Nike Rebounds On NBA Pact
Nike shares rebounded Wednesday on news that the National Basketball Association has reached an agreement with its players to salvage what's left of the playing season.
As Nike's stock (NKE) bounced 7.2 percent, the news also perked up shares of other athletic-footwear companies, as well as those of media companies that own teams or faced advertising revenue shortfalls due to the lockout.
Shares of Nike, whose sales of basketball shoes stumbled during the six-month ordeal, gained 2 15/16 to close at 43 5/8.
According to The Associated Press, NBA labor peace is in the hands of the owners after the Players' Association overwhelmingly ratified a new, six-year collective bargaining agreement.
Players voted 179 to five to approve the deal. The proposal must still be approved by the Board of Governors, which will meet Thursday.
Under the current plan, the league will play about 50 games beginning the first week of February, with playoffs starting in the first few days of May.
Salomon Smith Barney analyst Faye Landes told CBS.MarketWatch.com that Nike had the most to lose among the leading footwear brands, so it will probably get the biggest boost now that the strike is over.
"About 15 percent of Nike's global business is in U.S. basketball footwear and apparel," she said. "Nike is much more exposed than other companies."
Landes, who reiterated her "buy" rating on Nike, said the basketball strike won't have the devastating effect on the league that the 1994-95 baseball strike did. The optimism and media play of the strike settlement, she predicted, should ease fans' return to the sport.
"A truncated season is less of a problem," Landes said. "The big question now is whether Michael Jordan will return." The Chicago Bulls star, the NBA's marquee player, has strongly hinted that his playing days are behind him.
Shares of other footwear companies perked up on news of the pact. Fila (FLH) rose 1/4, or 3 percent, to 8 5/8. Reebok (RBK) gained 9/16, or 3.6 percent, to 16 1/4.
"If the salvaged NBA season produces an exciting playoffs, we believe fans could be won back," Landes said in a call note.
Shares of broadcaster Ackerley Group (AK), which owns the Seattle SuperSonics, rose 15/16, or 5.2 percent, to 19 1/8.
Cable operator Comcast (CMCSK), which owns the Philadelphia 76ers, gained 3 5/8, or 6.1 percent, to 63. But that stock may also have been reacting to news of the company's creation of a new Internet venture fund. See full story.
Cablevision (CVC), which owns the New York Knicks, rose 9/16, or 1 percent, to 51 1/2. Fox Entertainment (FOX), which has a stake in the Knicks and owns 40 percent of one of the game's premier facilities, Madison Square Garden in Manhattan, was down 9/16 to 23 1/8.
Shares of the Boston Celtics (BOS), the only pure-play publicly traded NBA team, rocketed 4 1/8, or 39 percent, to 14 5/8.
Bishop Cheen, an analyst with First Union Capital Mrkets, said the NBA lockout threatened advertising revenue for big media companies but that saving the season should salvage any possible shortfalls.
"The [ad] money will come back to basketball," he said. "You're not going to see much of a vacuum. There's pent-up demand for basketball."
Cheen said Young Broadcasting (YBTVA), which broadcasts Los Angeles Lakers games, will likely see a boost. Shares of Young gained 2 3/16 to 42 1/4.
Under the proposal, the union agrees to a $14 million-dollar salary cap for players with at least ten years experience. Owners agreed to give the players 55 percent of revenue in the fourth, fifth and sixth years of the new agreement.
Players would get 57 percent if management decides to exercise the deal's seventh-year option. The deal also calls for an adjustment in the Larry Bird exception for free agents re-signed to a team.
The league's board of governors had scheduled a meeting for 11 a.m. Thursday, and Stern and his deputy commissioner, Russ Granik, had said they would recommend canceling the rest of the season if no agreement had been reached.
NBA players had begun arriving in New York for a scheduled vote on whether to support the position of their negotiating committee, which had recommended that the owners' final offer be rejected.
NBA players have the highest average salary in professional sports, about $2.6 million annually, and the median salary is about $1.3 million.
National Football League players average about $900,000, and major-league baseball teams pay an average of $1.45 million. The owners' last proposal had guaranteed that NBA players' top-pay status would remain. The union had wanted higher salaries for so-called lower- and middle-class players.
The lockout, in effect since July 1, has caused the NBA to miss games because of a labor dispute for the first time in its history. The first three months of the season had been scrapped, and players had lost about $500 million in aggregate salaries.
Steve Gelsi is a reporter for CBS MarketWatch. The Associated Press contributed to this report.