A Legendary NBA player, mega Endorser, and shrewd investor are three different characteristics of GOAT Michael Jordan. But he lose US$ 500 million in 2020. Let us see how.
Michael Jordan is well known for his NBA accomplishments and the stardom that followed. It also gave him much more money to play around – majorly from the endorsements and lifelong contract with Nike. He made a smart decision – invest in the market.
Jordan has a major investment in sports-related firms. NBA franchise Charlotte Hornets and the Jordan Brand are two major invested entities for Michael. The NBA team values US$ 1.6 billion in 2021. Jordan had joined the investor group that bought MLB’s Miami Marlins.
Jordan joined with his ex-fellow NBA stars and launched a super-premium tequila brand, Cincoro, in 2020. His other investment with fellow Hall of Famer Magic is in aXiomatic. People might think that such diversified investments and lifelong contracts with a renowned brand will keep you safest for the future. Sadly that’s not true.
Forbes magazine – a global standard for valuation had estimated Michael’s net worth at $2.1 billion in 2020. But in newly reformed valuation, specifically in April 2021, Forbes updated its number for Michael to $1.6 billion, a dramatic 24% dip. That is US$ 500 million lost.
Where did Jordan lose US$ 500 million in one year?
Forbes actually has not explained the reasons for this dip or losses to MJ but there are many theories for the same. We will evaluate each reason one by one.
The GameStop Gamble
Huge investments come with huge risks. MJ, well known for his gambles had stocks in GameStop Company. It currently has a market cap of $13.5 billion. The Company deals in renting the games in supermarkets. The company was losing money every day and their share value had never crossed the US$ 30 mark.
In late January 2020, GameStop’s stock price was fluctuating like a ping-pong game with the lowest point of US$ 125 to US$350. This fluctuation was majorly due to a “short squeeze” perpetrated by a group of investors.
Melvin Capital had a large short bet against GameStop. The bet was that a company’s stock price will fall. But as soon as people bought shares in GameStop, the stock price rose to new highs. When that happened, Melvin’s short position against GameStop quickly became a problem for the investment firm itself.
The problem was so big that Melvin Capital’s investments lost 53% of their value over a matter of days. This is where some arguments are connecting “the loss to MJ”.
Michael sold a minority of his stake in Hornets to two hedge fund managers at a valuation of $1.5 billion in 2019. One of those hedge fund managers is named Gabe Plotkin – founder of Melvin Capital.
Yet the problem with Melvin Capital won’t affect MJ directly. Even if it does it won’t be US$ 500 million. For that MJ must have around US$ 1 billion investment in the Capital firm. There is no proof for such investments and so the connection causing loss can’t be considered as a viable one.
Charlotte Hornets losses
The majority of MJ investments are in the Hornets franchise. This actually can be a reason behind losses to the legendary NBA star. Here again, two different theories relate the MJ loss to the franchise.
Covid-19 situation
Since 2020 NBA itself has suffered huge losses due to the Covid-19 situation. The season was completed within the bio bubble and no fans were allowed to enter the arenas. Fan’s absence, no revenue through tickets and merchandise had hit the teams badly.
Plus the Hornets never made it to the post-season which could have provided some TV revenue to the franchise. Eventually, the money-losing franchise had cost MJ dearly and will be one reason for the loss.
Revaluation of the franchise
Some reports even suggest that Forbes magazine itself had valued the Charlotte Hornets high in MJ’s data. But now that the NBA and sporting world is facing problems generating the revenue, it has re-evaluated the franchise to the lower end and this has affected the total net worth of Michael Jordan.
Yes, this theory can also be accepted, since Hornets play a major role in MJ net worth. Eventually, Forbes needs to give a clear-cut explanation for dropping massive value from Michael Jordan’s net worth that has shocked the NBA world.
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