Red Sox finances could stay secret even with stake sale to SPAC

The finances of professional sports teams are among the most closely guarded secrets in the business world. That will probably continue even as franchises sell stakes to publicly traded funds.

Normally, investors in such sales would get a peek into financial details. But a quirk in accounting rules could allow teams such as the Boston Red Sox to keep their ledgers away from widespread scrutiny.

U.S. professional sports leagues have been miserly about revealing profit and loss. As recently as July, Major League Baseball and its players’ union were locked in a dispute over allocation of proceeds from a 2020 season shortened by the coronavirus epidemic. Players urged team owners to open their books, the owners refused, and it nearly resulted in a lost year.

The Miami Marlins wanted taxpayers to help finance a new stadium in the early 2010s. The Marlins claimed they were losing money and needed the funding. Then financial documents obtained by the sports website Deadspin showed the team was actually profitable.

The latest possible look behind the clubs’ financial veil involves Billy Beane, the man portrayed by Brad Pitt in the movie “Moneyball.” Beane is part of the leadership of a special purpose acquisition company, or SPAC, called RedBall Acquisition Corp. that has expressed interest in buying a stake in the Red Sox, the winners of nine World Series.

According to Generally Accepted Accounting Principles, or GAAP, there’s no requirement that if the deal is consummated RedBall would have to report data for the Red Sox, according to Kurt Gee, an assistant accounting professor at Pennsylvania State University. That’s because the Red Sox are just one part, or division, of a larger business, Fenway Sports Group, which also owns the Liverpool soccer club in England.

If the Red Sox were a stand-alone entity, RedBall would most likely have to submit the baseball team’s financial data to its investors, Gee said. But the decision whether baseball or soccer would get broken out as separate line items would be determined by how executives at RedBall view the importance of the teams to the overall business.

“Given the entity in this case would be Fenway Group, I’m assuming that the reported revenue would be the aggregate of that and not line items for each of their businesses,” Gee wrote in an email.

RedBall declined to comment. Fenway Sports Group, through the Red Sox, didn’t respond to a request for comment.

Current GAAP guidelines give management the final say on what they decide to disclose, said Gary Buesser, a member of the Financial Accounting Standards Board, the nonprofit group that oversees GAAP.

“It really depends on the facts and circumstances of each company,” Buesser said. “There’s no rule that says you have to do the following. You could easily say teams with similar economic characteristics can be grouped into a single operating segment.”