by Edwian Stokes
May 31, 2026
Madison Square Garden Sports Corp. has filed a confidential registration statement on Form 10 with the Securities and Exchange Commission to seek a tax-free spinoff and separate the New York Knicks and New York Rangers into independent, publicly traded companies.
This proposal follows the MSG Sports board’s approval in February to explore a strategic demerger.
The Knicks unit would oversee the NBA team and its G League affiliate, the Westchester Knicks, while the Rangers unit would manage the NHL club and the AHL’s Hartford Wolf Pack.
“Completion of the transaction would be subject to various conditions, including the effectiveness of the Form 10 registration statement, any required approval from the league, receipt of a tax opinion from an attorney and approval of the corporate board of directors,” MSG Sports said in a statement.
The Financial Plan: Unlocking Blocked Value
The primary reason for this transaction is to reduce the existing valuation gap between public market capitalization and private franchise valuations.
MSG Sports has a public market valuation of approximately $8.5 billion. Sportico recently valued the Knicks at $9.85 billion and the Rangers at $3.65 billion, for a total private market valuation of $13.5 billion. Although MSG Sports shares are trading at $372.83, the public stock is 29% below the combined private valuation.
Business conglomerates often face a “conglomerate discount” because their complex frameworks obscure the valuations of their pure assets. Separating the franchises allows for an independent assessment of each team’s growth prospects, cash flows and media rights opportunities.
“The spin improves the ability to raise capital and facilitates the sale of minority stakes by providing two distinct team business models, resulting in a clearer investment vehicle,” David Joyce, an analyst at Seaport Research Partners, wrote in a research note.
The new structure has led to speculation that longtime owner James Dolan may consider selling control of a franchise. Although sources familiar with the situation deny plans for an outright sale, separate companies would make any partial or full divestiture easier.
Tax complications and real estate headwinds
The spinoff is expected to be tax-free for shareholders, but recent federal tax changes pose financial hurdles. A revised federal tax provision expanding the Internal Revenue Code will limit executive compensation deductions beginning in the 2027 tax year. The law increases the $1 million deduction cap from five to ten executives. According to Seaport Research Partners, an independent Knicks entity would pay its top five executives and top five players $195 million, triggering an estimated tax liability of $55.4 million. The Rangers would face an additional tax of $19.8 million on $76 million in payroll after the spin.
The teams are also affiliated with Madison Square Garden Arena, which is affiliated with Sphere Entertainment Co. According to the company’s annual report, Sphere Entertainment spun off a majority stake in the arena’s operating company in 2023 but retained about a third of the ownership interest, making lease terms, shared costs and cash flows among Dolan-controlled companies important factors as the arena’s permit expires in 2028. Planning.
Performance in court increases sales
The restructuring comes at a time when the Knicks are reaching a peak in their business development. Strong seasons from both the Rangers and Knicks helped Madison Square Garden Sports Corp’s third-quarter revenue rise 13% year-over-year, according to Front Office Sports. After reaching the NBA Finals by defeating the Cleveland Cavaliers in the Eastern Conference Finals, the franchise is expected to generate at least $140 million in postseason arena revenue.
In contrast, the Rangers missed the postseason for the second straight year, highlighting the two franchises’ different competitive cycles as they prepare to separate their finances.