Is former BET owner/billionaire, Bob Johnson, going broke?
Johnson became the nation’s first African-American billionaire when he sold BET to Viacom, but these days, he’s strapped for cash. No, he’s not exactly broke. He’s just not liquid and needed a cash infusion from the sale of the Bobcats to “fund his other investment obligations and avoid becoming insolvent,” said the report.
An interest payment on the NBA team’s $40 million bank debt was coming up recently, and Johnson rushed to make the sale to Jordan final before he had to fork over the cash, which was just a few million dollars. This, combined with the terms of the sale, suggests Bob isn’t the cash cow he used to be.
“If he didn’t get out now, he’d be [out of cash] soon,” an unnamed former college tells The Daily Beast.
When Johnson sold BET to Viacom for $3 billion dollars in 2000, he landed in Forbes’ 400 Richest Americans list the following year with a net worth of $1.3 billion. However, a large sum of Johnson’s assets are tied up in various investments and a network of businesses. That, in addition to a divorce settlement of around $400 million+ dollars in recent years, heavily effected his bottom line.
A source told The Beast that several of his businesses require a lot of upfront cash, which he can’t afford these days. So, selling the Bobcats was almost needed for Johnson to stay afloat.
“Bob is in a lot of businesses that require a lot of upfront capital expenditures, like hotels and gaming,” a financial world source close to Johnson said, “so he needs to husband cash flow for the assets that are growing rather than the ones that are not.”
Much of Johnson’s assets are hard assets that don’t convert to cash too easily, nor do they generate much either. The report says they actually tend to appreciate in value over time, but how long can he fork out cash that’s not coming in?
With the value of real estate, banking, gaming, and auto assets going down the tubes in the past few years, Johnson’s fortune fell with them. Basically, “he’s invested very poorly,” a former colleague said.
The biggest strain on his fortune was the Bobcats, so flipping it to Jordan at a loss made more sense to Johnson than to continue losing his available cash each year. “No one has ever lost money on an NBA franchise, and I don’t think anybody ever will,” Johnson told USA Today in 2006. Despite the comment, Johnson reportedly sunk $300 million into obtaining the franchise rights for the team in 2002 and pledged to invest a further $30 million on top of that.
Under Johnson’s direction, the team has lost between $20 million and $25 million per year, or around $200 million total, sources said. “He’s put up a lot of cash, and he’s nearly lost it all,” said a former colleague.
In short, Johnson isn’t exactly broke at the moment, but his finances are dwindling quickly in the money pit of investments he owns. If he doesn’t act quickly, he may not have anything left.
Johnson declined to comment on The Daily Beast’s story. To read their report, head over to TheDailyBeast.com.