'85 Chronology-Risk and Reward

Event Date: March 22nd, 1985

Event Description: Bulls  Stock Offering

Source: Sun Sentinel

The Jacksonville Bulls, who are starting their second year in the United States Football League, are giving investors some rare insight into the game.

But the Bulls are baring the secrets of the front office in a preliminary prospectus for a proposed public stock offering designed to attract between $500,000 and $12.5 million in new capital.

If everything goes as planned, Wall Street bulls later this year will get a chance to bet on the Jacksonville franchise in the over-the-counter market.

For $100 a share, fans are being offered what will be the only pure football "play" on Wall Street.

Not one other team in the USFL is publicly held. No N.F.L. team is owned by the public for profit. The Green Bay Packers are a nonprofit publicly owned organization.

In fact, few sports franchises of any type are owned by companies with publicly traded shares.

Turner Broadcasting System Inc. generates business for its television cable channel, WTBS, by broadcasting games of its Atlanta Braves baseball team and the Atlanta Hawks basketball club.

Most public companies with sports franchises, however, derive the majority of their revenue and profit from other sources.

Sophisticated investors don't buy shares in Anheuser-Busch Inc. based on the performance of the St. Louis Cardinals baseball team; stock in Gulf & Western Industries, because it owns the New York Knicks of basketball and the New York Rangers of hockey; or shares in the Tribune Company, because it owns the Chicago Cubs, a National League baseball team.

There's a reason why most clubs are owned by individuals and partnerships, rather than corporations.

As partnerships, sports franchises generate tax benefits for their owners, said Norman Fosback, editor of New Issues and other investment newsletters published by the Fort Lauderdale-based Institute of Econometric Research. Corporations, however, strive for income and growth, because tax write-offs cannot be transferred to shareholders. And sports enterprises are often unprofitable on paper.

In fact, even after the planned public sale of stock, a limited partnership will own a controlling interest in the Bulls -- not the shareholders of the public company.

Among those with interests in the partnership are developer Fred B. Bullard Jr., his company Sound Builders Inc. and former Miami Dolphin Larry Csonka, the Bulls' general manager.

Under securities laws, executives with the Jacksonville Bulls are prohibited from publicly commenting on the stock offering.

Through a joint venture agreement with the partnership, the public company will own from 1 to 49 percent of the franchise, depending on the number of shares sold in the initial public offering.

"In effect, you have no control over your own destiny,"  Fosback said. Even a majority of the stockholders will not be able to change the operation of the team without support of the partners.

"The partnership and the corporation could be working at cross purposes.”

Other factors also disturb Fosback.

While attendance averaged 47,736, the highest in the league last year, the Bulls still lost $7.4 million. "There's just no assurance they are ever going to make any money," he said.

The questionable future of the USFL makes the Bulls stock even more risky.

Several recent football leagues, including the World Football League of the 1970s, have failed in competition with the NFL.

Key to survival are contracts with ESPN and ABC television. These contracts provide not only revenue but also invaluable public exposure.

"Failure to obtain or renew such television contracts would result in a severe financial loss for the USFL, the company, the partnership and the joint venture," according to the prospectus.

The stock looks attractive for only one reason to Fosback. The NFL might take over some or all of the USFL in the same way that it merged with the American Football League in 1966.

"There's a good possibility that Jacksonville could be one of the surviving franchises," he said. "And a franchise in the NFL would be worth a lot of money."

Story-(Sun Sentinel)