Meet the Mets, greet the Mets, meet the man who just bought the Mets – well not quite. Steve Cohen is now in talks to increase his investment in the Queens team to an 80% stake worth $2.6 billion! The deal will take place in five years.
The Mets, a beloved New York baseball franchise known for their passionate fanbase, have been majority-owned by the Wilpon family for nearly 20 years. Fred Wilpon purchased a majority share in the team in 2002 from business partner Nelson Doubleday. But now in the midst of an unpopular ownership era, the Wilpons seem prepared to sell one of the most valuable sports franchises in the world and pocket a hefty return.
The Wilpon Era Explained
The Wilpon reign over the Mets has long been an unpopular one for Mets fans. Whether fair or not, the Wilpons have taken flack over countless years of frugality and non-competitive baseball. Fred Wilpon made his fortune in the real estate business with his firm Stirling Equities. From 1972 to 1980, Fred and his brother-in-law Saul Katz developed townhouses throughout Westchester County and purchased real estate at the bottom of the housing market.
Fred Wilpon found unbridled success in the real estate business and set his sights on one of his greatest passions – baseball. The Mets owner not only played baseball as a boy, but played on the same Brooklyn high school team as Sandy Koufax!
Fred Wilpon – New York Mets Owner
In 1980, the Payson family, the original owners, sold the team to Nelson Doubleday Jr. and Fred Wilpon through their various business entities for an 80/20 share respectfully. Between 1980 and 1986, Wilpon and Doubleday turned the franchise around into must-see television.
The Mets nurtured and cultivated a budding star pitcher named Doc Gooden into a global phenomenon and created a team of hard-nosed, brutish, yet insanely talented players. When Wilpon was given a 50% stake in the team in 1986, the Mets snatched victory from the jaws of defeat in a legendary 86’ world series against the Red Sox.
The management team went through some disappointing seasons in the aftermath of that world-series win but did make the World Series in 2000. The Wilpons bought out Doubleday for $135 million in 2002, cementing their sole-ownership over the franchise. Since 2002, the Wilpon ownership group has overseen the club through the 9/11 attacks, the financial crisis and the construction of a new stadium, Citi Field.
The Bernie Madoff Effect
You’ve likely heard the name Bernie Madoff, the billionaire financier who defrauded millions of investors out of billions through the largest Ponzi scheme in American history. Madoff, a legendary hedge fund manager known for his unrivaled investment returns, managed billions for his numerous investors.
The chairman and founder of Bernard L. Madoff Investment Securities offered 10% annual returns to wealthy investors, a deal no one could refuse. On paper, Madoff payed out lofty returns each year by continuing to take on new clients that added to the investment pot.
As long as the investment pot grew each year, Madoff could redistribute the billions to investors who now thought their portfolio had grown even though their money was never actually invested in the market. Ponzi schemes collapse when investors start to pull their money out of the pot. When the financial crisis struck in 2008, Madoff’s mythical investment firm revealed itself to be nothing more than a pyramid scheme.
Enter the Wilpon family.
The Wilpons and Bernie Madoff
In the most infamous episode in New York Mets history, the Wilpons lost an estimated $700 million through Bernie Madoff alone! The timing could not have been worse. When housing prices crashed 33% in 2008 during the Great Recession, the Wilpon’s real-estate business faltered.
To cover expenses, Fred Wilpon looked to sell off shares of the franchise in 2011 and 2012. SportsNet NY, several venture capitalists, political pundit Bill Maher, and Steve Cohen of Point72 Venture (formerly SAC Capital Advisors) bought minority stakes in the Mets. Cohen’s initial investment was for $20 million.
In addition to the fire sale, salaries were cut by over $50 million, 10% of the workforce was let go, and the team implemented money-saving measures to help with the financial burden Madoff left behind.
Steve Cohen: How Did He Make His Billions
The founder of S.A.C. Capital Advisors and Point72, a venture capital firm based in Samford CT, Steve Cohen can best be described through the character who is loosely based on him in the show “Billions”. Damian Lewis of “Band of Brothers” acclaim, plays the brilliant hedge fund manager, Bobby Axelrod on the hit HBO dramedy. Axelrod’s life mirrors Cohen in that both share New York, middle class roots, are bold and brash, yet both also entered into similar plea deals for insider trading.
