Andrew Bary

Madison Square Garden Sports stock is up 7% Friday as the reported sale of a majority stake in basketball's Los Angeles Lakers highlights the depressed value of the company's shares.

There could be more upside in MSG Sports stock since the company continues to be valued at a deep discount to widely reported L.A. Lakers valuation of $10 billion, a new high for a National Basketball Association team.

Shares of MSG Sports, which owns the New York Knicks and New York Rangers, are up 6.7% at $204.01 in Friday afternoon trading. But the stock remains below a 52-week high of $238 set in December. The company now is valued at about $5 billion -- and there also is around $200 million of net debt.

The NBA's Knicks were valued at $7.5 billion in the latest Forbes estimate, and the NHL's Rangers at $3.5 billion by Forbes. That's a combined $11 billion, or more than double the current MSG Sports market value.

"MSG Sports is one of the cheapest stocks relative to the value of its assets in the stock market," says Jon Boyar, president of the Boyar Value Group. His firm values the company at more than $400 per share.

Barron's has written favorably on MSG Sports, including in March when the Boston Celtics were sold for more than $6 billion.

Boyar tells Barron's that the Lakers are comparable to the Knicks because the L.A. team plays in the country's second-biggest market behind New York, and both are glamour teams with strong fan bases. Neither owns its own stadium. The Knicks and Rangers play in Madison Square Garden, which is owned by Madison Square Garden Entertainment. Boyar's view is that the Knicks are worth at least as much as the Lakers.

So why does MSG Sports trade so cheaply relative to its estimated asset value? Call it the "Dolan discount." This refers to New York's Dolan family which controls the company through supervoting stock.

The Dolan family, led by MSG Sports CEO and Chairman James Dolan, has been unwilling to sell the entire company, or part with either one of the two teams. The company has considered a partial sale of one of the teams, but hasn't acted yet.

The Knicks and Rangers are marquee trophy assets, but like many in pro sports, they don't produce much income. Their full value probably will only be recognized in a sale, and the Dolans have been unwilling to consider that. During the first three quarters of the company's fiscal year ending in June, MSG Sports had $55 million of adjusted operating income, down 53% year over year.

Results were pressured by higher player salaries, the NBA's luxury tax, and lower broadcast rights from a revised contract with its regional cable operator. The free-cash-flow yield on MSG Sports is low, and the company pays no regular dividend. Also, the company hasn't bought back stock in the past year.

Boyar thinks the company should split in two into separate Knicks and Rangers franchises.

"That would enable the company to sell one or both teams more easily, Boyar says. "Someone who wants the Knicks might not want Rangers and vice versa. Something needs to be done." MSG Sports stock has appreciated little over the past four years despite sharply higher pro sports franchise values.

In a letter Friday to James Dolan, Boyar wrote, " 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 18 close). But if a sale is not on the table, a spinout offers significant upside with minimal downside."

Other investors including Mario Gabelli of Gamco Investors have suggested that the company should sell a minority stake in either team and use the proceeds to buy back stock.

The most recent public comment from the company related to a potential transaction involving one of the teams came in February on MSG Sports's earnings conference call. Jamaal Lesane, the chief operating officer, said, "We are as confident as ever in the value of our teams. They are scarce assets. They have strong business fundamentals. And we don't think that those are appropriately reflected in our current stock price. So we would never rule out the possibility of a minority stake sale. But we also, at this time, have nothing concrete to report."

In an interview with Barron's in September 2023, James Dolan said: "The value of the assets keeps going up every year. What you sell today may look like a cheap price" later.

He added, "If what they mean by a 'Dolan discount' is that we're not selling, they're right."

Dolan's comments highlight the frustrating situation for many investors, who are hoping the family relents, and moves to realize the value in the company.

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

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June 20, 2025 15:13 ET (19:13 GMT)

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