Conflict Overview
The conflict between Mat Ishbia, the proprietor of the Phoenix Suns and Mercury, and two minority stakeholders, Andy Kohlberg and Scott Seldin, has escalated with a fresh set of accusations emerging. The minority owners allege that Ishbia manages the franchises in a self-serving manner, essentially treating them as an extension of his personal finances, and concealing his fiscal dealings from them.
Legal Developments
In a legal document submitted last week in Delaware, Kohlberg and Seldin have fired back against Ishbia following his countersuit from the previous month. They accuse him of poor management and financial misconduct, claiming he attempted to pressure them into relinquishing some of their ownership stakes through a capital call. However, they contend that this maneuver ultimately backfired and may actually present an opportunity for them to gain a controlling interest in the franchises.
Allegations Against Ishbia
The document articulates concerns that Ishbia’s approach is not focused on the profitability of the Suns and Mercury, but rather benefits his mortgage company, United Wholesale Mortgage.
“Ishbia operates the teams as his own fiefdom, prioritizing his personal interests over those of the franchises, leveraging conflicted transactions that put the minority owners at a disadvantage,”
the filing states.
Allegations include Ishbia taking loans from the Suns at inflated interest rates and leasing practice facilities to himself. The minority owners assert that under Ishbia’s leadership, both franchises have become unprofitable, even while he aims to achieve success through his other business ventures.
Response from Ishbia
A spokesperson for Ishbia has dismissed the claims, labeling them a “shakedown masquerading as a lawsuit.” They argue that Ishbia was upfront about his vision for the teams, encouraging his investors to either align with him or divest. According to Ishbia’s representative, Kohlberg and Seldin’s legal actions signify an unwillingness to participate in the operational and financial success that Ishbia is attempting to create.
Background of the Dispute
The roots of this dispute trace back to a capital call enacted this past summer. Kohlberg recounted that he approached Ishbia last September with hopes of selling his shares due to financial constraints. After Ishbia acquired a majority stake in the teams in early 2023, he allegedly failed to respond promptly to Kohlberg’s request. When he finally did, instead of addressing Kohlberg’s offer, Ishbia issued a capital call the following day, a move the minority owners argue was designed to diminish their equity in the teams unless they complied financially.
After the two minority owners complied with the initial capital call, claims also arose when another investor didn’t meet their funding obligations, leading Ishbia to initiate another capital call soon after. The minority owners later discovered that Ishbia had made alterations to the funding arrangements, including using a debt-to-equity conversion method they deemed improper. They also flagged issues with subsequent capital calls, asserting that they were entitled to purchase the shares not funded by Ishbia, which could potentially lead them to own the majority stake.
“Ishbia stumbled into his own trap, risking a major dilution of his ownership if his actions came to light,”
the filing stated. The discrepancies could endanger his status as an NBA governor and jeopardize his financial standing.
Current Performance and Future Prospects
Since taking control of the Suns earlier this year, Ishbia has expressed ambitions of championship victories, backing this with significant investments. His initial moves included acquiring superstar Kevin Durant and later trading for Bradley Beal, yet these decisions led to a disappointing performance as the team finished with a 36-46 record last season.
This season, the Suns are currently performing well with a record of 11-6 under new head coach Jordan Ott, having optimized their roster post-trade.
Additionally, while the insurance of investor relations remains rocky, the Mercury have seen success, showcasing a new state-of-the-art practice facility in downtown Phoenix and reaching the WNBA Finals last season.
Conclusion
Kohlberg and Seldin’s legal struggle began earlier this summer when their frustrations over financial transparency and internal record access prompted them to file suit against Ishbia. They assert that recent capital calls represented tactics to pressure and undermine their ownership.
Ishbia, in his countersuit, has accused the minority owners of trying to extort premium buyouts for their shares. He remains resolute against settling any of the outstanding lawsuits tied to the franchises, as multiple former and current employees have brought forth claims of inappropriate workplace practices. Ishbia has affirmed his commitment to litigation, stating to the press that he would not concede unless wrongdoing was proven against him. This ongoing saga highlights the turbulent atmosphere surrounding both organizations as they navigate operational and legal upheaval.
