Why is Mark Davis selling stakes in the Raiders?

DALLAS — NFL owners are expected to vote on the Raiders’ latest limited partnership ownership sale when they meet Tuesday and Wednesday.

If the deals are approved, as expected, Silver Lake co-CEO and Endeavor board chairman Egon Durban and Discovery Land Company founder and chairman Michael Meldman will purchase a 15 percent stake in the Raiders in separate purchases of 7.5 percent.

Update: NFL approves 2 more purchases of ownership in Raiders

The Durban and Meldman deals come two months after Tom Brady, his business partner Tom Wagner and former NFL great Richard Seymour purchased about 10 percent of the franchise. Brady and Wagner each bought a 5 percent stake, and Seymour purchased a 0.5 percent stake.

Despite the combined transactions, owner Mark Davis will remain in firm control of the team. Davis and his mother, Carol Davis, own more than 40 percent of the Raiders, and as the controlling owner, he has full decision-making power of the club and sole voting rights at league meetings.

None of the new minority owners will have official roles or decision-making power.

The most recent limited partnership sales of the Raiders begs multiple questions.

Why is Davis suddenly selling off 25 percent of the Raiders? And why are Brady, Wagner, Seymour, Durban and Meldman pouring substantial money into buying pieces of the franchise that don’t include any actual power?

After consulting with league and financial industry sources, here are some answers.

Creating new cash flow

Davis has several motivations for selling portions of his team. With the value continuing to soar since the franchise moved into Allegiant Stadium in the ever-growing Las Vegas market, the opportunity to create a financial windfall by liquidating is compelling.

CNBC recently valued the Raiders at $7.8 billion, an incredible growth from their valuation of $1.4 billion in 2015, just before the NFL gave Davis permission to relocate from Oakland.

The sales price the newest limited owners are paying will not reflect the club’s full $7.8 billion worth — in fact, one of the holdups of the deal with Brady was the discount Davis was giving him. But rest assured, these transactions are still generating hundreds of millions of dollars in cash for Davis.

“It’s literally turning paper into money,” a league source well-versed in these types of transactions said.

Or, as another league source put it: “As long as owners can get very attractive prices for selling little pieces of their team, why wouldn’t they do it?”

Along with Davis and his mother, the Raiders are owned by a group of investors with ties to A.D. Football Inc., which Al Davis formed upon purchasing the Raiders in 1972.

That group, according to the Raiders’ media guide, consists of six “interest holders”: A. Boscacci, Jill Boscacci Lovingfoss, the Sargent Family, First Football, the Winkenbach Family and Fox Football. Brady, Wagner and Seymour are limited partners.

Sources confirmed that the recent stakes being sold are not solely from Davis’ portion.

“He loses no control of his team, and he walks away with a substantial amount of money,” an industry source said.

Estate planning purposes

While the Raiders’ vastly improved valuation is undoubtedly a major benefit, it also brings potential future complications.

With Davis’ mother in her 90s, it’s more important than ever to be prepared for the inevitable. Davis, 69, is an only child, and at some point, he will have to pay an inheritance tax based on the increased value of the franchise when his mother dies.

Davis would have done so without actually seeing any financial gain before the recent deals. By liquidating a percentage of the team now, he gets the financial gain today and is in better position to plan for the looming capital gains tax he will eventually pay.

“Essentially, if you’re going to be taxed on realized gains or unrealized gains, why not have the cash?” an industry source said.

Why these investors?

When the Brady, Wagner and Seymour deals were approved two months ago in Atlanta, Davis made it clear money was not the sole factor.

“The transactions that we are doing are not based on just getting money,” he said. “It’s bringing value to the franchise, which is even more important.”

Brady is expected to have a prominent voice in the club’s football operations over time. He might play a significant role in the direction as early as the offseason. Decisions must be made on the future of first-year coach Antonio Pierce and whom the Raiders might target at quarterback in the draft or trade and free-agency markets.

“Although Tom can’t play, I think he can help us select a quarterback in the future and potentially train him as well,” Davis said in October. “So it’s a huge benefit for the organization.”

Brady is in the first year of a 10-year, $375 million contract as the lead analyst for NFL games on Fox, so it will take time before he fully immerses himself in his role with the Raiders. But the expectation is that he eventually will be the face of the football side of the operation.

It remains to be seen what roles Wagner, Durban and Meldman will have. But their business experience and vision could benefit the Raiders, whose rapid growth since moving to Las Vegas has left the club confident there is still an incredible amount of untapped potential.

“The Raiders are a potential gold mine,” an industry source said. “If they play their cards right, they are going to be a lion that roars for a long time.”

What’s in it for the buyers?

Investing in an NFL franchise is an incredibly safe endeavor. The Raiders’ increased valuation — largely because of their move to Las Vegas — reflects an unending upward trend across the league.

Three years ago, the NFL closed media rights deals worth $111 billion over 11 years, most of which include opt-outs in 2029 that allow the league to seize whatever benefits might result from the ever-changing media landscape.

Combined with workforce harmony after recently negotiating a new collective bargaining agreement with the players’ union and its growth internationally, the league’s financial and overall health continues to prosper. That’s why every franchise has seen its value increase dramatically.

“There’s ego involved, sure,” a prominent investment industry source said. “So, yes, these guys are getting in because it’s cool to say you are part of an NFL team’s ownership. But it’s also extremely safe. They’re not going to lose a penny on it. They’re going to make money. And it will be much safer than many other things you can invest in.”

Beyond that are the tax benefits. If someone is enough of a participating partner to the extent that the rules allow, he can write off the investment over the next 15 years.

Positioning for ownership?

The NFL requires owners to submit succession plans in the event of death, but that information remains private. Davis has no children. Whatever plan he has for the Raiders when he dies is unknown.

If the club goes up for sale, as expected, a healthy market is guaranteed to emerge. Brady and the other investors could position themselves at the head of that line.

It’s not unusual for investors to request rights of first refusal in deals like this. If an ROFR is part of the Brady deal, he would have the right to match any offer if the team goes to market. That’s how Stan Kroenke beat out Shahid Khan to buy the then-St. Louis Rams in 2010.

When Rams controlling owner Georgia Frontiere died, Kroenke owned a 40 percent minority stake in the club, including an ROFR. Khan emerged with the highest bid when the Rams went up for sale. Kroenke, to the surprise of many, matched it and ended up buying the remaining 60 percent of the team. Khan eventually bought the Jacksonville Jaguars.

If there isn’t an ROFR involved, Brady and the others could still benefit from building familiarity and goodwill as full-fledged members of the NFL ownership club. As a result, they could be in an advantageous position to buy the club.

“They’ll have their foot in the door of a pretty exclusive club,” an industry source said.

Contact Vincent Bonsignore at vbonsignore@reviewjournal.com. Follow @VinnyBonsignore on X.

A previous version of this story incorrectly reported the amount of the NFL media rights deal in 2021. It was $111 billion.