Chime paid Dallas Mavericks $33 million for jersey patch

Chime, a fintech company seeking to go public, disclosed in an SEC filing that it paid the Dallas Mavericks $33 million over three years (2022-2024) for jersey patch rights and other sponsorships, with annual payments ranging from $10.5 to $11.5 million. The deal, initially struck in 2020 and extended in October, was motivated by Luka Doncic's international appeal, though Doncic was unexpectedly traded to the Lakers four months later; Dallas' acquisition of the No. 1 draft pick is now expected to boost jersey sales despite Doncic's departure.

Analysis

Fintech company Chime, in its SEC filing for a prospective IPO, disclosed a significant marketing expenditure of $33 million paid to the Dallas Mavericks over three fiscal years (2022-2024) for jersey patch rights and other promotional activities, with annual payments fluctuating between $10.5 million and $11.5 million. This arrangement, detailed as a related party transaction due to former Mavericks CEO Cynt Marshall's position on Chime's board, was initially motivated by the international appeal of then-Mavericks star Luka Doncic, whom Chime co-founder Chris Britt described in 2020 as an "international phenomenon." Despite extending the sponsorship deal in October, Chime's strategy faced an unexpected challenge when Doncic was traded to the Los Angeles Lakers just four months later, impacting jersey sales visibility for the Chime logo, as Doncic's jersey subsequently became the top seller for the Lakers while no Mavericks jersey made the top 15. However, the Dallas Mavericks' recent acquisition of the No. 1 pick in the NBA draft lottery, likely leading to the signing of Duke phenom Cooper Flagg, presents a serendipitous opportunity to potentially revitalize jersey sales and associated brand exposure for Chime.

Key Decisions for Investors

• Potential investors in Chime's upcoming IPO should closely scrutinize the company's marketing expenditures, particularly the $33 million Mavericks sponsorship, and assess the return on investment given the unexpected trade of Luka Doncic and the reliance on a new draft pick for brand visibility.
• Monitor the impact of the Dallas Mavericks' No. 1 draft pick on team popularity and merchandise sales, as this will directly affect the value and exposure derived from Chime's jersey sponsorship.
• Consider the inherent risks and volatility associated with athlete-centric marketing strategies, as exemplified by Doncic's departure, when evaluating the sustainability and effectiveness of Chime's future brand-building initiatives.