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Ball Don't Lie

Prospective Memphis Grizzlies owner may not be approved due to money problems, sales in Iran

Eric Freeman
Ball Don't Lie

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Grizzlies GM Chris Wallace does business with an Iranian center (Joe Murphy/ Getty).

In June, the Memphis Grizzlies announced that the franchise was in the process of being sold to Silicon Valley near-billionaire Robert Pera. While Pera lives and works in Northern California, he promised not to move the team, which had been feared. These were all good developments for the Grizzlies, an improving squad building a fan base in a relatively small market.

However, this sale looks less and less likely to be improved. The reasons aren't minor, either, because Pera is losing worth at a rapid rate. Oh, and his company Ubiquiti Networks also did business in Iran. From Diana Samuels for SportsBusiness Journal, as published on SportingNews.com (via EOB):

Pera has a 63 percent stake in Ubiquiti, according to regulatory filings. That stock was worth $2 billion as of May but has dropped to $800 million. Ubiquiti went public in October at $15 per share, and that price rose to nearly $36 before it started crashing in May. As of Aug. 10, it was trading at just below $9. [...]

While Pera appears on paper to have plenty of capital to buy the team, there have been conflicting media reports in that regard. One report said Pera has a net worth of $200 million. Other reports say Pera is looking for partners on the [Grizzlies] deal.

The Iran issue was one of the first controversies to hit Ubiquiti. The company uses a network of distributors to get its products to customers, and in its filing to go public it disclosed that two of its Middle East distributors had sold products into Iran. The filing said Ubiquiti's executives originally did not know this was a problem, as the company "lacked sufficient familiarity" with export laws due to "the "inexperience of our management team in these matters."

Even after putting policies in place to prevent products from being sold into Iran, the company acknowledged its distributors still sold there for a period of time and Ubiquiti "overlooked emails" that showed the sales were happening, according to the Securities and Exchange Commission filings. [...]

"We already have full disclosure with the government," Pera said. "They worked with us to put procedures in place (to prevent it from happening again) and issued a warning letter. So in our eyes, it's a concluded, closed matter."

I will not claim to be an expert in either of these areas, but it's pretty clear that both these developments are bad news for Pera's hopes of owning the franchise. The NBA likes its owners to have the ability to run their franchises with a lack of financial distress, so as to avoid even more sales and owner turnover in the future. On top of that, it's not exactly the best PR to have an owner who did business with one of the United States' chief antagonists, even if he just worked with businesses (or maybe Iranian Grizzlies center Hamed Haddadi) and not the government itself (though there are as yet no specifics there). That's the sort of story that becomes a league-wide headache the minute it gains traction in the press.

In fact, it wouldn't be terribly surprising if the sale to Pera never reaches a more formal vote for approval, because the mere fact that a controversial businessman could get that far into the process would be a bad image for the league. Like most giant corporations, the NBA tries to avoid controversy unless it's the harmless sort that promotes discussion of the product on the court. Otherwise, they start to lose their credibility, and that can be trouble for an organization that often causes fans to cry conspiracy.

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