It is Unfortunate that Professional Sports Franchises are not Shortable

I suspect these stories are an omen for the Wilpons’ continued ownership of the Mets:

Mets will pay 3 percent interest to investors

Mets lay off 10 percent of staff

If Reyes waits, he’ll get big bucks — but not from Mets

When David Einhorn offered to save the Wilpons by buying a minority stake in the team, I thought Einhorn had lost his mind. What value investor would offer up so much for so little in return, even one who loved the Mets? But, I was obviously not privy to the negotiations. Einhorn wisely sought a return of his capital in a set time frame or it would spring a majority ownership position in the team. And, even after the Wilpons returned Einhorn’s capital, Einhorn would keep his minority ownership position. Now THAT is a proper value investment.

I suspect that once Major League Baseball is finished cleaning up the mess in Los Angeles, they will focus on cleaning up the mess in Queens. The Mets owe many people a lot money, and it is money the Wilpons have little hope of acquiring after rejecting Einhorn. Einhorn may wind up as the managing partner in the Mets soon enough.

The Wilpons were dumb for rejecting Einhorn’s offer. One-hundred percent of nothing is less than a lesser percentage (greater than zero) of something. But, dumb has been their M.O.: One championship in thirty-one years for a major market team with a team-related cable channel and no salary cap restrictions is a major failure. How bad are the Wilpons in running a baseball team?

Some accounts said former Mets joint owner Nelson Doubleday had to overcome a Wilpon veto of the Mike Piazza trade in 1998 because Wilpon did not want to pay Piazza’s salary. Piazza is largely credited for the Mets perennial playoff runs from 1998 to 2003 and those runs were instrumental in bringing in a lot of cash. But, the epitome of the Wilpons’ failure came when they traded Mike Cameron before the 2006 season.

Cameron was a Gold Glove centerfielder who could hit and hit with power. They got rid of him in order to save $8 million in salary, which they had in spades at the time because–thanks largely to Piazza in the years before–the Mets were competitive. They were built to win a championship in 2006 except for the fact that they had no one to play a decent rightfield. While it is true that value investors would rather hold on to their cash than spend it unnecessarily, the good ones usually do a great job of separating necessary expenditures from unnecessary ones.

Halfway through the 2006 season the Wilpons scrambled to find someone who could play rightfield who could hit. They settled on Shawn Green–a long-swing, ageing hitter who played a clumsy outfield–and paid him Mike Cameron money. So much for saving a few bucks. The Mets reached the NL Championship Series in 2006 against the Cardinals–one step from the World Series–and had home field advantage. They lost to the Cardinals in seven games and the Cards went on to win the World Series. A big part of the reason that they did not dispatch the Cardinals in five games was the poor outfield play of Shawn Green. Meanwhile, Mike Cameron won his third Gold Glove in 2006 while playing outfield for the Padres.

The Wilpons tried to save a few pennies in 2006 relative to the dollars of salary they were paying for a championship-caliber team and blew it. They failed to see that the return on Cameron’s $8 million would have exceeded the cost by multiples with a World Series title. They failed to see that paying Cameron’s salary was a necessary expense. The Cameron episode was typical of their operation. The Wilpons tried to save a few pennies in their negotiations with potential minority partners in 2011 and are blowing it again, but this time it is a good thing for Mets’ fans.

Update 11/6: Today’s headlines indicate they are open to trade offers for David Wright, and some Mets executive was quoted anonymously saying they hope to have a winning team again by 2014.

The Mets did one thing correctly, but I am not sure how much of the credit should go to the Wilpons and how much to Major League Baseball, which cannot afford another mismanaged debacle in a major league team. The Mets hired three front office leaders who were instrumental in bringing Moneyball to the majors and were highlighted in Michael Lewis’s book: They are Sandy Alderson, the General Manager who was previously an executive with Major league Baseball in Manhattan and who hired Billy Beane for the A’s front office and taught him how to be a GM; JP Ricciardi, former Blue Jays General Manager; and Paul DePodesta VP in charge of Mets player development. The Mets finally have a philosophy; a roadmap. That is a good thing even if they will not be competitive for several years.

Moneyball is value investing.


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