Cohen was born in Great Neck, Long Island in 1956. The hedge-fund titan, now worth roughly $14 billion, was raised in a humble, blue-collar family. Cohen’s mother taught piano while his father worked as a garment manufacturer. Cohen credits the game of poker with teaching him how to take risks – a skill any good hedge-fund manager must have. Cohen graduated from the Wharton School of Business in 1978 with a degree in economics.
He secured a job on Wall Street after graduation with Gruntal & Co. Cohen would go on to make the firm a reported $100,000 per day and manage a $75 million dollar portfolio at the company before founding his own firm, S.A.C. Capital advisors in 1992, the company derived its name from Cohen’s initials. The billionaire founded the firm with a $10 million investment from his own pocket. By 2003, the New York Times reported the firm was one of the largest hedge funds in the world. In 2009, S.A.C managed $14 billion in equity.
A Run-In With the SEC
In 2012, Cohen was implicated on charges of insider trading. The SEC convicted a former S.A.C. manager, Mathew Martoma, on similar charges in 2014, but the charges did not stick with Cohen. Cohen settled the case in 2016 with the SEC on the grounds that he would not manage outside money until 2018. S.A.C. pled guilty to the charges and payed $1.8 billion in penalties. The firm closed down in the fallout of the conviction. Cohen founded the venture capital firm Point72 Ventures in 2016 as a result.
What Does a Billionaire Do With All That Money?
You might imagine that Steve Cohen has spent his fortune on some pretty interesting things: (Reported by Business Insider)
- 14-acre estate in Greenwich, CT worth $14.8 million
- 35,000 Square Foot Home in Beverly Hills, CA worth $35 million
- 9,000 Square Foot Beach Home in East Hampton, NY
- Multiple Apartments in Manhattan’s West Village worth a combined $62 million
- Multi-million Dollar Collection of Famous Art Work
- $8 Million, 14-Foot Preserved Shark
- Portrait of Mao Zedong by Andy Warhol that was sold at auction for $47.5 million
What Other Sport Franchises Are for Sale?
Have a couple hundred million or even a few billion lying around and feel like you missed out on owning the Mets? Do not fret, there are several great sports franchises that will likely be sold in the near future.
The Tigers have been in the Illitch family (of Little Caesars fame) since 1992. In that time, the team has experienced many years of sustained success, but it looks like the bottom has fallen out on the franchise.
The team has combined to win only 111 games in the last two seasons and fan attendance has plummeted as a result. To make matters worse, Detroit continues to suffer economic hardships that have caused property value to plummet and many citizens to leave the city. Forbes values the team at $1.25 billion and it looks like a sale is on the horizon.
Tampa Bay Rays
Wait Tampa has a team? Sometimes it feels like this beautiful bay city doesn’t. Even winning 97 games and appearing in the 2008 World Series hasn’t been enough to attract fans to this failing franchise.
Tampa’s Tropicana Field is consistently ranked the worst in baseball leading many to argue that there are much better things to do in Tampa than sit in a decrepit stadium and watch the Rays. Average attendance in 2018 was a paltry 14,258 – that’s 42% capacity! The Rays have one of the lowest valuations in the MLB at $1 billion, a steal for the right investor!
Senators owner Eugene Melynk may be one of the least popular owners in sports. While Melynk has affirmed to the fans that he has no plans to sell the franchise, a majority of fans would like to see him go. In the past, Melynk has been linked to a bizarre Twitter-bot scandal and an embarrassing PR video where the owner hinted at cutting some players mid-season.
The Senators have not found any sustainable success since Melynk purchased the team in 2003 and averaged just 76% capacity for the 2018/19 season. The NHL team is valued at $435 million, a price many Ottawa fans would gladly pay to see Melynk leave town.
What Does Cohen’s Purchase Mean for Entrepreneurs?
Look, Cohen has more money than 99.9% of the global population. You may not be able to buy a sports team, but the franchise system still holds true. When someone purchases a franchise, they acquire the license to sell, distribute, or provide services under an established brand.
Franchisees gain valuable advice on management, equipment, operation, design, etc…. Entrepreneurs, big and small, have many options available on the road to success. For Steve Cohen that meant buying his childhood team, the New York Mets, a dream come true!
By Tyler Dikun and Jim Notaris