Brooklyn Nets Jay-Z Cut
Reading time: 3 – 4 minutes
I was in the barbershop the other day when me and this young barber got into it. As usual my boy runs the barbershop so I wasn’t sweating it but when it comes to talk about money I can’t help myself. So young homie was looking at me funny like I didn’t know what I was talking about. I told him Jay-z probably owned like 1 or 2% and really doesn’t own the franchise. I told him it’s like a spokesperson deal same as Magic with the Lakers and Usher with the Cavaliers. They pay to have celebrities attached to their franchise to make that pop audience come in.
I told young homie to go look up the owner and he’ll find out the Russian cat has super deep pockets on some owning steel factories in Russia. I said now that cat has the real dough. But, you know in typical I don’t understand money way he said he wanted to bet on it. Now I’m all for taking a cats money but I had to pass as youngin would get his feelings hurt. Then since we are all from different gang neighborhoods it’s bound to get ugly sooner or later. So I had to play the role of being a grownup and declined the EASY CHIP$!
So for those of you who don’t know here’s the deal!
The nature of Jay-Z’s stake in the Nets was never officially disclosed, but New York newspapers did their requisite digging. The Daily News reported that Jay-Z invested $1 million in the team, while the Post pegged his holdings at 1.5 percent (based on FORBES’ valuations of the team, such a stake would have been worth about $4.2 million in 2005 and worth about $4.6 million today). Though the two reports seem to contradict each other at first glance, they both make sense under the scenario that Jay-Z invested $1 million and received a 1.5 percent stake, demanding a deep discount on his purchase because he knew that the Nets wanted an A-list star in their court.
Publicly, Jay-Z is quick to point out that he paid for his stake. “Nobody gave me anything,” he declared in 2005. “I spent my money like everyone else, and I came in and added value.” But just because he spent money doesn’t mean he didn’t get a hefty discount. Celebrities often receive sweetheart deals when buying stakes in professional sports teams, and Jay-Z isn’t one to pass on such freebies.
In any case, Jay-Z wasn’t getting only a discounted rate. He was getting a discounted rate on an asset that was sure to dramatically increase in value with the team slated to move from the Prudential Center in Newark to the Barclays Center in Brooklyn (now scheduled for a 2012 debut). Here at FORBES, we estimate that if the Nets can field a competitive squad — looking more likely following the team’s trade for star point guard Deron Williams — the team’s value could approach $500 million in Brooklyn, nearly twice what the team was worth in New Jersey.
When Jay-Z first bought into the Nets, he undoubtedly realized the favorable math: Assuming that he indeed paid $1 million for an investment already worth $4.2 million, his deal with the Nets virtually guaranteed an eight-fold return.