Comments on: Garber: Team Not For Sale

By: Chris

Chris — Wed, 15 Apr 2009 23:17:35 +0000

Hmm…you are right, wow I knew it was private but I didn’t know it was only owned by 2 people. Well, that does change things, but either way the comapny is still acoutable to the two of them, they might not care as much tho if it loses money if it builds thier empire.
Sucks…I was hoping for a sale.

By: Dave Martinez

Dave Martinez — Wed, 15 Apr 2009 19:19:24 +0000

Wow Doel – they arent publicly owned? Such a large organization?! Kudos to them . . . and Chris, that all WOULDA made alot of sense. That is some solice.

Good job boys.

By: Doel

Doel — Wed, 15 Apr 2009 18:00:12 +0000

RedBull is a private company. Own by two families. ROI is not that important as you pointed out.

By: Dave Martinez

Dave Martinez — Wed, 15 Apr 2009 16:00:47 +0000

Chris, well put.

Regarding your point “In my opion I think this investment has been a net loser for the Red Bull corporation, and by holding on at this point they are basically speculating that they might be able to make up for the losses in the future.”
- The speculation would be well founded. They must feel incredibily encouraged by what they see happening around the league, especially RSL, which couldnt draw a straight line let alone fans. Calculated risk, but if they are to sell, its a chance they would have to get to improve their ROI.

Great post Chris.

By: Chris

Chris — Wed, 15 Apr 2009 15:30:51 +0000

Ok here’s my take….you have to understand that unlike private investors who buy a club for the pure enjoyment of owning a franchise, corporations have an obligation to thier shareholders to make investments that get a good return. I’m a finance grad student so i’ll break this down.

We don’t really know how much Red Bull paid for the team (it paid $100 mil for the team and a slice of the stadium). But lets assume $30 of that $100 mil was for the club. That means that it paid $30 mil and has since lost probably close to another $30 mil (-$14 in 06, -$6 in 07, -$4.5 in 08, and probably another -$4 in 09). So the total investment by the club has been around $60 mil with no return in 4 years.

In order for Red Bull to get a respectable ROI at this point, say 8%, the value of the club would have to jump to $100 mil in the next five years. Which may be a stretch but isn’t that unrealistic if the new stadium explodeds.

Then you have to factor in the ROI that Red Bull is getting by selling more cans of energy drink. This number is impossible for us to calculate. But basically if they have made enough profit from selling extra cans of Red Bull as a direct result of marketing the team to make up for huge loss they have taken and also provide a decent ROI then it would be worth it to continue owning the club.

In my opion I think this investment has been a net loser for the Red Bull corporation, and by holding on at this point they are basically speculating that they might be able to make up for the losses in the future.

The next few years will be critical, because if they can’t get a decent ROI from all this money they invested, they will have an obligation to their shareholders to sell.