An Open Letter to James Dolan
We believe the time has come to separate the Knicks and Rangers into independently traded companies—a move that we believe would unlock billions in value for shareholders.
Dear Mr. Dolan,
We are shareholders of Madison Square Garden Sports Corp. (MSGS) and have followed the company since its spin-out from Cablevision, covering it extensively in our institutional research publication, Boyar Research.
Despite owning two of the most iconic franchises in professional sports—the New York Knicks and the New York Rangers—MSGS continues to trade at a steep discount to the underlying value of its assets.
We believe the time has come to separate the Knicks and Rangers into independently traded companies—a move that we believe would unlock billions in value for shareholders.
Valuation Disconnect
The Knicks and Rangers are quintessential trophy assets. According to Forbes, the Knicks are valued at $7.5 billion and the Rangers at $3.5 billion. Yet MSG Sports trades at an enterprise value of just $5 billion—a nearly $6 billion shortfall. And that gap may understate the true disparity. With the Los Angeles Lakers reportedly selling for $10 billion (a 41% premium to the prevailing Forbes value), Forbes’ valuation for the Knicks now appears conservative.
Moreover, nearly every recent professional sports franchise transaction has occurred at a meaningful premium to Forbes’ estimates (for example the recent ~$7.3 billion blended valuation that the Boston Celtics are commanding is a 22% premium to the prevailing Forbes value).
This valuation disconnect is not lost on MSGS management. MSGS executives have repeatedly acknowledged this valuation gap, as illustrated in remarks from former executives Andrew Lustgarten and David Hopkinson:
There have been transactions for minority stakes with no public market liquidity involving the Los Angeles Lakers and the Golden State Warriors that according to press reports reflect team valuations of $5 billion and above. This is an interesting comparison to the current enterprise value of just over $4 billion for our company.
– Andrew Lustgarten, August 19, 2021
Since we last spoke, there have been additional transactions which demonstrate the continued demand that exist for professional sports teams. They include a private equity firm reportedly increasing its illiquid minority investment in the Golden State Warriors, at a valuation of above $5 billion, and the majority stake sale of the Pittsburgh Penguins, at a reported valuation of approximately $900 million.
Closer to home in December, Sportico published a ranking of NBA team valuations, with the Knicks leading the league at $6.1 billion, according to their list. That same month, Forbes updated its NHL team valuations, with the Rangers retaining the top spot while also becoming the publication’s first NHL franchise valued at $2 billion. As we pointed out in the past, these estimated team valuations continue to significantly exceed our current enterprise value…
Andrew Lustgarten, MSGS’s then president and CEO, February 3, 2022
We continue to be as confident as ever in the value of our teams. They are incredibly scarce assets with strong business fundamentals, as we just talked about, and significant opportunities for long-term growth, which we don’t think is appropriately reflected in our current stock price.
– David Hopkinson, August 17, 2023
Despite acknowledging the gap—and investor demand for sports franchises—management has taken no meaningful steps to address the disconnect. For years, shareholders have watched the value of these iconic franchises rise steadily while MSG Sports’ stock price has floundered. The persistent gap between private market values and public market pricing is no longer just a missed opportunity—it’s a failure to act in the best interest of shareholders.
A Simple Fix: Unlocking Billions in Hidden Value
At a minimum, we believe MSG Sports should separate the Knicks and Rangers into two independently traded public companies.
This would accomplish two critical objectives:
1. Close the Valuation Gap:
Today, MSG Sports trades at a ~$5 billion EV—yet the Knicks alone are valued at $7.5 billion. That implies the public market is assigning no value whatsoever to the Rangers and significantly underpricing the Knicks. We believe standalone entities would moderate this mispricing and the separated entities would trade at a material premium to MSGS’s current valuation.
2. Enable Tax-Efficient Monetization:
A direct sale of either team today could trigger significant corporate taxes. A spinout structure—especially under IRS Section 355—could allow future monetization in a far more tax-efficient manner. Furthermore, an investor interested in one team may have no interest in the other—a separation would resolve this.
This approach isn’t unfamiliar to you. The Dolan family has a long history of using spinoffs to unlock shareholder value—from Cablevision’s original spin of MSG, to MSG’s spin of MSG Sports and the Sphere separating from Madison Square Garden Entertainment.
All value-enhancing options should remain on the table—including the sale of the entire company or a partial stake to a sovereign wealth fund or private equity investor, with proceeds used to repurchase shares at highly discounted prices. We currently estimate that MSGS is trading at a 54% discount to its private market value (as of the June 18th close). But if a sale is not on the table, a spinout offers significant upside with minimal downside.
We respectfully urge you and the board to seriously consider this path. We would welcome the opportunity to discuss these ideas with you further.
Sincerely
Jonathan Boyar
President of The Boyar Value Group