Question:
At the time of this question, the Atlanta Braves baseball team is one of the "only" publicly traded teams. At the beginning of the season, their stock price was about $29. Right now, they are one game away from going to the World Series and their stock price has dropped to $26. When a baseball team goes to the playoffs, they receive more revenue in ticket sales, concession and so forth. The Texas Rangers generate about $13,000 a night in sales tax alone for the city of Arlington when it packs the stadium. THAT IS JUST SALES TAX! So when a team goes to the playoffs, their pocketbooks get bolstered. So why did their stock go down in price, since the team obviously has more liquid assets in their accounts and they get placed in a better position for next year's trades?Answer:
Interesting question. The Braves defeated the Dodgers on Oct. 20 (2021) to take a 3-1 game lead in the National League Championship Series and are now just one game away from the World Series. Liberty Media Corporation is an American mass media company that has three divisions, reflecting the company's ownership stakes in Formula One, SiriusXM, and the Atlanta Braves. The company's stock went from $27+ on Oct. 20 to $29+ on Oct. 21.
For one thing, the change in the company's stock price depends on the beginning and ending dates used. The most recent change could reflect a Liberty Media 'possible World Series' effect, but it could also reflect not just what is happening to the Braves, but also what is happening in their other divisions. A majority of future World Series ticket sales, if the Braves get there, will have to be shared with the Major League Baseball Commissioner's office, MLB players, and the other team. Thus, such additional sales are likely not a major stock price 'mover.'
As the questioner noted, success on the field can lead to greater demand for tickets and other revenue streams within a stadium and also increase the value of broadcast rights and sponsorships. If a team does not have a long history of success or fan enthusiasm, the World Series win can be impactful. In the case of the Braves, they have had a run of playoff success before so they should already have much fan support. The team will generally sell more tickets and have greater demand for sponsorships in the near term. Teams that have expiring broadcast agreements may be able to leverage this timing into more favorable terms. So essentially it comes down to timing. Teams with a long history of high attendance and strong demand may see only a marginal impact on franchise value, but teams that are building success and leveraging this success into increased demand for their product can see a significant impact on franchise value. Teams in larger markets may be able to magnify this even more as higher levels of corporate support and disposable income can help to turn this increased demand to even higher levels of revenue.
The Chicago Cubs won the World Series in 2016 for the first time in 106 years. Forbes' valuation of the Cubs went from $1.8 bil in 2015 to $2.2 bil in 2016 (+22%) before the team won the World Series. Forbes' valuation of the Cubs went to $2.68 bil in 2017 (+22%) the year after their epic World Series win. Given the team value increased the same (% basis) the year before winning the World Series and the year after winning the World Series suggests winning a World Series may not be the most significant factor in determining a team's value (and stock price if publicly traded).
