Memphis Grizzlies: Buy Sell Option Exercised

The Memphis Grizzlies ownership is about to change, but it really shouldn’t have a great effect on the city or the team.

The Memphis Grizzlies future has been on hold for five years. It could be resolved soon according to the Athletic’s exclusive story.

Steve Kaplan or Daniel Strauss (possibly both) have exercised their option to purchase Robert Pera’s shares of the Memphis Grizzlies. Pera can either match the offer and buy out the investor(s), or he must sell.

What’s the Next Step?

Some time in the next 90 days the minority owner(s) will announce their price to Pera. The price isn’t based on any previous sales figure. The sale of other teams recently will have an impact on the valuation. The minority interest has 60 – 90 days to make an offer. There’ll be negotiations between both sides during this time to find an equitable price if possible.

Once the price is determined, Robert Pera has to make his decision to buy or sell the franchise. It’s possible the negotiations could extend past the 90 day time frame.

It’s important to note the other minority owners don’t have this option and aren’t involved in the transaction. This group includes personalities such as Payton Manning, Justin Timberlake, Penny Hardaway and Elliott Perry as well as local businessmen Pitt Hyde, Staley Cates, Duncan Williams, Edward Dobbs and Billy Orgel to name a few. The Memphis Flyer has a great breakdown of all the minority owners and their ownership breakdown here.

How did it get to this point? 

In 2012 Michael Heisley sold the Grizzlies to Robert Pera for a reported $377 million. Due to a market decline in his stock’s price (Ubiquity Network), Pera needed more financial support to get the deal approved by the league.

The new buying group left Pera with less than 30 percent of the Memphis Grizzlies. Steve Kaplan and Daniel Strauss own around 12.5 percent. Pera also gave Kaplan and Strauss a buy/sell option in their deal.

That’s what has been exercised last week.

Will it go smoothly?

What will the price be? Will Kaplan attempt to set a price too high for Pera, the self-proclaimed NBA superfan, to match? Do Pera and Kaplan even like each other?

No one really knows.

More from Grizzlies News

• Dillon Brooks speaks out after beating former Grizzlies teammate in World Cup
• Jaren Jackson Jr. puts ex-Grizzlies teammate on notice
• 3 players Grizzlies would consider trading Ja Morant for
• Grizzlies star Jaren Jackson Jr. put on blast following FIBA elimination
• Ex-Grizzlies guard signs with title favorite, joins forces with 6-time All-Star

There have been grumblings about Robert Pera as owner from within the organization’s heirarchy. He isn’t a good communicator with his minority partners. Pera is very secretive by nature. He’s not under any obligation to inform the others any action he takes and rarely has.

This has resulted in the minority owners finding out about trades, draft picks and coaches being released via media reports. It has ruffled some of the minority owners feathers at times. This silence created friction with some of the minority owners. They don’t appreciate hearing these things over the radio or TV rather than from the organization first.

The first sign of a problem occurred when Jason Levien was fired by Pera after the 2013-14 season. Levien was a friend and business associate of Steve Kaplan. Pera also had Strauss and Kaplan removed as alternate members of the NBA Board of Governors. Levien and Kaplan subsequently bought Swansea in the English Premier League together in 2016.

So in a sense, the battle lines are drawn. One one side is Robert Pera and Chris Wallace. On the other side are Steve Kaplan, Daniel Strauss and Jason Levien.

It’s assumed Kaplan wants to become a majority owner in the NBA. He tried to purchase a majority position with the Minnesota Timberwolves. One problem was his ownership with the Grizzlies.

When Will This End?

With all the turmoil swirling around the Grizzlies, no one is anxious for a protracted battle. The team is struggling, and there’s an interim coach in charge. There are almost daily rumors that one or more of the team’s stars are on the trading block. The most likely timeframe is within 60 days, but it could spread on to 90 days. They’re talking about a lot of money after all.

Then there are the egos. Everyone involved with this situation is used to coming out on top in business deals. They don’t like to lose, and they don’t like leaving money on the table. There’s every expectation that negotiations will be contentious.

They’ll also likely be very quiet. Battles between NBA majority partners are rare. Public battles between majority and minority partners are even rarer. The league has policies in place to fine individuals and franchises when owners take their disagreements to the press.

Next: Time to rebuild?

The Bottom Line

This comes down to valuing the Memphis Grizzlies. Pera has a greater net worth than Kaplan or Strauss, so the most likely outcome is that Pera will remain the majority partner with a greater percentage of the team. The minority owners will try and get as much money as possible, of course.

Fans of the Memphis Grizzlies will have to sit back and wait without a lot of information about what’s happening. The good news appears to be neither side is actively looking to move the franchise from Memphis. There are restrictions in place to move the team until at least 2021, and it’s highly unlikely this situation will alter it.

The ownership will alter somewhat, but the team will remain the Memphis Grizzlies for the time being regardless of who wins.