What's behind Liberty Media's spinoff of the Braves?

Dec. 16—After last month's announcement that the Atlanta Braves will soon become their own publicly traded company, team officials were quick to say little will change, baseball-wise.

"From our perspective, from a Braves' team perspective, it's business as usual," President and CEO Derek Schiller told investors at a Nov. 17 meeting.

Braves Chairman Terry McGuirk echoed that sentiment in a letter to workers for the Braves and the Battery Atlanta.

"For the most part, nothing will change in how the Atlanta Braves and The Battery Atlanta will operate every day," McGuirk wrote. "My role as the 'Control Person' of the Braves franchise under MLB rules and our executive management structure will remain the same."

But business-wise, the Braves' financial separation from owner Liberty Media, announced on Nov. 17, could have significant implications down the road.

The Braves are currently traded as a "tracking stock" — a subset of Liberty Media that's still tied to the firm's overall performance, but represents one of its subsidiaries. Pending approval by shareholders and Major League Baseball, the Braves will become a fully separate entity within the next six to eight months, executives have said.

Fans and financiers alike will then be able to purchase a stake in the team.

Liberty CEO Greg Maffei has said repeatedly the impetus for the spinoff comes from a desire to showcase the Braves' value independent of Liberty as a whole. The stock will represent not only the team and its assets, but the Battery Atlanta and the Braves Development Company, the latter of which manages the team's real estate holdings.

The announcement itself came two weeks after Breach Inlet Capital, a South Carolina-based investment firm that counts itself among the Braves' top 25 shareholders, called for a spinoff of the stock. In an open letter to Liberty's board, the firm argued the Braves' tracking stock was trading at about 60% less than its true value.

The letter pointed to the Braves' continued success, and argued the team is relatively undervalued compared to other major sports franchises.

Breach Inlet Capital founder Chris Colvin speculated the Braves' undervaluation was due to Liberty's "confusing and convoluted structure," referring to Liberty's ownership of Formula 1 racing, Sirius XM, and other media empires. In other words, the Braves' true value isn't apparent because it's tied up in Liberty's many and varied financial holdings.

Indeed, all indicators point to the Braves — just a year off their World Series championship — being a moneymaking machine.

In filings submitted to the Securities and Exchange Commission (SEC) Sept. 30, the Braves and the Battery reported some $535 million in revenue through the first three quarters of 2022, up from $466 million at the same point in 2021.

On Nov. 4, the team reported 42 sellout crowds and 3.2 million tickets sold, the highest ticket sales since 2000. The Braves ranked fourth in attendance this year among their peers in the MLB.

Comments from Maffei, meanwhile, have led to speculation the stock spinoff is the first move toward an eventual sale of the team by Liberty. Maffei told CNBC that among the benefits of the split would be the option to "create future flexibility for any kind of transaction we might want."

The Braves declined an interview request for this story, providing a statement which reiterated, "we will operate our team and this business in the same way." But Tom Smith, an economics professors at Emory University's Goizueta Business School, suggested the rumors may have some legs.

"The implication is that it's separated from your other holdings, and now you are signaling that you're going to sell the Braves outright to a group of investors," Smith said.

"The time to sell a sports team is when the value of a sports team is really high, and the time to sell any particular sports team is when ... you think you can get the highest value for that team," he added. "And so the Braves (are) coming out two years off of a championship. They've got a beautiful stadium and a beautiful stadium complex. People like the team, it's a young team ... What better time to test the market than when the organization is doing well?"

And as Maffei, Smith, and Colvin all alluded to, sports teams are a hot commodity among the jet set, and remain persistently scarce.

"Among baseball teams, Baltimore and Washington are rumored to be contemplating a sale. We'd argue, I think with some reasons, that the Braves are a far more attractive asset," Maffei told investors at the Nov. 17 meeting, according to the Hollywood Reporter.

Smith speculated a future sale might look very appealing to a billionaire who otherwise has it all.

"This is one of those sort of feathers in your cap, if you will. If you're a tech billionaire, and you have money and power and prestige ... this is one of the things that you might want, right?" Smith told the MDJ. "...Once you have everything else, what do you need after that? You need a sports team."