September 8, 2023 Author: Brian Warner
On August 24, Bloomberg published an article “Michael Jordan becomes richest basketball player of all time with $3.5 billion fortune“For the past few weeks, we have received six emails a day and as many private messages telling us that Michael Jordan’s $2.6 billion net worth estimate is out of date and needs to be updated.
I’m a fan of Bloomberg articles and authors in general. They tend to publish high-quality, fact-based articles that are easy to understand even if you don’t have a finance degree. However, in this case, I think they missed the mark. Michael Jordan is undoubtedly the richest basketball player in the world and the richest athlete in the world. But there’s no math to prove his net worth of $3.5 billion…
Breaking down Michael Jordan’s wealth
During his NBA career, Michael’s NBA salary was only $90 million. Clearly, a salary is not his ticket to the billionaire club.
Endorsements certainly contributed a healthy amount to Jordan’s wealth, but they weren’t enough to make him a billionaire. To date, Michael’s endorsement income has reached $1.6 billion (pre-tax). That includes his roughly $200 million in annual Nike royalties.
Michael achieved billionaire status through his smart investments in NBA teams. For simplicity’s sake, I’ll call the team he bought the Bobcats (even though they were the Hornets when he first invested). In 2010, Michael purchased a stake in the Bobcats for $175 million. At the time of the acquisition, the Bobcats were valued at $233 million. By 2014, Jordan’s shareholding had increased to 90%. In the same year, the Los Angeles Clippers were sold for $2 billion. Prior to this release, the Bobcats were worth $500 million. The Clippers’ worth pushes the Bobcats’ worth to at least $600 million, and possibly closer to $800 million. Let’s take $700 million. Michael’s 90% stake of $700 million is worth $630 million. Along with his other wealth, the increase in the Bobcats’ valuation officially made Michael Jordan a billionaire for the first time on June 12, 2014.
Over the next few years, Michael reduced his stake back to 80%, selling primarily to hedge fund manager Gabe Plotkin.
On June 16, 2023, Michael sold the majority of his stake in the Bobcats to Gabe Plotkin for US$3 billion. We previously estimated he retained 10%, and Bloomberg said he “retained less than 5% interest.” So let’s just use the 5% figure.
Prior to the sale for $3 billion, Michael’s net worth was $2 billion. Of this $2 billion, US$1.2 billion is the book value of 80% of the Bobcats, valuing the Bobcats at $1.5 billion (which was the valuation Plotkin used when investing in 2019). That $1 billion difference is Michael’s wealth outside of the Bobcats.
When Michael sold 75% of the Bobcats to Plotkin at a valuation of $3 billion, it amounted to $2.25 billion before taxes. This is a long-term asset and Michael lives in Florida, a state with no state income tax.After removing his cost basis, Michael’s after-tax windfall from the sale is likely to be $1.6 billion. This adds $400 million to our previous estimate of $2 billion, bringing his net worth to $2.4 billion. If Michael still owns 5% of a team worth $3 billion, that stake is worth $150 million. This brings his net worth to $2.55 billion.
All told, following the $3 billion sale, we immediately bump Michael Jordan’s net worth to…
I simply cannot understand how Bloomberg can come up with an additional $900 million in wealth to justify their $3.5 billion figure. Their article gives no clues. I respect Bloomberg, but this article misses the point. It reads like someone just watched Air (which is basically a fantasy movie due to the many, many historical inaccuracies) and then fleshed out Michael’s Wikipedia page.
The article mentions his first contract with Nike, a five-year deal worth $2.5 million, and how his mother got Michael to take Nike seriously. It was mentioned that the Jordan Brand generated $5 billion in revenue for Nike last year, accounting for 11% of the company’s total revenue. The book mentions that Michael earned $15 to $20 million a year through endorsements in the early 1990s, and that he appeared on the cover of Wheaties magazine 19 times, “more than any other athlete.” The article also mentioned that LeBron James has a net worth of $1.5 billion, which is another fantastic number.
The article quoted a controversial statement from a financial analyst at BMO Capital Markets:
“Jordan himself and the Jordan Brand helped shape Nike and the entire sportswear landscape.“
Wow man. Be careful what you say! There is some truth to this statement!
Bloomberg mentioned Michael’s sponsorship of NASCAR and his position as an advisor to the Draftkings board of directors. It was quick to mention the overall terms and history of the Bobcats’ sale. But I don’t see a detailed explanation in the article of how they justify a $3.5 billion net worth.
Basic math just doesn’t add up.
FYI, Forbes currently estimates Michael’s net worth at $2 billion. That’s up from $1.7 billion a year ago.