TODD HORNE: Before Calling LSU’s Financial Plan Reckless, Understand The Transaction

Matt Hayes sees danger. Scott Rabalais sees a necessary gamble. Both raise legitimate concerns. But until LSU’s proposed investment structure is fully understood, the most important questions remain unanswered.

The national debate over LSU’s proposed new financial model is beginning to take shape.

Matt Hayes of USA TODAY sees danger. LSU, in his view, wants cash now and is willing to put future media revenue at risk to get it.

Scott Rabalais of The Advocate sees something more nuanced: a definite gamble, but perhaps a necessary one in an economic environment forcing athletic departments to find entirely new sources of revenue.

Both raise legitimate concerns.

Neither has the documents.

Neither do we.

And that remains the most important fact in this entire discussion.

Before we decide whether LSU is being reckless, prudent or revolutionary, we first have to understand what LSU is actually building.

Hayes has identified a legitimate risk.

Rabalais has identified the necessity driving LSU toward it.

What neither can determine yet are the economics of the transaction itself.

We still do not have the valuation.

We do not know precisely which media revenues would be transferred into the proposed company.

We do not know how capital would move through the enterprise or how profits ultimately would be distributed.

We do not know the precise governance rights granted to minority investors.

And perhaps most importantly, we do not know how much of the reported $100 million would immediately flow into LSU Athletics and how much would remain inside the company as investment capital.

Those are not technical details.

They are the transaction.

Start With What Has Actually Been Reported

The clearest reporting now suggests LSU is considering creating a separate company built around one of its most valuable long-term assets: future broadcast revenue.

According to The Advocate, a private investor would contribute approximately $100 million in exchange for a 9 percent ownership interest in the company and 7 percent of its profits.

LSU would reportedly retain approximately 80 percent ownership, while additional investors could eventually bring total outside ownership to no more than 20 percent.

The company could also hire professional investment managers to invest its capital into other businesses designed to generate what LSU officials have described as perpetual revenue.

LSU has characterized the proposal as an “evolving scenario” and said “no deal has been confirmed or signed.”

The simplest way to understand what has been reported is this:

LSU appears to be building an investment company whose anchor asset is future broadcast revenue.

That changes the analytical question.

We are no longer simply asking whether LSU should take $100 million today in exchange for television money tomorrow.

We are asking whether LSU can use the value of one durable asset to capitalize an enterprise capable of creating additional assets and additional revenue.

That does not make it a good idea.

It means we can finally begin evaluating the right idea.

There Are Two Very Different Ways This Could Work

Hayes’ argument essentially assumes one economic model.

There is certainly a scenario in which he is exactly right.

Call it the Deficit Plug Model.

LSU receives $100 million.

Most of the money immediately flows into Athletics.

It covers operating deficits, coaching buyouts, roster expenses and other short-term obligations.

Years later, LSU has surrendered part of a media-revenue stream that became considerably more valuable.

If that is what LSU ultimately does, the criticism writes itself.

LSU would have converted part of a valuable long-term asset into short-term operating cash.

But the reporting also supports another possibility.

Call it the Investment Engine Model.

The company receives $100 million.

A meaningful portion remains inside the enterprise.

The company holds the economic benefit of an appreciating media-rights asset.

Professional investment managers deploy capital into other businesses.

Those investments generate returns.

Some returns are reinvested.

Compounding begins.

Over time, SEC broadcast revenue is no longer the only source of growth because the company owns additional revenue-producing assets capable of generating cash flow independent of television distributions.

LSU reportedly continues controlling approximately 80 percent of that enterprise.

That is not simply borrowing tomorrow’s money.

It is an attempt to convert one durable asset into multiple long-term revenue streams.

And there is an enormous difference between those two models.

Capital Allocation Is The Deal

Which brings us to the most important unanswered question:

Where does the $100 million actually go?

The Advocate reported that its source could not say how much would go directly to LSU Athletics for current expenses and how much would remain inside the company as seed capital.

That answer could determine whether Hayes’ characterization ultimately proves correct.

If most of the money immediately leaves the company and gets spent by Athletics, the proposal begins looking much more like monetizing tomorrow to finance today.

If most of the capital remains inside the company and is professionally invested, LSU is attempting something fundamentally different.

Until we know how the capital will be allocated, we cannot know whether LSU is building a bridge or building a business.

Capital allocation is not a footnote.

It is the deal.

Broadcast Revenue Explains The Architecture

Once broadcast revenue emerged as the reported anchor asset, much of the structure became easier to understand.

It helps explain the independent valuation.

It helps explain why outside capital would receive equity rather than a conventional repayment schedule.

It helps explain LSU’s repeated emphasis on maintaining control while allowing minority ownership.

And it helps explain why a significant investor could receive board representation without necessarily gaining operational authority over LSU Athletics.

Media revenue is also among the most durable assets available to a major college athletic program.

LSU and other SEC schools received an average conference distribution of $72.4 million for the 2024-25 fiscal year, and the investment thesis apparently assumes those rights will become substantially more valuable in the future.

That expectation itself carries risk.

But it also explains why media revenue would become the foundation of the enterprise.

Nine Percent Ownership Is Not Seven Percent Of Profits

One of the most revealing reported details has received surprisingly little attention.

The initial investor would reportedly receive:

9 percent ownership.

And:

7 percent of profits.

Those are different economic rights.

Does the 7 percent represent ordinary profit participation?

A preferred return?

Some hybrid?

Does it apply to all profits generated by the company or only certain income?

