Why I Avoid The Braves, But You May Like The Stock

| About: Liberty Braves (BATRA)

Summary

BATRA, the Atlanta Braves' tracking stock, has lost half its value in just two days of trading.

Even at that, the value of the club Liberty Media bought for $500 million is $800 million.

The extra value is courtesy of local taxpayers, who were scalped.

Atlanta, specifically the suburban taxpayers of Cobb County, have been taken to the cleaners by entertainment conglomerate Liberty Media (NASDAQ:LMCA) of Colorado.

If I didn't live in Atlanta, I'd be applauding.

What the media is talking about is the fact that the IPO of the Atlanta Braves' (BATRA) new tracking stock was a disaster for those foolish enough to buy in early. After going out at $36/share, almost half of that valuation had been lost within two days, with the most recent trade being at $18.25.

The team's value by the end of Tuesday trading will probably be about $800 million, well below the $1.175 billion Forbes said the team was worth last week, or the $1.5 billion value on the IPO.

Even with the haircut, don't shed any tears for Liberty Media or CEO John Malone. They are doing fine.

Liberty Media got the Braves in 2007 for 68.5 million shares of Time Warner (NYSE:TWX) stock, then worth about $21.50/share, which got Malone out of the Time Warner boardroom. That $1.5 billion included $980 million in cash and a unit of Time Warner called Leisure Arts, so the actual price Liberty paid for the club was closer to $500 million. (True fact. The club's name was given to it in Boston, a century ago, when that club was bought by New York investors close to Tammany Hall.)

Liberty next demanded "parity" between its baseball club and the local NFL team, the Atlanta Falcons, including a taxpayer funded rail link to the nearest transit stadium, various improvements to the 12-year-old former Atlanta Olympics stadium, and control over more of the surrounding neighborhood it had already turned into parking lots.

The timing was exquisite. Exquisitely bad. Home prices were already rising around Turner Field, thanks in part to the growth of nearby Georgia State University, now the state's largest in terms of student population. (I expect the stadium to eventually become the home of GSU football, and the older footprint of Atlanta Fulton County Stadium to become a small baseball park, with the rest of the land becoming classrooms and office buildings.) The Atlanta hotel motel tax, which had always been used as a sort of "slush fund" for new stadia, would be tapped out by the Falcons' new deal (Mercedes Benz Stadium opens next year, with a retractable roof and a pitch for a new soccer team).

So the Braves turned to politics. The excuse was that the team's fans mostly lived in northern suburbs, but I live here, and make no mistake. In Cobb County, Atlanta still means poverty, and mass transit systems like MARTA have never been accepted there.

Cobb's slogan is "low on taxes, big on business" but that's going to change with the deal, which was deliberately negotiated in secret. The county's taxpayers forked over $300 million, funded by new hotel-motel taxes, a new rental car tax, and $8.67 million/year in "relocated" school taxes, among other goodies. The team was also able to get 80 acres of undeveloped land next to the park for $50 million the next year.

Think that's all? No, it's not. The state government is rebuilding the nearest freeway intersection, where I-285 meets I-75, burying the cost in a $834 million toll road project that might not be necessary but for the additional traffic created by the Stadium's need to get 40,000 cars in-and-out of it for each game. (Tollroadnews estimates the interchange itself will cost $240 million.)

The irony here is that land values around the old stadium continue to increase, while those near the new Stadium have barely returned to 2007 levels. While clubs around the country are moving back into central cities, the Braves are abandoning theirs. Demographics are changing, urban centers being advantaged over the areas around suburban malls, and the new stadium actually has fewer seats than the old one.

What Liberty hopes is that by putting the Braves onto the public market they can scare up a buyer, and even at $800 million, you're still looking at a profit of $300 million for a little financial and political manipulation, that only split wide-open the racial divide that still haunts the "Capital of the New South." More likely, given the rarity of baseball clubs, they will find some suburban billionaire willing to give them something close to the $1.175 billion figure Forbes had, even the $1.5 billion the club was supposedly worth at its IPO.

If you're a speculator, buy the stock.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.