Recent reports from ESPN’s Met insider Adam Rubin give a very interesting picture of the deal the Wilpons and David Einhorn are apparently working on.
Rubin claims the source for this is the same one who correctly identified Einhorn as the new Met part owner before it became public information and who also clarified earlier rumors about the deal that were making news, so there is reason to believe that this information could be very close to the truth.
The way the deal appears, Einhorn will give the Mets $200 million for about 1/3 of the team. The deal supposedly stipulates that in three years he will have the option to force the Wilpons to sell him enough to make him the controlling majority owner. Should Fred decide against this, Einhorn will then receive his $200 million back, while still retaining 1/6 ownership, or half his original stake.
Should this occur, essentially the Wilpons would have received a $200 million loan for three years with the interest being 1/6 of the team.
In other words, Einhorn wins either way, but will probably win even more if the team continues to fail and the Wilpon financial situation becomes bleak enough that they must sell. Should this happen, then Einhorn will be able to buy controlling interest in what is clearly one of the most potentially valuable, cash-generating franchises in sports for what would undoubtedly be a below-market, insider price.
This is a clever man.
The connection both men have with Bud Selig does seem to indicate that this deal will be approved by MLB; indeed it surely is very welcome in the short term to help Wilpon keep control of the Mets. Unlike the Dodger situation, by most accounts Wilpon is well-liked in baseball circles, and the fans who want Selig to “take” the team from Fred are certainly dreaming.
The real question here is what does Einhorn indeed want, short- and long-term. Does he want the team to simply succeed, so he can make some money over time with the Mets, or does he want it to fail now so he can gobble up the rest at a preferred price and take further advantage of Wilpon distress? Based on this man’s career, it is very reasonable to expect the latter.
Einhorn made his fortune by “selling short.” What this essentially means is targeting a business that he thinks will fail in the near future, and taking an investment position which assures huge profits should that indeed happen. Sell high now, buy low later.
Einhorn was heavily involved with a major subprime lending company which failed. Businesses he has been involved with have been the target of various investigations and settlements of suits. He’s been called a destroyer of companies. While he is certainly charitable and a fun-loving poker player too, he is not a builder—he is a man who makes fortunes off of others’ risks and failures.
Why would Selig welcome such a Faustian bargain with a man like this? Clearly he wants the Mets to succeed and for Wilpon to be able to retain ownership. This is a risky move indeed. If Fred is somehow able to make a smaller than expected settlement with Picard, and should the team’s on-field fortunes dramatically improve in the next 12—24 months, the deal will ultimately wind up having given the team the influx of cash which they might not have been able to obtain elsewhere; MLB made it clear no more loans were forthcoming, and with the economy being what it is and with Fred advertising that the team is “bleeding cash” it is hard to see how else he could have gained $200 million.
But should Picard wind up winning a huge figure and/or tying the case up with uncertainty and the ongoing leaking of negative information, and should the Mets continue to lose in their very difficult division while attendance and revenue maintain their downward spiral, Einhorn will again be in a position to reap a huge windfall from the distress of a major business.
What does this mean for fans right now? Very, very hard to say. But Einhorn is a shrewd and well-connected man with fantastic timing. There’s zero chance he did this to save the Wilpons or because he loves baseball and the Mets. He did this because, to paraphrase Ace Rothstein’s line in the Scorsese movie Casino about blackjack cheats, he cruises the business world looking for vulnerable companies the way “lions look for weak antelope.”
The Mets are MLB’s weak antelope right now. Should Einhorn’s plan be to sit back and wait for things to really bottom out and then scoop up the team, this could in the long-term be great for fans. He might buy out the Wilpons and then sell out at a big profit to someone like Mark Cuban—an owner who is a sports lover and a builder who would clearly be in it to spend and to win. There’s nothing in Einhorn’s history that suggests he will become a Cuban or a Steinbrenner.
But even if this is how it all ultimately plays out, Met fans may be in for several more years of darkness before the dawn. Earlier in the year this comment board was filled with debate on what the year most analogous to 2011 was. 1984 where we just needed a few more pieces? 1982 where we had a nice young foundation that was a few years away? Or more like 1978, when we were largely devoid of prime talent, a strong minor league system, or ownership willing to spend, while being in a division with several clearly stronger teams? Or the Yankees in the mid-1960s, years away from the George era?
Alas, it seems as though the latter is what we are currently viewing. One can imagine what Sandy Alderson must be thinking right now, with public reports swirling regarding how low next year’s payroll will be, with the Phils on pace for 102 wins despite the problems with offense, age, and injuries, the Braves regenerating pitching dominance, the Marlins much better much faster than expected, and with this potential agreement with Einhorn and its possible ramifications.
The diehards are not going to stop watching or following the team, but we may indeed be in for several more very stormy and disappointing years before the orange and blue storm clouds clear up again once and for all.