The story of Magic Johnson turning down Nike founder Phil Knight’s offer to give him stock in 1979 took on new life this week when the story was recapped on the HBO series “Winning Time: The Rise of the Lakers. Dynasty”.
There was an actor playing Phil Knight doing the Magic bid and there was the show saying that Johnson could have received 100,000 shares that would net him $5.2 billion today.
The last part is a creative sleight of hand and it’s unclear if Johnson’s story is actually true.
Circumstances surrounding Nike when Magic was a shoeless agent?
Johnson was obviously a huge star, the most outstanding player in the NCAA Tournament, beating Larry Bird and Indiana State in the finals in March 1979. Converse already had Dr. J. They were the leader and they still offered the most money: 75 $000 to $100,000 a year was in sight for Magic and Larry.
At the time, did we ever say that Nike was in the running?
No. In July 1979, Al Harden, who worked for Converse Vice President of Promotions Joe Dean, signed Magic.
Where does this story come from?
It’s hard to figure out the origin, but it first gained momentum in 2017 when Magic told the story on the Ellen DeGeneres show.
“When I got out of college, all the shoe companies came after me,” Johnson said. “Then there was this guy, Phil Knight, who just started Nike. So he said something about stocks. ‘I’m going to give you a lot of stocks.’ I didn’t know anything about stocks.
He told Yahoo in 2019 and recently at a McDonald’s event with the snippet posted on Twitter.
“I would have been a billionaire by now,” Magic said. “You think about that stock in 1979 and what it’s worth today. Yeah. It kills me every time I think about it. And I’m like man, Michael Jordan would make me so much money.
But this week, the story exploded even further when it was chronicled on the HBO series “Winning Time: The Rise of the Lakers Dynasty” as fact. There was an actor playing Phil Knight and a ledger displayed on screen suggested that if Magic took the action, he would be worth $5.2 billion.
Would it be true?
Well, put it this way. Nike had endorsers before. We know that their first endorser Ilie Nastase, who was receiving $10,000, left for adidas because they went over the cash offer. There was no stock. John McEnroe replaced Nastase and he didn’t get rich from Nike stocks. And I saw the contract that Nike gave George Gervin in 1977. A signing bonus of $1,000, $2,500 a year, and a guaranteed split of $20,000 among all Nike basketball players.
So, could Phil Knight – in 1979 – think Magic was much more essential to the company? In 1979, basketball shoes accounted for about 25% of Nike’s business, accounting for $19 million in profits and $150 million in total gross revenue.
“Winning Time” took on major license that actually doesn’t make sense. They figured out that Nike was offering Magic the same stock that Converse was offering ($100,000) at a strike price of 18 cents plus $1 on each shoe shipped.
The 18-cent stock price doesn’t make sense because when Magic was negotiating its shoe deal in the summer of 1979, Nike was not public. It debuted at 18 cents but that was December 2, 1980. Magic was already in its second season with Converse.
The $1 per shoe is also way too aggressive a fee. Magic’s Nikes would have cost around $20. The standard royalty is five percent of the gross price ($10). It’s 50 cents.
The first person we know of got shares in a deal with Michael Jordan five years later and, according to his agent David Falk, it was a small amount.
This story sounds familiar…
If you feel like you’ve heard this before, you’ve read the story of Spencer Haywood, who signed with Nike and said he was willing to stock up. However, he lost what he says was $2.8 billion because his agent had a power of attorney and sold his shares.
How specific would an offer to Magic have been?
“Winning Time” explains that if Magic made the deal with Nike and kept everything, he would be worth $5.2 billion.
It’s ridiculous. Phil Knight is the 27th richest person in the world, according to Forbes, at $47 billion, but there isn’t another Nike executive on the Forbes list. To think that Magic would have been there before another Nike executive doesn’t make sense.
It’s also odd that Johnson’s story didn’t seem to surface until 2017.
If Magic had been offered stock in the summer of 1979, it would have been through debentures that Blue Ribbon Sports, Nike’s previously named predecessor, distributed at $1 apiece. When the company went public in December 1980, each debenture was converted into 30 shares.
For the record, neither Phil Knight nor Nike have commented on the story and until that happens, the story with live with relatively little challenge.