THE IFL: What is Real, What is the Illusion?
Published by on February 28th, 2008 in Operation Cleanup

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By Charles Jay

The message seemed to come through loud and clear.

About a year ago, John Dorman, a stock analyst for the respected Bloomberg.com site, was making a study of something called the International Fight League, which had been trading shares on the NASDAQ since late 2006. What Dorman discovered was astounding, to say the least.

The IFL, ostensibly created to be a rival for the more established Ultimate Fighting Championship, was, according to its “market cap,” i.e., the stock price multiplied by the number of shares outstanding, valued at a whopping $829 million, which at that particular moment made the company more valuable than ten of the 32 NFL franchises, 29 of the 30 MLB teams, all of the teams in both the NBA and NHL, and all but four European soccer clubs (Manchester United, Real Madrid, AC Milan and Arsenal were the only exceptions).

To put this in even more vivid perspective, the IFL had a higher value than institutions like the New York Knicks, Boston Celtics, Los Angeles Dodgers, New York Mets, Montreal Canadians, Oakland Radiers, San Francisco 49ers and Los Angeles Lakers – franchises with long and accomplished histories, not to mention large, definable fan bases, merchandise brand value and facilities built for nine-figure sums who shared in national television contracts of substantial proportions.

Dorman wonderd how this could be, given the state of the balance sheet and revenue statements.

The IFL’s book value (calculated by subtracting assets minus liabilities) was MINUS $960,000, And those assets carried with them a worth of just $10,000. Live shows had not done very well at the gate. There was nothing in the way of a major pay-per-view event under the company’s belt, nor was there a national television contract with one of the big players in television; no CBS, NBC, ABC or Fox. No ESPN. Nothing on HBO or Showtime. Nothing where live events were shown, only a deal with Fox SportsNet, a compilation of small, regional sports channels which showed scattered events on a tape-delay basis, right alonside women’s volleyball, steer wrestling and infomercials.

The company that, on the stock market, looked as substantive as the most established brand names in professional sports had no real value at all beyond a few jockstraps, a ring canvas and an internet website.

To veteran stock watchers, Dorman included, it was oddly reminiscent of many of the dot-com investment boondoggles that led to the crash of the NASDAQ in March of 2000.

“To put International Fight League in the same ballpark (as the aforementioned sports franchises) seems ludicous to me,” Dorman asserted.

It was even more “ludicrous” than that, truth be known. The IFL’s stock, which at the time of Dorman’s report was selling for $15.50 a share, had actually hit a high of $17. It originally traded for $3 a share, and even less in the form of the “shell” company with which it had executed a reverse merger back in November of 2006, for those who may have been tipped off beforehand.

As of today, IFL stock is selling for less than ten cents a share. And with losses skyrocketing, there is very little hope for naive investors, who bought into the hype surrounding mixed martial arts, to recoup their money.

How did it all come to this? In what can best be described as an ethereal rise, who told lies and who told the truth? Which “insiders” profited in the end from one of the most precipitous stock plunges of recent years?

And how much damage does this do to the image of mixed martial arts, an industry that is trying to create and reinforce an air of credibility, vis-a-vis its sibling rival in combat sports, professional boxing?

That last question evokes what may be the most salient issue. Many in the MMA industry have taken great pains in positioning their sport as a favorable option that offers those things boxing lacks, or is perceived to lack – namely, a sense of order and legitimacy.

The IFL debacle would seem to set that agenda back considerably.

And that’s why it deserves much further study and inquiry, if for no other reason that for the sake of those who comprise the bulk of the mixed martial arts constituency – the younger demographic – a group that appears a little less tolerant of such skullduggery than its progenitors, and who may have never suspected that its sport might actually validate the phrase that is so famously ascribed, accurately or not, to P.T. Barnum.

And of course, you KNOW what that is.