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Does a sub-$1 billion Atlanta Hawks signal a burst bubble?

The NBA's Atlanta Hawks announced this week that the team was sold to an investment group for $850 million. This is the first league transaction since former Microsoft CEO Steve Ballmer bought the LA Clippers for $2 billion in 2014. After such a massive price paid by Ballmer, the question is whether the Atlanta deal signals the bursting of an NBA asset bubble.

In January, CNBC reported on what price industry insiders thought the Hawks would sell for. At the time, the range of estimates was quite high, anywhere from $700 million to $1 billion. The final amount ended up right in the middle.

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More than three months later, we can look back now to see who was right, and what that possibly suggests for future transactions. In January, here were the estimates:

January 2015 Hawks purchase price estimates:
$900 million - $1 billion: Unnamed NBA co-owner
$900 million - $1 billion: Scott Rosner, Wharton
$750 million - $1 billion: Patrick Rishe, Sportsimpacts
$700 million - $750 million: Andrew Zimbalist, Smith College

The only one to get it right was Patrick Rishe, but his range was much wider than the others. Everybody else had a narrower $50 million to $100 million range—but were all wrong. "I'm certainly not surprised by this outcome," said Rishe, founder and president of market research firm Sportsimpacts, and incoming director of the sports business program at Washington University in St Louis.

Rishe expanded on his analysis: "Considering how the Hawks were ranked 22nd at $825 million by Forbes in January 2015, valued at $425 million the prior year and were purchased in 2004 at $189 million, I'd say NBA owners and the former Hawks owners in particular are feeling pretty good today about the short-term and long-term financial health of their league."

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He continued with a positive outlook to the future: "With greater revenue sharing than ever before, stricter luxury tax rules, and massive local and national media deals, they have every reason to feel this way."

One NBA owner sees the bubble deflating

Contrast that assessment with the unnamed NBA co-owner who expected at least $900 mllion. He said this deal was "significantly lower than anyone expected," and "probably not a bad deal" for incoming owners Grant Hill and Tony Ressler. He thought the process reflected a "clear bifurcation of the market and absolutely no pricing in of a move to Seattle."

He also said that this idea of automatically assuming every NBA team was worth a billion dollars is over. "It's probably not a great sign for lower-market teams whose owners thought their teams were worth at least a billion, as Atlanta is a midtier market versus Sacramento or Milwaukee or Minneapolis."

"Eight hundred and fifty million dollars is a really strong number for this market" -Irwin Raij, sports attorney at Foley & Lardner

"Eight hundred and fifty million dollars is a good price for this team," said Irwin Raij, a sports attorney at Foley & Lardner. "Putting it into context, not that long ago you could buy a piece of the Hawks at an enterprise value below $400 million."

Raij said the "price reflects the strength of the NBA product right now" and "takes into account the national and local media deals and the trend of increasing NBA team valuations."

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As far as using the Clippers sale price as an example for other teams to go by, he thinks that's irrelevant. "More simply, Los Angeles is a different market with a different set of circumstances." And in his mind, the bubble hasn't burst yet. "Some may have wanted to see it exceed $900 million, but $850 million is a really strong number for this market."