Patrick Mahomes has owned the Chargers’ defense, the Texans’ defense, and the 49ers’ defense. Now he’ll own the Kansas City Royals.
The Royals announced that Chiefs quarterback Patrick Mahomes has joined the ownership group.
Welcome to the #Royals family, @PatrickMahomes!#AlwaysRoyal pic.twitter.com/mRJE0sgzMl— Kansas City Royals (@Royals) July 28, 2020
The group, which purchased the Royals from the late David Glass for $1 billion last fall, is led by local businessman John Sherman and includes a group of over 20 investors with local ties, including entertainer Eric Stonestreet.
Mahomes grew up around the game of baseball, as the son of former MLB reliever Pat Mahomes. The portion that he owns has not been disclosed, but it is likely a very small portion. The quarterback is fresh off signing a 10-year contract with the Chiefs that could be worth up to $503 million. The 24-year old becomes becomes the youngest sports owner in history.
Even purchasing 1 percent of the Royals, assuming Mahomes didn’t buy at a lower post-money valuation than the other investors paid, would cost the Chiefs quarterback around $10 million which is a significant outlay for someone who has made slightly more than $13 million over his brief playing career, not including endorsements.
Unlike MLB deals, NFL contracts aren’t fully guaranteed, so Mahomes can’t quite start spending like he has earned his entire half a billion dollar contract. Still, if Mahomes needed an advance to purchase a larger stake in the team (of say 2-3 percent), he would likely be able to find that in an owner-financed sale in which he would pay it off over time as more of his contract becomes guaranteed.
Ownership shares don’t trade on any liquid market (although that may be changing) so it’s not like Mahomes can go log into his broker and pick up a couple shares. He would had to have purchased his share either through one current owner or multiple owners given up a smaller percentage. It’s unlikely he bought any one owner out (which is why my guess is that he doesn’t own much of the team) as the new ownership hasn’t even been in place for a year yet, and there may be a lock-up period attached.
Mahomes isn’t buying a stake as an investment in reality. While franchise values have increased annually, even a doubling of his ownership isn’t going to be a financial boom for him. What he is buying ownership for is to be an ambassador of the Royals, Chiefs, and Kansas City. Like Stonestreet, Mahomes would be more of a celebrity figurehead than someone making day-to-day decisions.
It’s cool to be able to say “I own part of a sports team” and celebrity ownership of franchises is a storied history that includes “owners” like Jay-Z (who owned less than 1 percent of the Brooklyn Nets), Jennifer Lopez and then husband Marc Anthony (unreported amount of the Miami Dolphins), Bill Maher (who at one pint owned 1-4% of the Mets), Justin Timberlake (Memphis Grizzlies), Will Smith (Philadelphia 76ers), and others. These are all brand ambassador roles and carry a bit more headline value than operational value.
Still, Mahomes signed a very long-term deal with the Chiefs and his small stake in the Royals further embeds him into Kansas City for the next decade or more to come. The investment should be a pretty sound one as the value of sports franchises continues to rise. There is also a possibility that once his playing days are over he may want to transition into a bigger role in running the club, as other former athletes like Derek Jeter and Magic Johnson have done. It is also a good sign that he is putting his roots down in the community and fully embracing the city.