Why Donald Sterling Might Win in the Sale of the Clippers
Think Donald Sterling is appropriately being punished by being forced to sell the L.A. Clippers? Troublingly, it turns out this may actually be a good thing for him.
The demand of the league
It isn't worth rehashing the awful remarks that brought Sterling into this mess. And it should come as no surprise ESPN reported he was going to fight the demands of the NBA "to the bloody end," and would do all he could to ensure his Clippers weren't sold.
What is regrettably lost in all of this is Sterling might be the big winner as a result of his disgusting remarks.
The troubling truth
Consider the reality that there is only one Clippers team.
When supply is fixed at one, the price is only determined by demand. It's a straight line, and it will only get sold for what people are willing to pay for it.
And in the case of Donald Sterling, that may be exactly what is happening. With the widespread media attention surrounding the controversy, it's not difficult to imagine some of the possible groups interested in buying the Clippers are those who would've never considered it otherwise. Perhaps their thought to buy the Clippers was driven solely by the fact it's such a well-known sale.
After all, it was just last month when the Milwaukee Bucks were sold for $550 million, and Sports Illustrated said, "The sale of the team concludes a quiet, extended process carried out with specific ends in mind."
And while there would undoubtedly be more demand for the Clippers than the Bucks under normal circumstances, a "quiet" and "extended process" is the exact opposite of what the sale of the Clippers will ultimately be.
ESPN said today there are "at least six serious groups" who've approached Sterling's wife to buy the team already. And last week it also reported "the number of bidders for the Clippers is expected to stray well into double digits," provided the league is able to "force the sale of the team."
So does that mean demand will double? While we cannot say for certain, we do know the sale is expected to top $1 billion. But it was just this January when Forbes pegged the value of the Clippers at "just" $575 million. With the demand on the rise, and the supply fixed at one, the price is apparently only moving up. Meaning Sterling will only get more from the sale.
The surprising bright spot
To think a deplorable man like Sterling could actually benefit by getting a higher price than he would otherwise as a result of the attention devoted to him is somewhat defeating. Yet there is one lone bright spot.
Sterling's remarks note:
On top of that punishment, forcing a sale rather than allowing the team to pass by succession to the remaining spouse or heirs would trigger an avoidable capital gains tax estimated to be more than $300 million to $500 million.
If the price rises, it means Sterling will end up having to pay more in taxes. And while we may all think what we will about taxes, it turns out this may be one instance where the taxes appropriately make all Americans -- but one -- a little richer.
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The article Why Donald Sterling Might Win in the Sale of the Clippers originally appeared on Fool.com.Patrick Morris has no position in any stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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