By Andrew Bary

Sports teams have been winning investments, but shares of Madison Square Garden Sports, the owner of the New York Knicks and Rangers, have languished. It may be time for the stock to shed its losing ways.

In March, a group of investors agreed to pay $6.1 billion for the Boston Celtics, a record price for a National Basketball Association team, only to see that surpassed by the $10 billion fetched for the Los Angeles Lakers. MSG Sports, however, trades at $215 a share, valuing the company at $5.2 billion plus $146 million of net debt, despite owning two of the most valuable professional basketball and hockey franchises.

Blame the "Dolan discount," a reference to CEO James Dolan and his family, who control the teams through supervoting shares. Dolan, 70, has said he would never sell the franchises.

While a sale would be the surest way to unlock the value of the assets, there are other ways to close the gap. The Dolan family could consider a partial sale of the Knicks or Rangers, splitting the teams into pure-play stocks, and even taking the company private. For long-suffering investors -- MSG Sports shares are down 5% this year and up just 40% over the past five -- any one of those steps could finally make the stock a winner.

"MSG Sports is one of the cheapest stocks relative to the value of its underlying assets," says Jon Boyar, president of the Boyar Value Group, who puts the company's intrinsic value at over $400 a share, or 86% more than its current stock price.

Unlocking value in sports teams generally involves a willingness to sell. For the most part, they are trophy assets that produce modest cash flow and only provide a big payoff to investors in a sale. MSG Sports doesn't offer what public-market investors like to see. It pays no regular dividend and doesn't repurchase stock. The company had weak results in its fiscal year ended in June, losing $22.6 million based on generally accepted accounting principles. Its preferred measure, adjusted operating income, fell 78% to $38 million.

Results were depressed by higher team salaries, a $39 million NBA luxury tax payment, and a reduction in media rights paid by MSG Networks as part of a debt restructuring agreement worked out by the regional sports network that carries Knicks and Rangers games.

Conditions should improve in the current year. MSG Sports will benefit from the NBA's lucrative new TV deal with ESPN and other broadcasters that begins in the coming season, and could see its revenue get a $100 million annual boost. Still, that's not the kind of growth that tends to get investors excited.

A sale would. Media mogul John Malone controls the other major public sports franchise, Atlanta Braves Holdings, whose shares, at $42, trade at a narrower discount to estimated asset value than MSG Sports because of speculation that Malone, 84, may agree to a sale. An actual sale of the company, which owns a real estate business around the Braves' ballpark, could net $55 a share or more. Malone has a different attitude than James Dolan, saying "the store is always open" -- meaning his assets are for sale at a price.

MSG Sports trades for less than half the estimated value of its two teams. Its current enterprise value of $5.3 billion compares with Forbes' annual valuation estimate from last year of $11 billion -- $7.5 billion for the Knicks and $3.5 billion for the Rangers. The Forbes estimate looks low given the sale of the Lakers. The Knicks probably are worth as much given their position in the country's largest market.

Dolan appears to have no interest in selling. "The Knicks, the Rangers, the Garden: These are one-of-a-kind assets. My hope is that my kids grow up and take my place, just like I did with my dad," James Dolan, whose father bought the teams more than 30 years ago, said in a March podcast interview with Knicks stars Jalen Brunson and Josh Hart. The MSG Sports board is stacked with Dolans, including Dolan's son, Quentin, 30.

There are other options to unlock value. Citigroup analyst Steven Sheeckutz recently began coverage of the company with a Buy rating and a $285 price target, up 33% from Thursday's close. He wrote that the stock looked undervalued and that he saw "scope" for the gap "to close, driven by favorable private-market trends and a potential minority interest sale of either the Knicks or Rangers."

That scenario isn't far-fetched. Jamaal Lesane, MSG Sports' chief operating officer, said on the August earnings conference call that the company doesn't think its value is "appropriately reflected in our current stock price," adding, "We would never rule out the possibility of a minority stake sale."

There are other possibilities. In a letter to James Dolan in June, Boyar wrote that the Knicks and Rangers should be separated into independent companies. "We believe that stand-alone entities...would trade at a material premium to MSG's current valuation."

A tax-law change could make going private more alluring. Currently, the top five executive salaries -- including players -- can be deducted by a public company. Beginning in 2027, such companies won't be able to deduct compensation of $1 million or more to any "covered" employee. This will mean that compensation to the five highest paid players -- likely Knicks -- will no longer be deductible. The five highest-paid Knicks now earn an estimated $150 million or more. Privately held teams wouldn't face such a penalty.

"This is a major blow to MSG and certainly argues for taking the teams private as soon as possible," says New York tax expert Robert Willens.

On the August conference call, Chief Financial Officer Victoria Mink said MSG Sports is "assessing the impact" of the tax change.

Few companies have as many levers to pull to reward shareholders, and the stock's downside seems limited given the discount to asset value. The big risk appears to be time, if the Dolans take no shareholder-friendly actions. Even with the Dolans in control, MSG Sports is the best buy in the sports world.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 19, 2025 12:58 ET (16:58 GMT)

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