dolans are not exactly the role model of stewardship of shareholder capital.
Again, this is a reasonable concern. The Dolan family's tight-gripped control over the company is entrenched by a long-standing dual share-class structure. Capital allocation decisions seem to have been made in the family's best interests. In March 2014, Cablevision directors were sued by an investor for wrongfully approving "grossly excessive" compensation for Chairman Charles Dolan and members of his family who serve as executives.
Sports teams are not exactly great investments.
Well this is debatable. It's true that only a minority of sports teams make money. Sports teams are very seasonal and can bring volatility to the earnings. A sports team is usually profitable and benefits from other corporate units such as an arena and a media deal. Sports teams are generally not a cash cow but their asset value has been steadily increasing over time. The Knicks and Rangers' real value would be realized if the teams were taken private.
MSG should be split in different companies. The market doesn't recognize the full market value of the different divisions of MSG.
I agree that having three different segments with so many different assets can make it difficult to value. The different segments have different risk profiles and different risk attached to their cash flow. MSG could unlock value if they spin off their real estate in a trust and the sports teams could sold separately.
- Fiscal 2015 should be the first full year to see full benefits of the completely renovated Garden, as well as increased sponsorship revenues and higher ticket prices kicking in and full seasons for NBA and NHL.
- $1 billion later, the Garden is fully renovated. Capex should normalize and free cash flow generation should accelerate.
- MSG has a collection of iconic brands and trophy assets that are irreplaceable.
- MSG is debt free. Hopefully, a portion of the free cash flow might return to shareholders via dividends or share buybacks.
- MSG has a diversified revenue stream.
- Sports media rights are increasing. Sports network (ESPN, Fox Sports, TWC SportsNet) need live programming
- MSG recently sold FuseTV for $226 million as well as 15% equity in the combined company.
- MSG owns the Knicks and the Rangers, sports teams valuation are sky rocketing at the moment.
- MSG benefits from loyal and passionate fan bases that span a wide demographic mix.
- The NHL is growing. Revenues for the 2013-2014 season is expected at roughly $4 billion.
- The Rangers are in the final of the Stanley Cup.
- The hiring of Phil Jackson should help the Knicks.
- Both the NHL and NBA are benefiting from labor peace.
- The NBA is growing really fast internationally. The Knicks are one of the "premier" brand overseas, especially in China/Taiwan thanks to Jeremy Lin.
Negatives, Risks, and Concerns
- There's an uncertainty surrounding The Madison Square Garden arena in ten years. The city renewed their operating permit for another ten years to make room to rebuild Penn Station. Aside from a political and bureaucratic mess, the money question hasn't been answered.
- There's increased pressure for the Garden to pay property taxes. The annual property taxes exemption jumps from $17 million to $54 million a year. The jump is caused by the recent renovation. The Garden hasn't paid property taxes since 1982.
- The Dolans have a dodgy past when it comes to capital allocation. MSG is a family business and is not shareholder friendly. Investors and sports fans have been very critical.
- Having either the Knicks or the Rangers miss the playoffs would cause a decline in earnings.
- A slump in the Knicks and Rangers could decrease cable subscription.
- Lockouts are always a treat, even though the NHL just signed a long-term agreement with its players.
- The Knicks and Rangers are competing in a sport crowded sport city. They must compete with the NY Islanders (Brooklyn soon), the NY Yankees, the NY Mets, the Brooklyn Nets, and two NFL team.
- The Brooklyn Nets and the Barclays Center Brooklyn brings fresh competition.
- The crowd at the Garden is very corporate. A downturn in the economy and in corporate "discretionary spending" will have a negative impact on the team. Premium seats and boxes are very lucrative.
- The Dolan family, which controls Cablevision, still controls MSG via super-voting shares.
- Management shakeup, while sometime necessary, can create short-term chaos and uncertainties.
- Radio City's new Rockettes show, "Heart and Lights," was canceled less than a week before its opening. It will be delayed until at least 2015. It had an impact on earnings during the 3rd quarter.
- The Knicks are affected by the NBA luxury tax, the NHL has salaries on the rise and the NYR contributes to revenue sharing.
- The sale of the Clippers might wake the stock up. It's currently gaining the loss ground from last quarter.
- Free cash flow generation should increase since they completed the renovation of the MSG.
- MSG could initiate a dividend or a share buyback. A buyback should be more beneficial since I consider the stock to be undervalued.
- Take the company off the public market. This could happen through a takeover.
- MSG is a collection of assets that can be spun off, sold and monetized.
- A REIT or sale/leaseback of the MSG's real estates would unlock hidden value associated
- If a team such as the Rangers or the Knicks makes it to the finals and wins a championship, they will have a long lasting positive impact on the brand and will materialize in an increase in revenues
- The new Madison Square Garden arena is completed built to generate more revenues.
- A take private transaction at the right price would enhance the value of MSG. The Dolan family has tried in the past to take their company private (Cablevision).
- The superstar "effect" such as a Michael Jordan, Carmelo Anthony or even Jeremy Lin Linsanity" can have a great effect on the team.
- A new sports media right TV deal. Sports network competes with each other to secure programming. Market observers expect the NBA to double its rights fee from national media with new deals after the current national agreements with ESPN and Turner Sports expire in 2015.
Oprah, to summarize the research, my valuation indicates that a sum of the parts approach of the MSG Company is worth considerably more than today's price of ~$56.
The $1 billon renovation, the delay of the latest Rockettes show, the Knicks trouble, the Dolan family risk, and the many diverse assets have overshadowed the true market value of the MSG Company. MSG is a great way to participate in the rising sports rights and the rising value of sports teams.
As I have indicated above, there are many catalysts that could unlock MSG's stock. A combination of increasing free cash flow generation, a "new" renovated Garden, issuing a regular dividend, annoucement of share buybacks, a championship run, a new superstar, higher sports media right fees, extended labor peace, a growing international business, a buyout offer, a spin off of the real-estates or different segments, or a take private transaction could fuel the MSG Company upward.
Mrs. Winfrey, if you add up all the pieces, you have an enterprise value in the range of $6.4 billion to $7.5 billion. MSG Media is worth between $3.5 billion and $4.2 billion, represents more than half of the total enterprise value. If you add up the rest you basically get the rest of the company at a bargain.
The MSG Company is very under the radar. It's maybe a little bit misunderstood too. When I tell people about all the assets inside of it, they are generally surprised and also excited at the prospect of knowing they can own a tiny piece of a sport team (in this case two). Pretending that CNBC announced that the Knicks where for sale tomorrow, I'm pretty sure your billionaire friends will be making a lot of noises. Oprah, the reality is that the Knicks and MSG are a bargain, and you can buy it before the billionaire herd stars splashing their billions.
Disclosure: The author is long MSG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: As with all of my articles, the opinions are my own. You should do your homework and make your own best judgments about the company. (I know that this resembles the boilerplate disclosure that you see in every email that you get from your broker but I really mean this and I am not saying it to avoid getting sued.)