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With the Loss of 'Linsanity,' Madison Square Garden's Stock Starts Slipping


If Knicks' sensation Jeremy Lin doesn't return, what will happen to the Garden?

MINYANVILLE ORIGINAL Over the weekend, rumors surfaced that New York Knicks' sensation Jeremy Lin might not be re-signed for the 2012-2013 season. Cue the opening bell Monday morning, and Madison Square Garden (MSG) saw its shares plummet. The Garden has full ownership of the Knicks as well as the New York Rangers, the New York Liberty, and the Connecticut Whale.

By now, even those unfamiliar with the world of sports are aware of Jeremy Lin's rapid ascendency to international superstardom. An undrafted Harvard graduate who started in the D-Leagues, Lin was cut by two different NBA teams before eventually making his way to the Knicks' bench. And he stayed on that bench for several months, until the perfect storm of team injuries and desperation led then-coach Mike D'Antoni to take a chance on the 23-year-old point guard. Lin made his debut for the Knicks on February 4 with a stunning 25 points, seven assists, and five rebounds. He went on to average 14.6 points, 6.2 assists, and 3.1 rebounds in 35 games -- 25 of which he started in -- before suffering a season-ending knee injury.

Lin's rise from perpetual benchwarmer to global phenomenon happened almost overnight, sparking the period known as "Linsanity." Lin's jersey flew off the shelves, outselling even NBA All-Stars Kobe Bryant and LeBron James. Ticket prices and television ratings for Knicks' games soared. Everyone was amazed at the incredible talent that had nearly slipped through the cracks.

As Lin skyrocketed to stardom, the Garden's stock rose as well. Within two weeks of Lin starting, MSG shares rose over 10%, amounting to an increase of $227 million in market cap. Of course, this cannot necessarily be totally attributed to the basketball phenom, but it does prove to be an interesting coincidence -- especially when you consider the dive MSG stocks took Monday morning, opening -$1.12.

Is it a coincidence that this sudden drop in shares occurred immediately after the Houston Rockets sent Lin a backloaded offer sheet that would leave the Knicks wallowing in luxury tax for the 2014-2015 season? According to Business Insider, if the Knicks decided to match Houston's offer and keep Lin, they would likely be facing around $31.3 million in luxury tax penalties alone. Sources close to the team are telling reporters that this hefty price tag might be more than the Knicks are willing to pay.

This move makes the most sense for the Knicks right now. It is impractical and illogical for them to blow upwards of $30 million on a player who, despite the incredible talent he has displayed, is still a relative unknown given the short period of time he was in the spotlight. Lin is also coming back from a knee injury. Fellow point guard Raymond Felton, whom the Knicks signed Sunday, along with veteran PG Jason Kidd (signed July 5), will be more than capable of holding the post -- and at a much cheaper cost.

While the Knicks should be able to recover from the loss of Lin, will the Garden be able to recover from the loss of Linsanity? Shares have slightly recovered from the initial drop, rising to -$0.59 at market close Monday. As of Tuesday morning, however, shares have continued to drop. Is the market simply adjusting to the thought of a Lin-less season, or will the loss of its most marketable superstar leave Garden stocks spiraling? Stand by for updates.
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