Posted by John Vrooman on Thursday, October 13, 2016 in National Hockey League.

Interview with Pittsburgh Tribune.

I’m writing a story today about the Penguins no longer being for sale. I noticed there hasn’t been a franchise sold in the big four sports in the U.S. since the Atlanta Hawks in 2015. I wondered if there was something going on in the big picture to slow down the sale of franchises.

As monopoly cartels, all of the leagues artificially restrict the number of franchises to inflate the asking and selling prices. As a result the final auction selling prices are systematically overvalued by about 25 percent on average. For example, the NBA LA Clippers were valued at $1.6 billion (by my estimates) and ultimately sold for $2 billion.

The excess supply problem of unsold franchises sitting on the market seems to be peculiar to the NHL, and this indicates that the league may have expanded past its internal profit optimum, franchise price-maximizing size.

So if the Pens are worth an estimated $600 million then normally the selling price could go as high as the recent $750 million asking price for the defending Stanley Cup Champions.  If no potential NHL buyers were taking the Pens bait at $750 million, then the Penguins are obviously overvalued by the owners and undervalued by potential investors.

Ironically the Pens were probably overvalued by the owners because the League was simultaneously flooding the market by Vegas expansion and counterintuitively, the Championship club was increasing its negative cash flow (decreasing its value) because of the top heavy salary structure that generated the Stanley Cup.

This can also be seen in the bloated $500 million expansion fee/price for the new Las Vegas club being set at the value of the average NHL franchise ($500 million according the Forbes in 2015). There were no bidders from the NHL-superior Seattle market at an inflated $500 million, because the NHL expansion fee should have probably been in the $300 million range.

The cash flow from a new NHL club is just not sufficient to justify the NHL average $500 million expansion for a new upstart franchise, regardless of even the most lucrative arena deals. On top of the internally inferior NHL overexpansion into Las Vegas there are three financially underperforming sun-belt clubs (Florida, Carolina and Arizona) that should probably be relocated and realigned before further expansion into internally superior Seattle, Quebec City or suburban Toronto (GTA).