Unless there is a last-minute snag, hedge fund giant Steve Cohen will become the next owner of the New York Mets when Major League Baseball’s owners convene as part of their meetings in November for a vote to approve the sale from Sterling Equities.
The deal, reportedly for $2.42 billion, would reportedly see Cohen increase his ownership stake in the Mets to 95%, from 8%. The Sterling partners, which include Fred Wilpon and Saul Katz, will retain a 5% minority interest in the club. When accounting for inflation, the Los Angeles Dodgers’ $2 billion sale to Guggenheim Partners in 2012 would be the only MLB sale higher (inflation-adjusted $2.65 billion).
Regional sports network SNY is not part of the sale.
If 75% of the league’s owners approve the transaction, it will be the culmination of a lengthy effort by Cohen to land an MLB club. Cohen could become a stabilizing force for the Mets—or, if history is a guide, he could be controversial. Here’s a look at Cohen and how he would factor as a team owner.
How He Nearly Landed The Los Angeles Dodgers
That record sale of the Dodgers is an important jumping-off point for Cohen’s story: He very nearly purchased the club. He and Los Angeles-based billionaire Patrick Soon-Shiong had an offer of $1.6 billion up for the Dodgers before Mark Walter and Guggenheim sweetened the pot by $400 million. Up until then, many pegged Cohen as winning the day.
That process, with Cohen in the mix for the Dodgers, provided the early background for the league’s vetting process. What they found may have given them pause.
SAC Capital Advisors, Insider Trading, A $1.8 Billion Settlement
Cohen founded SAC Capital Advisors, a Connecticut-based investment firm, in 1992. By the time he made his pursuit of the Dodgers in late 2011, Cohen had amassed a net worth of approximately $8 billion, according to Forbes.
Look up SAC Capital now, and you’ll find nothing but its history. That’s because an SEC investigation found that a former portfolio manager named Mathew Martoma was engaged in an insider trading scheme in 2008 while employed at CR Intrinsic Investors, an investment advisory firm that was a wholly owned subsidiary of SAC Capital Advisors at the time. Marmota reported directly to Cohen. In 2013, the SEC formally charged Cohen, Martoma and one other, saying: “Cohen ignored the red flags and allowed Martoma and Steinberg to execute the trades. Instead of scrutinizing their conduct, Cohen praised Steinberg for his role in the suspicious trading and rewarded Martoma with a $9 million bonus for his work. Cohen’s hedge funds earned profits and avoided losses of more than $275 million as a result of the illegal trades.”
In connection with those cases, CR Intrinsic agreed to pay more than $600 million in the largest-ever insider trading settlement. Another Cohen affiliate, Sigma Capital, agreed to pay nearly $14 million to settle insider trading charges.
In November 2013, the Department of Justice announced that as part of a guilty plea by the company, SAC Capital would be shut down. (Cohen himself was not accused.) As part of the plea agreement, fines of $1.8 billion were imposed on the SAC companies—the largest insider trading penalty in history—“split between a $900 million fine in the criminal case and a $900 million forfeiture judgment in a civil money laundering and forfeiture action filed by the government simultaneously with the criminal charges.”
In 2016, the SEC prohibited Cohen from engaging in “supervising funds that manage outside money” for two years “in order to settle charges for failing to supervise” Martoma.
Cohen Resurrects And Has The Ability To Write The Check
After completing his two-year ban by the SEC, in 2018 Cohen started Point72 Asset Management, a $16 billion hedge fund firm. As of publication, Forbes’ real-time estimate of Cohen’s net worth is $14.6 billion.
That incredible wealth is why Cohen easily won the purchase agreement for the Mets over bidders that included Philadelphia 76ers and New Jersey Devils owner Josh Harris and a group that included former MLB player Alex Rodriguez and music star Jennifer Lopez. Cohen’s vast wealth allowed him to make the purchase entirely on his own. How much of the transaction, if any, involves debt has not yet been revealed.
Cohen As A Stabilizing Factor For The Mets: Debt Service
Unlike Sterling Equities, which was mired in the Bernie Madoff Ponzi scheme, Cohen should provide a stabilizing factor financially. He will be able to bear the 15% debt-to-value ratio and $350 million in debt. According to Forbes’ Mike Ozanian, the Mets’ home ballpark, Citi Field, recently saw its debt downgraded to BB+, below investment grade. At the time, credit rating agency S&P Global Ratings said: “A combination of cash on hand and liquidity can keep the project afloat until June 2021. We estimate cash and liquidity in the form of its debt service reserve can cover operations and maintenance (O&M) and debt service obligations for QBC if the entire 2020 season is canceled, and if this occurred would be sufficient to support the first of two debt service obligations in 2021.”
Cohen would be well aware of this as part of his vetting process and has to have calculated what is required to meet the quarterly $44 million PILOT debt service payments, with or without a 2021 regular season with fans in attendance during the coronavirus pandemic.
Cohen As A Stabilizing Factor For The Mets: Player Payroll
Cohen would take over a roster that has only Robinson Cano, Jacob deGrom, Jeurys Familia and Dellin Betances under multi-year contracts for 2021. All other player contracts in 2020 were of the one-year variety. That gives Cohen, a lifelong baseball fan, the chance to open up spending.
While that’s good for Mets fans (and baseball at large), it may create concerns for baseball’s other 29 owners. It will be interesting to see if Cohen makes a big splash and whether he hews closer to what the Boston Red Sox have done (occasionally break MLB’s luxury-tax threshold only to drop below it in subsequent years) or to what the Dodgers have done (spend well more than the luxury-tax threshold for multiple years). While a wildly spending Cohen would be exciting for fans, he could raise the ire of his fellow owners in the “Lodge” if he makes the rest look bad light for showing fiscal restraint, whether that restraint is legitimate because of the pandemic or otherwise.
What The Future Holds
The big question is whether Cohen will be approved by the league’s owners. On the plus side, Cohen provides deep pockets and would ensure that a cornerstone club in the country’s largest market doesn’t fall into the same mess that caused the Dodgers (under Frank McCourt) and the Texas Rangers (Tom Hicks) to file for bankruptcy protection. The fear, of course, stems from Cohen’s old run-in with the SEC.
Outside that, Cohen will almost assuredly have his eye on the purchase of SNY. That may be a harder nut to crack. After all, this isn’t the first time Cohen has tried to purchase the Mets. He walked away from a purchase of the club at a $2.6 billion valuation in February. That deal saw Sterling retain control of the club for five years after the sale, with Fred Wilpon serving as Mets CEO and Jeff Wilpon as chief operating officer during that timeframe. The New York Post reported at the time that Cohen backed out of the deal because he was “deeply unhappy” with a last-minute alteration of the deal by the Wilpons. Given that Sterling is the majority owner of SNY, they may wish to retain it to allow some control from a distance.
If Cohen is approved, will he look to put his own stamp on the club? If that’s the case, could general manager Brodie Van Wagenen be out the door?
In a larger sense, Cohen could breathe new life into the team’s business partnerships given his wealth and his reach. The Mets are an incredible asset because of their placement in New York.
Finally, does Cohen—warts and all—bring addition by subtraction to the New York Mets? Objectively, the Wilpons have not been the best stewards of the club since they took over the club in 2002 for $391 million. Cohen may be the key to righting the ship, but it’s no given. Other club sales have seen fans look to new ownership as the knight in shining armor only to find out otherwise. (Fans of the Orioles didn’t wind up with Jeffrey Loria but didn’t get much better in Peter Angelos when the club was up for sale in bankruptcy court.) If Cohen is approved in the next MLB owners’ meetings, we’ll soon find out.