It’s not just Cleveland Cavaliers fans who are suffering today. Traders who bought Madison Square Garden Inc. stock yesterday have seen their hopes fade, too.
Today’s slump in Madison Square Garden wiped out $90.2 million in market value as traders bet LeBron James, the National Basketball Association’s Most Valuable Player the past two seasons, will leave Cleveland and join the Miami Heat instead of the New York Knicks. Madison Square Garden, which owns the Knicks, gained $98.5 million yesterday on speculation James would sign with New York.
“Madison Square’s action has been the ultimate in event-related trading,” said Michael Block, chief equities strategist at Phoenix Partners Group LP in New York. “I’m not sure anyone thinks he’s going anywhere but Miami right now.”
Madison Square Garden shares fell 5.5 percent to $20.38 at 4 p.m. in New York. The odds that James will sign with the Knicks sank to 11 percent today from more than 50 percent yesterday, according to trading on the prediction market run by Dublin-based Intrade. The Heat were at 68 percent and the Cavaliers 26 percent.
James will announce his decision on ESPN during a show starting at 9 p.m. New York time. The 25-year-old is leaning toward the Heat, ESPN reported, citing sources with knowledge of the situation. He has booked 25 rooms at the W Hotel in Miami starting tonight, bolstering speculation that’s where he’ll play, the New York Post reported, citing a source.
Dwyane Wade said this week he’s staying with the Heat, and Chris Bosh will join him. Wade and Bosh were among the top free agents in the NBA this offseason, along with James.
The addition of the 6-foot-10 Bosh, a five-time All-Star, gives the Heat an inside presence to complement the 6-foot-4 Wade’s playmaking and ability to drive to the basket. Miami hasn’t won a playoff series since Shaquille O’Neal teamed with Wade to lead the franchise to a championship five years ago.
“Of course we’d love for LeBron to join Miami.” Wade said. “Who wouldn’t?”
Madison Square Garden will post profit this year of 75 cents a share excluding some items, according to the average of two estimates in a Bloomberg survey. That compares with earnings of 37 cents on the same basis for 2009.
“The wind seems to have changed,” Chris Marangi, an analyst with Gabelli & Co. in Rye, New York, said of expectations about where James will play. Marangi covers Madison Square Garden stock and has a “buy” rating. “It’s a disappointment for the company, but earnings will probably still go up regardless of not having LeBron.”