Could the Mets Just Go Public?

What’s the hottest current sports business model? At least for the moment, a few days after the Super Bowl, the Green Bay Packers’ nonprofit public ownership is looking a whole lot sexier than the traditional model of for-profit private ownership, especially when those owners aren’t exactly model. While Green Bay’s owners — Packer fans who bought shares in the team, an arrangement that goes back to 1923 — just won a Super Bowl last week, the Mets’ shoddy ownership has been perhaps the biggest story of the offseason. It’s hard to know exactly how much money the Wilpons have lost, but between the team’s debt and the allegations of Madoff-related malfeasance, some or all of the team is going to need to be sold.

A few days ago, Forbes’s Mike Ozanian noted that the aggregate book value of the Mets franchise is -$225 million: with $375 million in debt associated with the team and $695 million in debt associated with Citi Field, the franchise has $225 million more debt than assets. So while the Wilpons are trying to sell a piece of the team just to dig themselves out from under their Madoff-related mess, the team is in a pretty dire need for dough. What if they went public?

Though the Packers are the only team in America’s four major leagues to be owned as a public nonprofit, they aren’t the only such team in the world. Just yesterday, NotGraphs’ Bethany Heck wondered aloud why there weren’t more such teams. Moreover, when it comes to teams being traded publicly as Krikor Meshefejian wrote for the Illinois Business Law Journal, in the late ’90s, both the Cleveland Indians and the Florida Panthers were traded on NASDAQ. That didn’t necessarily effect their ownership structure as radically as it does in Green Bay — Indians owner Richard Jacobs still owned a controlling share, so while shareholders had a vote, he had final say. Finally, the Boston Celtics were publicly traded until nine years ago, and Fangraphs’ own Robert Sanchez was briefly one of their many owners. (Several other teams are wholly-owned subsidiaries of corporations that are traded publicly, such as the Seattle Mariners, owned by Nintendo of America.)

There are still a few minor league teams, English Premier League teams, and Canadian Football League teams who are completely publicly owned. The Institute for Local Self-Reliance, a liberal think tank, has a list of the six minor league baseball teams with public ownership: the Wisconsin Timber Rattlers, the Harrisburg Senators, the Memphis Redbirds, the Rochester Red Wings, the Syracuse SkyChiefs, and the Toledo Mud Hens.

According to the Institute, all are nonprofit but the Red Wings, and the Red Wings operate as effectively nonprofit; this means that none of the teams pays a dividend, and all proceeds from the games and from merchandise are spent on the team’s operations. That could be difficult if a team had trouble turning a profit, because the way to generate new capital would be to issue new stock, diluting the shares that were already held, which would damage the franchise’s credibility and value in short order. But for a cash cow like the Toledo Mud Hens (made famous by a story arc on M*A*S*H) or the Green Bay Packers, where the dollars are plentiful and each one of them goes right back onto the field, the arrangement has been close to ideal.

The Mets aren’t the only team that could use a serious rethinking of ownership. Last year, we learned that the owners of the Marlins and Pirates have been pocketing huge profits from revenue sharing while skimping on baseball operations. As Jeff Passan wrote of the Marlins, “The team fought to conceal the $48.9 million in profits over the last two years because the revelation would have prompted county commissioners to insist the team provide more funding.” And Forbes reported, “The Pirates earned $15.6 million in 2009 because they received $40 million in revenue sharing from their more successful competitors.” If a team were publicly owned, such malfeasance would not only be harder to cover up, because the books would be open, but it would also be contradicted by the desires of ownership, because the ill-gotten gains would be directed to the shareholders, nearly all of whom would be likely to vote for management who preferred championships to shareholder dividends.

Moreover, as Patrick Hruby wrote for ESPN:

Had the Baltimore Colts’ ownership structure been similar to Green Bay’s, they never would have left in overnight trucks for Indianapolis.

The Browns never would have left for Baltimore.

The Seattle Sonics never would have jetted to Oklahoma City.

Los Angeles might still have an NFL team. Or two.

So there are a lot of benefits to a fanbase from a team being owned transparently. The problem, sadly, is obvious: Major League Baseball has complete control over who gets to own a major league team, and nonprofit public ownership just isn’t the sort of thing they approve, as sports business expert Vince Gennaro told me in an interview: “The owners are very much handpicked.”

The Wilpons might consider selling a partial, non-controlling stake in the team, as the Indians did in the ’90s, but Gennaro points out that the teams are in very different situations: back then, Richard Jacobs’s Cleveland Indians were one of the hottest teams in baseball, selling out the recently-opened Jacobs Field every night for 455 consecutive games from 1995 to 2001, and “the wind was clearly at his back.” By contrast, the Wilpons would have to persuade their diehard fans to be silent partners of an ownership group currently being sued for a billion dollars — diehard fans who have been so slow to buy season tickets that, on Tuesday, the Mets announced a series of new partial season ticket plans that included free tickets. If a fan was uneasy about shelling out a few hundred or a few thousand dollars for tickets, it’s hard to imagine they’d be more willing to pay the same amount of money for little more than the pride of ownership.

Mets fans might get a better team if they owned the team rather than the Wilpons, but they may not get that choice any time soon. Their only hope right now is that the Wilpons are even more overextended than they’ve let on, with the end result that Major League Baseball would be forced to offer another ownership group the opportunity to buy the team. (Gennaro suggested Stu Sternberg, the successful owner of the Tampa Bay Rays — who would then need to divest ownership of the Rays, with someone else brought in to purchase that team — but it’s not hard to imagine a number of owners who might be able to do a better job than have the Wilpons.) Pure public ownership may work well when it works, but it’s a lot easier for a team to go from public to private, as a number of Premier League teams have recently done, than vice versa. Sadly, the Mets are likely to remain privately owned for the foreseeable future. Even if it’s no longer exactly clear by whom.

Alex is a writer for The Hardball Times.

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13 years ago

One thing to keep in mind is that if a team registers to trade on a public exchange, they are required to fully disclose their financials on a regular basis. Not only would that be less than ideal for individual owners, but leagues wouldn’t be too happy if one team is reporting healthy operations while the commissioner is trying to claim hardship.