How are retained earnings treated?

Does the profit participation survive an ownership transfer?

Until those terms are known, nobody outside the negotiations can accurately calculate what LSU is giving up in exchange for $100 million.

The question is not simply what percentage of the company LSU is selling.

The question is what bundle of economic rights LSU is selling.

A Six-Year Exit Is A Valuation Event

The reported six-year provision also should not be confused with a loan maturity.

According to The Advocate, after six years an investor could seek to sell its ownership interest with board approval while LSU would hold a right of first refusal.

That does not mean LSU owes the investor $100 million in six years.

The investor appears to carry equity risk.

If the company becomes extraordinarily valuable, LSU could have to pay substantially more to reacquire the stake.

If the enterprise underperforms, the interest could be worth less.

A six-year exit is not necessarily a repayment date.

It is potentially a valuation event.

And the valuation at that moment could tell us whether LSU created value or surrendered too much of it.

Rabalais Identifies Another Risk

Rabalais raises an important issue that extends beyond the investment portfolio itself.

What if LSU successfully creates new revenue—and expenses simply grow faster?

That possibility should not be dismissed.

LSU could execute the investment strategy competently and still lose the larger economic race if athlete compensation, coaching salaries, roster acquisition and facilities expenses continue increasing faster than the enterprise can generate returns.

Creating more revenue does not solve college athletics’ cost problem if expenses compound faster than income.

There are regulatory risks as well.

The reported IRS review remains unresolved.

Congress continues considering legislation affecting college athletics.

Revenue-sharing rules could change.

Conference economics could change.

The College Football Playoff could expand—or remain where it is.

Media valuations themselves could change.

LSU is not simply betting on investments.

It is making assumptions about the future economics of college sports.

Rabalais Is Also Right About Something Larger

For all those risks, Rabalais reaches a conclusion that deserves attention:

LSU has to do something.

The old economic model of college athletics is gone.

The new one requires capital.

Revenue sharing with athletes is now embedded in the system.

Roster acquisition has become dramatically more expensive.

Coaching compensation continues climbing.

Facilities continue demanding investment.

And LSU entered this environment already facing substantial financial pressure.

Tiger Rag reported months ago that LSU Athletics was projecting a $25 million to $35 million Fiscal 2026 deficit.

LSU paid Brian Kelly more than $50 million not to coach.

It bought out Matt McMahon.

It committed $91 million to Lane Kiffin.

Those decisions absolutely justify skepticism about LSU’s stewardship of money.

But they do not mathematically determine whether this particular proposal is a bad transaction.

The valuation does.

The capital allocation does.

The investor rights do.

The governance does.

The investment performance eventually will.

Doing nothing carries risk, too.

The question is not whether LSU should avoid risk.

It is whether LSU is receiving sufficient long-term value for the risk it chooses to take.

The National Conversation Is Changing

Friday brought another development.

Sports Business Journal picked up the story.

SBJ did not add significant new reporting. Its importance was in how one of the nation’s leading sports-business publications framed what had already been reported.

The focus was the structure:

A new company.

Future broadcast revenue.

$100 million in outside capital.

Minority ownership.

Professional investment management.

Perpetual revenue.

That reflects the same evolution we have watched all week.

The conversation began with labels.

Private equity.

Venture capital.

Then came the $100 million.

Then the LLC.

Then LSU control.

Then broadcast revenue.

Then ownership percentages.

Then profit participation.

Then investment management.

The more information that has emerged, the less useful the original labels have become.

The question is no longer simply what LSU should call this.

The question is how the business actually works.

We Said Ball And Moscona Could Both Be Right

That is also why we resisted treating J.R. Ball’s original reporting and Matt Moscona’s subsequent reporting as mutually exclusive.

On Tuesday’s edition of Tiger Rag Radio, we said they could both be describing different parts of the same proposal.

Ball appeared to have much of the economics: approximately $100 million, outside capital and future media revenue.

Moscona appeared to have much of the architecture: an LSU-controlled LLC, retained control, independent valuation and IRS review.

The Advocate then supplied additional pieces: ownership percentages, broadcast revenue, board governance, investment management and an exit mechanism.

Those reports increasingly look less like competing stories than different windows into an evolving transaction.

And the transaction is considerably more sophisticated than the first headlines suggested.

So Is LSU Gambling With Its Future?

Yes.

In one sense, Rabalais’ description is unavoidable.

This is a gamble.

LSU could sell an interest in an extraordinarily valuable asset too cheaply.

Investment managers could underperform.

Media values could disappoint.

Expenses could outrun investment returns.

Governance could fail.

Regulatory assumptions could change.

Private investors could become difficult partners.

And LSU could discover years from now that immediate financial pressure caused it to surrender far more future value than anyone realized.

But the opposite outcome also exists.

LSU could use one of its most durable assets to attract outside capital, build a portfolio of additional revenue-producing investments and create an institutional source of recurring income that LSU Athletics otherwise would never possess.

The stakes are enormous in either direction.

If LSU gets this wrong, it could spend years paying for a decision made during a period of extraordinary financial pressure.

If LSU gets it right, it could create a blueprint other major athletic departments spend the next decade trying to replicate.

That is why the documents matter so much.

If LSU is selling tomorrow to pay for today, the documents will prove it.

If LSU is building a new kind of university investment enterprise, the documents will prove that, too.

Until then, “reckless,” “necessary gamble” and “brilliant” are all conclusions ahead of the evidence.

Before deciding LSU is mortgaging its future, I’d like to see the mortgage.