A number of team owners around the NBA are feeling the financial effects of the coronavirus pandemic, as Brian Windhorst of ESPN.com writes. Rockets owner Tilman Fertitta, for instance, has seen business fall off precipitously at his restaurants, hotels, and casinos, while Heat owner Micky Arison has had to temporarily shut down his Carnival Cruise Lines.
While some team owners have been hit harder than others by the effects of COVID-19, there’s an expectation that the pandemic will have a league-wide impact on spending this offseason, as Windhorst writes. Some teams may have to make difficult financial decisions that could result in unexpected player movement.
“With few exceptions, no one wants to make long-term commitments right now,” one general manager told ESPN. “You can already feel it coming.”
In addition to the teams that may feel pressure to dump pricey contracts or avoid expensive free agent commitments, some clubs may face financial constraints in the draft. Although selling second-round draft picks remains fairly common, no NBA team has sold a first-round pick since the Nuggets did so with the No. 27 selection in the 2013 draft, according to Windhorst. Some people around the league believe that teams will consider the possibility again in 2020.
“I suspect first-round picks will be for sale in this draft,” a team executive said. “We haven’t really seen that in a decade.”
Here are a few more noteworthy details and quotes from Windhorst’s examination of NBA teams’ finances:
- Warriors owner Joe Lacob has told his fellow owners that he’s exploring a deal with Goldman Sachs to raise up to $250MM to manage expenses, per Windhorst. Sources tell ESPN that other team owners are considering ways to raise capital as well, with some – including the Rockets – pursuing legal action against companies that have denied coronavirus-related insurance claims.
- Rockets owner Tilman Fertitta recently took out a $300MM loan and is more leveraged than many other owners, since he purchased the franchise fairly recently, but he continues to insist he’s not looking to sell any shares in the team. Brokers who have approached him representing potential bidders have been told the same, reports Windhorst.
- Nets owner Joseph Tsai recently sold about 25% of his shares in tech company Alibaba, according to Windhorst. Other owners might not have similar opportunities to raise capital. “I don’t know what will happen, but I may lose $50MM next season,” one owner told Windhorst. “If that happens, I have three options: I could borrow the money, I could sell part of the team or I could do a cash call and me and my partners would have to write checks.”
- NBA rules allow team owners to borrow $325MM against the equity in their franchises. A majority of NBA teams – including the Warriors – have maxed out that credit, sources tell Windhorst.
- Although the Buss family’s pockets aren’t as deep as some of their fellow owners, the Lakers bring in about $200MM annually from their local TV deal and aren’t expected to have any issues re-signing Anthony Davis, writes Windhorst.
This is going to suck for the small-market teams that don’t have quite the capital the big Market teams do. Teams like the Milwaukee Bucks for instance….
Yup. As soon as the season was halted in March, I said it felt like COVID-19 basically costed Milwaukee, Giannis.
His supermax is somewhere in the neighborhood of $253M/5y; I don’t know how they offer that…but they might find a way.
If the cap goes down [When we learn the new cap number], it’ll assuredly cost Giannis a boatload of coin. At that point, if you’re Giannis, and the Bucks didn’t offer a supermax…do you re-sign next summer for what’s essentially less, or do you do a shorter deal to wait out the cap situation — and if you do that, is it in Milwaukee? Do you chip-chase on a “super team”, while waiting out the cap, then go get a sizable max deal (since the supermax is essentially gone)
They gotta be uneasy out there in WI.
You bring up a good point. It might be a season or 2 or maybe even 3 where guys do the 5 year deal with the one-year opt out. Whatever is legal to do.. I know a lot of guys did the two-year deal with one-year opt out. That’s probably the way to go, as you say, to wait out this whole thing till the cap rises again.
Or.. this could be our world now. Even though times are tight a player may say, “hey I’ll take the five year guarantee even though it’s half what it was a few years ago.” I remember at work when things got tight in 06, we were sad because the Go-Go 90s were gone. Paid for lunches and business trips and Cocktails and other things on the company card. Perhaps like today’s NBA players, we were saying, those were the days.
You guys worried too much.
Bucks big 4 total salary is $105 million assuming that Giannis starts at $40 million
The rest players would be minimum at total 15 million.
Or Brook Lopez to Warriors for TE.
Supermax deals are enormous. So, if you’re Giannis and the Bucks do not offer the $253M/5 (that’s his supermax #), do you play out the 20-21 season and sign 5-years starting at 30% of whatever the lower cap is next season, or do you sign shorter deals until the cap rebounds to get 30% of the higher cap?
If your answer is the second scenario, then the question becomes, does Giannis take that shorter deal with the Bucks using his Bird Rights, or does he go to a ready-made situation like Miami, with additional stars?
That’s my point. Has nothing to do with fitting anything into the cap. Milwaukee is a small-market team. We saw another small-market team give their superstar a supermax during the financial boon in Westy, and even he was moved pre-covid. No guarantee Milwaukee has an appetite for $253M over 5 years. They hold those card this offseason.
If they do, it’d be cool to see Giannis play out his career in mainly one place. But there’s no guarantee of that
1. Sign Giannis for whatever the CBA says
2. Deal with it… everyone has the same cap
3. recruit ring-chasers
So the Warriors and Bucks have nothing to worry about when it comes to their own salary cap, but everyone else has to find a way to get under the luxury tax threshold?
And players aren’t traded to other teams for a trade exception, that’s not how it works. Teams use a trade exception to take on salary in a trade without having to send out a matching amount. The Bucks could trade Lopez to the Warriors, but they would still want something in return, like a first round pick for instance.
Anthony Davis was never gonna leave the team who tried so hard to get to after just one season to go to the Knicks lol or bulls lol ! Those teams need to get out of their own way first !
He made a promise to the team to stay at least one more year. (Shhh, behind closed doors.)
Anthony Davis will sign a 1+1 deal after the season. Then he will see how bad things get in LA during the 2020-21 season and bail.
And it still won’t be to the hapless Knicks or bulls lol
AD might be the heats fallback option when Giannis tells him no but every star free agent In 2021 is Gonna do like Star free agents all the years prior and not even give Knicks the time of day ! Knicks are in a long term rebuild that if they are lucky players will look at In four to five years !
I think this is kind of overblown… especially in the NBA for the most part every team spends approximately the salary cap amount (or over) it’s not like teams are going to cut salaries so drastically that they’re going to be significantly below the salary cap… so therefor guys will still get signed etc. — the only actual thing that might be noticed is if/when the salary cap amount is adjusted down/not increased as expected because of the lost revenue this season. otherwise things will more or less be “normal” — maybe in baseball… where teams can actually spend less and less to save $ (no salary cap system) players won’t be signing for as much/as long but I just don’t see it in the NBA
100% agree.
The top level free agents, like Davis and Giannis, will get paid. They won’t feel a thing. Teams won’t suddenly start trading off every thing of value that’s not nailed down, either. You still have to meet the salary floor.
I think the only difference we may see is that the small and mid-market teams may be reluctant to go long years on the second tier free agents because this class isn’t particularly strong.
If I were new owner of Wolves, I would trade the first round pick to Knicks for money.
In my opinion, LaMelo Ball market price is $80 million
If 1st round picks are sold, then it will be at the bottom of the 1st round. Not the top. Nobody is giving up a valuable pick for 6 mm or so.
Giannis’ offer is not going to be affected. Many reasons. First, because his free and clear market value is still greater than his salary under the super max. Second, because the current “crisis” is a short term cash flow crises, not a longer term one (which would be reconciled with the cap in any event), and his extension doesn’t kick in until the year after next.