June 2023

Leo Messi Turning Down $1.6 Billion to join Inter Miami is Foolish

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Leo Messi found himself sitting on a goldmine of offers, having the option to select between a cash deal of a reportedly $1.6 billion over three years vs a lower and more complex one offered by Inter Miami CF involving equity, cash, and revenue sharing that all are based upon speculative terms. Even by claiming the decision wasn't about the money, the complexity of Inter Miami using all of their powers and bringing in unprecedented help from Apple and Adidas makes this very doubtful.

Messi, by accepting the offer from Inter Miami CF is making the wrong decision and will come to regret it. There's no amount of cash, equity, and growth of any MLS team that bests the cash offer. Hell, he could afford to buy multiple MLS teams with plenty left over with the cash that he's turning down. see: Tiger Woods Turning Down Liv Golf Reminds Us To Always Take The Money

When comparing the growth metrics of Major League Soccer (MLS) over the past decade to his expected deal, it takes a little work to understand how a 35% equity stake in a MLS team has the potential to eventually get to 1.6 billion dollars. There's definitely reason to be confident in the league, but it won't give him a $1.6 billion dollar return in 3 years and is nowhere close to being guaranteed.

It Doesn't Add Up

While equity stakes can yield substantial returns, they also come with inherent risks. Market fluctuations, team performance, and various external factors that we just experienced firsthand during the COVID-19 pandemic can impact the value of an equity stake over time. By accepting a substantial cash deal, one secures their financial future immediately while minimizing exposure to potential fluctuations and uncertainties in the sports industry.

MLS growth rate cannot beat the cash return

Over the last decade, Major League Soccer has experienced significant growth in terms of both popularity and financial valuation. With the expansion of the league, increased media coverage, and rising fan engagement, the MLS has become a lucrative investment for those involved. According to industry reports, the average valuation of MLS teams has seen a remarkable annual growth rate of around 20% during this period.

Even with revenue sharing and royalties from Apple and Adidas, and even a valuation boost based upon his own presence, these likely don't remotely cover a straight cash $1.6 billion dollar.

Taxes in the USA are substantially higher than Saudi Arabia

Lets not forget the stark contrast in tax implications. While the United States imposes progressive tax rates, the tax burden in countries like Saudi Arabia, where al-Hilal is based, tends to be considerably lower. By signing with Inter Miami CF, Messi could potentially benefit from a more favorable tax regime, allowing him to retain a larger portion of his earnings and secure his financial future.

The valuation boost from his presence would only be realized after he sell his shares

It's possible that Leo Messi was swayed by the Miami lifestyle, a new stadium, and possibly even ownership rights through MLS expansion. He also may be banking on a substantial boost in the team valuation and if accompanied by stock options, the value may one day be comparable.

His presence alone could substantially increase the valuation of the team similar to when LeBron James joined the Los Angeles Lakers, and the team's valuation experiencing an astronomical increase of $3 billion and when Stephen Curry signed a contract extension with the Golden State Warriors in 2017, and the team's valuation skyrocketing by $1 billion.

But, by taking the cash, he could easily purchase everything being offered outright without any conditions, and free of risk and not dependent on speculation or hypotheticals.  Instead, he'll enter the ranks of people who have come to regret turning down cash offers and overthinking a decision that should be a no-brainer.

Always take the money, just ask Tiger.

Issa Hall, Esq

Issa has founded multiple ventures, is an author, and founding partner of Hall & Dixon law firm, with over a decade of experience in tech and law.

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