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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

May 14, 2012 at 9:34 AM

A closer look at Facebook IPO and Seattle NBA plan

Apparently not everyone appreciates my sense of humor.

Including a certain major investor in Facebook who is trying to bring an NBA team back to Seattle.

That would be Chris Hansen, the San Francisco hedge-fund manager orchestrating a deal to restore his beloved Seattle Sonics.

Hansen called last week after I wrote a blog post about how Facebook’s upcoming IPO may help his basketball venture.


Hansen has a big stake in the outcome of the Facebook stock offering, expected at the end of this week. He’s the managing partner of a San Francisco investment company, Valiant Capital, which scored a coup in 2010. It was able to buy 36,335,590 private shares of Facebook for less than $500 million.

If Facebook does well after public trading of its stock begins, Valiant may double its money. At the high end of Facebook’s projected offering — $35 per share — Valiant’s day one gain would be nearly $800 million. Its shares would then be worth $1.27 billion.

Who knows how the stock will fare. It’s supposed to break IPO records, but some big investors were reserved last week after Chief Executive Mark Zuckerberg pitched the stock while wearing a hoodie, then disclosed that ad sales aren’t growing as fast as site usage.

Maybe Facebook waited too long. Or maybe investors don’t fully understand the complex machine that Zuckerberg built. Love it or hate it, Facebook seems to have all sorts of levers and dials to pull and twist and boost sales at will.

As they say, the rich get richer.

Then some of them decide to buy sports teams.

If they ask for public assistance — especially from cities pleading poverty — they become fair game for snarky blog posts.

My post joked that the Facebook windfall could enable Hansen to build two arenas without public financing, or refit KeyArena with heated massage chairs and a helicopter shuttle service.

Hansen didn’t seem to mind the ribbing. He even read the flurry of online comments it generated.

But he wanted to make it clear that he personally won’t pocket that $800 million.

“I would just want people to understand that Facebook is a position of my investment-management company, not a personal investment of Chris Hansen, and therefore the profits are the profits of the fund and the investors that it represents,” he said.

As for his effort to build an arena for a Seattle NBA team, Hansen said it’s going “great.”

“I think we went into it knowing there would be some concerns, some constituencies that would be against it, that negotiations with the city and county wouldn’t be easy,” he said. “But I think there’s very broad-based support, given the thoughtfulness and fairness of the transaction relative to the prior proposals in Seattle and other stadium transactions and arena transactions.”

I’m not sure Seattle has decided yet whether it’s fully invested in this offering. Yet Hansen, a Roosevelt High School graduate, is hoping his hometown ends up on his side.

“Hopefully people just trust — really — I’m trying to do what’s right by the city,” he said.

In the meantime, this should still be a pretty good week for Hansen, as long as Facebook doesn’t face plant.

Firms like Valiant typically charge investors about 2 percent a year to manage their money and take 20 percent of fund profits.

So if Facebook stock does really well and Valiant’s gain is $1 billion, the firm would net $200 million.

Most of the gain would go to investors in the fund, such as endowments and foundations. Hansen likely is personally invested in the fund, as well.

Hansen doesn’t get all of the firm’s profit. Valiant has eight or nine partners who share the firm’s profits, although Hansen gets the largest share as managing partner.

This is business as usual, but it’s become a sensitive topic for Hansen.

Especially since he asked the city of Seattle and King County to back a $200 million loan to help finance a $490 million arena south of Safeco Field.

Whether Hansen can pay for it all himself doesn’t matter too much since local politicians are falling over each other to back the project. They did the same thing for Paul Allen, who is one of the richest men on earth. But it’s a good opportunity to look at how these businesses work.

Facebook’s the stock du jour, but Valiant invests in all sorts of companies in the U.S. and abroad. Its largest public holdings in the U.S. are $128.1 million worth of Apple stock, $78.6 million worth of Google and $71.2 million worth of cable company Liberty Global, according to a May 10 disclosure report.

I think there’s enough there to say Hansen is continuing the Seattle tradition of using technology riches to fund pro sports teams.

Nintendo of America is the majority owner of the Mariners. Co-owners include veterans of Microsoft and RealNetworks.

Microsoft co-founder Allen owns the Seahawks and the Portland Trail Blazers. He’s also part owner of the Sounders, whose general manager, Adrian Hanauer, was an early investor in and aQuantive and continues to be involved in Seattle startups.

Hansen hasn’t yet disclosed the group of investors in his NBA venture but it’s a safe bet that some made their fortunes in tech.

Nor is Hansen talking about his personal wealth, but he’s otherwise adjusting to being a public figure.

“If I wasn’t involved — hadn’t made a decision to come be involved bringing the Sonics back to Seattle — I would have continued to enjoy my anonymity, continued to enjoy and value my anonymity,” he said.

Hansen knew the spotlight was part of the deal.

“I have to be comfortable with it if I’m going to be successful,” he said. “It comes with the territory.”

Get ready, Chris. So do cheers and jeers from the cheap seats.

Comments | Topics: Billionaire techies, chris hansen, city of seattle


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