The Pickleball Billionaire

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GM! It's Friday, April 21st - Today, we're covering the Pickleball takeover as a billionaire builds his empire within the sport and the turbulent downfall of Virgin Orbit as it succumbs to bankruptcy.

- Callum

FEATURE

The Pickleball Billionaire

Tom Dundon is the head of PE firm Dundon Capital as well as a major player in the sports world.

• 2015: Became majority shareholder in Topgolf, a company worth $4.15B

• 2017: Purchased the Carolina Hurricanes for $420M

• 2019: Invested $250M into the now defunct Alliance of American Football

• 2021: Purchased all minority shares of the NHL franchise

In 2022, Dundon tripled down on what many thought was just a niche hobby, Pickleball. He purchased the Professional Pickleball Association (PPA), Pickleball Central, and PickleballTournaments.com software– but why?

Why Pickleball?

Pickleball showed massive growth potential when Dundon purchased the PPA.

• The sport grew from 5M American players in 2020 to 36.5M in 2022, largely due to COVID-19 preventing people from playing traditional sports.

• 70 countries currently play pickleball, just 5 more need to adopt it for it to become an Olympic sport.

• The Pickleball paddle market is valued at $158.4M expected to hit $267.8M by 2027.

When Dundon bought the PPA, no one else in the pickleball space had the sports acumen or sponsorship connections that he acquired as the owner of the Hurricanes.

Dundon’s PPA is now sponsored by 30+ companies, including Carvana, Hertz, Chase, Miller Lite, and Hyundai, many of which are also featured in his PE firm’s portfolio.

How Dundon is Monopolizing Pickleball

Pickleball competitions are organized by three different groups– Dundon’s PPA, Major League Pickleball, and the Association of Pickleball Professionals. In just a year, Dundon turned the PPA into a dominating force.

Here’s how Dundon executed a pickleball takeover

• Exclusivity contracts: Dundon’s first step was to sign all of pickleball’s top athletes into exclusive three year contracts. Through these lucrative contracts, PPA acquired the top male and female pickleball stars and prohibited them from competing in APP and MLP events.

• Tactical Competition Scheduling: PPA’s schedules its events for the same days as APP, forcing viewers to choose between the two franchises with most choosing the one with the best talent– PPA.

Outcompeting the MLP was a bit more difficult for Dundon as that organization offered a unique co-ed, team-based competition. So, Dundon forced the MLP to the negotiation table by creating Vibe Pickleball with an identical co-ed format to be played by his superior athletes.

Just a week after the creation of Vibe, a merger deal was announced and Dundon’s new league was taken under the MLP name. But don’t be fooled– pickleball pros see this as a clear PPA takeover of the MLP.

Through the merger conditions, Dundon now owns equity in the MLP and has turned the league into a mechanism for funneling more talent into the PPA. Athletes now need either a Silver or Gold Card to compete in the MLP.

• Silver Card: athletes must compete in 5 PPA events and 6 MLP events every year.

• Gold Card: athletes must compete in 20 PPA events and 6 MLP events. Gold Card holders earn double the prize money at PPA and MLP events.

So What?

Pickleball isn't just the fastest-growing sport in the country, it has the potential to be a gold mine.

• Its Bigger Than Tennis: 23.6m people played tennis in the United States in 2022, ~12.9 million less than the number of people who played pickleball (36.5m).

With the sports continued, billion-dollar companies will be built across the ecosystem, much like we've seen in Golf, Tennis, Football, basketball, and all other sports with global appeal.

With his place at the head of the table, Dundon is well-positioned to capitalize on the trend.

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ON TREND

Virgin Orbit Bankrupt: $100-$500M Owed

You should know:

Virgin Orbit, the now bankrupt rocket-maker, spun out of Virgin Galactic has set a May 14 deadline for bids on its business. The company's air-launch tech may attract buyers, but if not, its assets may be auctioned off.

The Takeaways:

• Virgin Orbit has filed for Chapter 11 bankruptcy due to expensive development (over $1 billion) and faced investor pullout after going public

• Virgin Orbit’s air-launch technology may be valuable.

• Falcon 9 cost $400M to get off the ground.

• Creditors are owed between $100M and $500M.

• Spire, Redwire, US Space Force and Arqit are owed over $1M, $6.8M, and $10M, respectively.