Less than two years after taking the New Jersey Nets over the Hudson River and into Brooklyn, billionaire owner Mikhail Prokhorov is planning a longer move: to Russia.
No, they won’t play their home games there, but Prokhorov is planning on putting the basketball team under the control of one of his Russian companies. The move would allow Prokhorov to heed President Vladimir Putin’s ban on politicians having foreign accounts and equity and his call for Russian-owned companies to be registered and pay taxes locally. Prokhorov told reporters in the Kremlin yesterday that such a transfer would comply with the National Basketball Association’s rules.
The billionaire may also be looking to keep his investment out of the reach of U.S. lawmakers as President Barack Obama threatens to step up economic sanctions against Russia in response to its annexation of Ukraine’s Crimea peninsula, according to Veles Capital and Sberbank Asset Management. The conflict has already cost Prokhorov, Russia’s eighth wealthiest man. His net worth has slumped $811 million this year as the selloff in Russian markets eroded the value of his holdings in stocks including OAO Uralkali (URKA), the world’s biggest potash maker.
“It’s a preventive measure,” Anton Rakhmanov, who helps manage $5 billion in assets as the head of Sberbank Asset Management in Moscow, said in a phone interview. “It’s his personal decision, it seems, to bring the assets home, where he knows how things work. The market has been very pessimistic and has priced in not only sanctions that were already imposed, but way more than that.”
The benchmark Micex Index (INDEXCF) gained 1.5 percent as of 3:45 p.m. in Moscow today, after a rout sent it into a bear market this month. Uralkali fell 1.4 percent in the Russian capital, extend declines this year to 7.6 percent.
Prokhorov -- who is worth $12 billion according to Bloomberg Billionaires Index estimates -- declined to comment on whether his decision to register the Nets in Russia was related to the sanctions. His press service, when asked to comment today, referred to a law signed by Putin in May 2013 that forbids government officials and lawmakers from holding financial instruments or cash in overseas banks.
Prokhorov, who ran for president in 2012, losing to Putin, said afterward that he planned to run for mayor of Moscow. He didn’t run in the mayoral election in September last year because of the block on owning foreign assets.
“A Russian company will own the basketball club,” said the 48-year-old Moscow native. “This doesn’t violate any NBA rules.”
Mike Bass, a spokesman for the NBA, said the league hasn’t received a proposal from Prokhorov to change the team’s ownership structure.
“The Nets are owned by Mikhail Prokhorov through a U.S.- based company,” Bass wrote in an e-mail. “We have received no application, nor is there a process under way through our office to transfer the ownership of the Nets to another company.”
The world’s leading industrial powers threatened further sanctions against Russia yesterday and said they’d boycott what was to be a Group of Eight summit hosted by Putin.
Investors pulled $5.5 billion from Russian equities and bonds this year through March 20, according to data compiled by EPFR Global, a Cambridge, Massachusetts-based firm tracking fund flows. The outflow was $6.1 billion in all of 2013.
After losing 20 of their first 30 games to start the season, the Nets have improved of late. They’ve won four of their last five games to lift their record to 37-32, losing yesterday in overtime.
“Prokhorov is known for being loyal to the Kremlin while the Kremlin is loyal to him,” said Ivan Manaenko, head of research at Veles Capital in Moscow. “His move is politically motivated” and the “question of more sanctions is rather when than an if.”