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NBA Lottery Raises Hopes for Knicks Fans and MSG Investors

Gregory Calderone
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NBA Lottery Raises Hopes for Knicks Fans and MSG Investors

(Bloomberg) -- MSG Networks Inc. shares climbed 2.1%, outperforming the broader market’s rebound, as investors look ahead to the NBA draft lottery Tuesday evening, where the future of the New York Knicks may be at stake.

The stock has fallen 5% this year and investors hope that the Knicks landing the top pick in the draft will turn performance around for the company, which owns broadcasting rights to the team. The Knicks have a 14% chance of winning the No. 1 overall pick and the chance to add Duke’s Zion Williamson to their roster. That would be a huge coup for a franchise that has only made the playoffs four times in the last eighteen years.

Options traders expect some volatility around the lottery with contracts set to expire on Friday pricing a 7% move in MSG Networks shares over the next three days. One investor appears to have established a bearish trade on Tuesday afternoon through the August $22.50/$20 ratio put spread, effectively hedging a move lower on 200,000 shares. Madison Square Garden Co., which owns the Knicks, rose 0.1% on Tuesday to close at $302.41.

BTIG analyst Brandon Ross wrote on Monday that trades and player moves this summer could have a “significant impact” on the Knicks as well as Madison Square Garden Co. and MSG Networks.

“The situation is much more pressing for MSG Networks, which is fighting strong industry headwinds with a weak product carrying a high price tag,” Ross said in a note to clients. “If the Knicks can transform into a winner, ratings should follow, and MSGN’s affiliate negotiations should become easier and advertising revenue could increase substantially.”

(Adds share performance of Madison Square Garden Co. in third paragraph.)

To contact the reporter on this story: Gregory Calderone in New York at gcalderone7@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Jeran Wittenstein

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