Alibaba’s co-founder prefers New York to Houston. This was one reason Joseph Tsai bought a 49 per cent stake in the Brooklyn Nets for $1bn two years ago. Now he is nearing a deal to buy the rest for a total price of $2.3bn, according to a Reuters report. That would give the National Basketball Association team a record valuation among US sports sides.
For the second-largest shareholder of the Chinese e-commerce giant, an NBA team would not be just a trophy asset. Ownership of a high-profile US sports franchise should improve the image of Alibaba during tense times between the US and China.
The mooted $2.3bn all-in price tag is more than seven times what current owner Russian billionaire Mikhail Prokhorov paid in 2010. The recent signing of NBA All-Star players Kyrie Irving and Kevin Durant should increase ticket sales. Mr Tsai, a board member of NBA China, would no doubt find ways to grow team revenues in Asia.
Apart from the joys of the game, Alibaba stands to benefit from raised US brand awareness. It has invested aggressively to expand its core e-commerce business outside China, but has yet to gain international recognition.
Alibaba’s core e-commerce business, over 80 per cent of total revenue, is largely immune from the US-China trade war. It is the biggest company in cloud computing in China. But New-York-listed shares are down 16 per cent from their May peak. They trade at 24 times forward earnings, well below their three-year average.
Domestic e-commerce sales growth is slowing. Many of Alibaba’s rapidly growing businesses, including cloud computing and entertainment, have yet to turn a profit.
China’s growing animosity towards Hong Kong may derail Alibaba’s planned September listing there. A large chunk of the $20bn it hopes to raise relies on funds from mainland China. Foreign investor sentiment and confidence in the Asian financial hub has been worn down.
Philosopher Noam Chomsky thought sports distracted the masses from the machinations of the powerful. But any deal that fosters east-west bonhomie over some high-grade hoop shooting should be welcomed.