Robert Pera, majority owner of the Memphis Grizzlies, apparently has a tough decision on his hands.
According to The Athletic’s Jon Krawczynski, minority team owners Steve Kaplan and Daniel Strausthe exercised a clause that requires the 39-year-old tech mogul to choose between buying them out or selling back his own stake in the franchise. The entire piece from Krawczynski is loaded with valuable intel, and you should definitely check out the whole thing, but here’s the headline-making news:
A buy-sell provision in the ownership agreement between Pera and minority owners Steve Kaplan and Daniel Straus was exercised last week, sources told The Athletic. Both minority owners had the right to invoke the clause starting in late October, which allows one or both of them to set a new valuation for the franchise that sold for $377 million in 2012.
Pera, who is being represented by CAA in the process, will have to decide whether to buy out Kaplan and/or Straus to keep control of the team or sell his shares at the set price and remove himself from the ownership group.
The clause in the agreement, which was first reported by ESPN, was born of Pera’s tenuous acquisition of the team from previous owner Michael Heisley in 2012. During that process, the value of Pera’s technology company, Ubiquiti Networks, took a sharp plunge, forcing him to bring on Kaplan and Straus as partners with 13.5 percent equity and give a number of owners with Memphis ties, including Peyton Manning and Justin Timberlake, smaller pieces of the pie to be able to close the deal.
Krawczynski doesn’t get too much into what Pera will actually do. He does, however, note that Pera is an absentee owner. Though Marc Gasol claims to have a close relationship with him, not everyone is sold on his interest or commitment to the organization.
Speaking of Gasol, this development breaks ground just as people are trying to figure out whether he had a hand in the firing of head coach David Fizdale. Gasol claims that he didn’t, but the two had barely been talking to one another for almost a year, an issue that no doubt factored into Memphis’ train of thought while contemplating Fizdale’s fate.
But back to Pera.
It’ll be interesting to see what he decides. The values of NBA teams have skyrocketed. The Los Angeles Clippers and Houston Rockets have each recently sold for $2 billion or more apiece. Pera could cash out now, striking while the iron’s the hottest it has ever been.
At the same time, it could be difficult for him to get a favorable evaluation of the franchise’s worth right now—relative to the rest of the league’s teams, that is. Not only do the Grizzlies play in a small market, but they don’t have a permanent head coach in place. They’re also in danger of missing the playoffs for the first time since 2010, and they have Gasol, Mike Conley and Chandler Parsons on the books making a combined $74-plus million per year through 2019-20—assuming Gasol doesn’t opt out of his contract before that season.
Mix in the first-round pick they owe to the Boston Celtics in 2019 (via the Clippers), and the timing to sell this team doesn’t seem ideal. And while that might suggest Pera should sit on his asset, we must remember he’s essentially doubling down by buying out Kaplan and Strausthe. If he senses the Grizzlies are nearing a rebuild that could damage their value over a protracted term, he might elect to get out anyway.
Like I said, this stuff is truly fascinating—a quintessential additive to the Grizzlies’ devolution from billboard for stability to harbinger of constant unrest.