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Sunday, January 30, 2011

Do You Want a Piece of. . . the Mets?

Most will remember the Seinfeld episode where Elaine saw Frank at the jail when they were there to bail out George. Elaine and Frank got into it, and Frank said to Elaine, "Do you want a piece of me?" You'll also remember that episode for outtakes that were shown around the time of the series finale, where Julia Louis-Dreyfus and Jerry Stiller lost it and cracked up because of the silliness of the whole confrontation.

Well. . . the Mets have liquidity issues. Rumors abounded after Bernie Madoff's star crashed to the earth that the Wilpon family went way back with him and that they lost a lot of money with him. The Mets denied that they were having problems, as it was plain to most baseball observers that they had enough problems with long-term contracts that either weren't panning out or players succumbing to injury or both. Carlos Delgado left, David Wright had a bad season (for him) two years ago, Jose Reyes has been hurt, Carlos Beltran has been hurt, Johan Santana got hurt, John Maine hasn't been healthy, and, as Billy Joel once sang, "we didn't start the fire." Atop that, apparently, the Mets have had some financial issues, or, otherwise, they wouldn't be seeking to sell a 25% interest in the club.

Which is ironic, because if the Mets have liquidity issues, they are trying to sell a very illiquid asset -- a minority interest in a private company. Which savvy investor -- outside a friend of the Wilpons -- would want to do that? Or, would want to do that without some significant protections, such as an option to buy the company down the road? Otherwise, you're buying a non-voting, 25% interest and you'll be at the mercy of the Wilpons, who, last we checked, if they're having cash flow problems, it's because they trusted an old friend without due diligence, with disastrous consequences. Why would an investor want to do that?

The dynamic is interesting, but I think that the Wilpons might have a hard time raising the cash from investors whom they'll want to be as passive as possible. (Also, the track record of the front office hasn't been stellar for the past 5 years). So, the investors will vie for a seat at the table and try to extract significant concessions from the Wilpons, perhaps to the degree that the Wilpons will have no alternative but to sell the entire club. That might be the best alternative for Met fans, but not for the Wilpons. The drama will build and remain compelling.

It's just hard to see anyone ponying up for a 25% interest as a minority shareholder with little, if any, ability to force the hand of the Wilpons.

Watch this one closely.


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