Hedging His Mets

When it was revealed last week that powerhouse hedge fund manager David Einhorn had entered into exclusive negotiations with the Wilpons to become their new equity partner,  I had little doubt about his intentions. Guys who manage billions in volatile assets and engage in high stakes poker games — literally as well as figuratively — don’t aspire to be docile and timid minority stakeholders.

As details of Einhorn’s proposed offer have trickled out in recent days, it seems clear that he is approaching this opportunity with Mets in much the same way he would any of the distressed and undervalued companies that he is well-known to target. An article in today’s New York Times by Ken Belson and Peter Lattman provides insight into how Einhorn could accumulate up to 60 percent of the team within the next three years.  If accurate, then I have to tip my cap to Einhorn. This is a man who knows he has leverage and wields it like a sledge-hammer.

“Anytime you hear a distressed seller pitching a deal where the valuation and risks don’t add up, either you take a pass or you pull pages from the vulture investor playbook,” said my friend John Hyde, who has years of experience handling debt restructuring and M&A for troubled companies. “In this case, Mr. Einhorn surely insisted on onerous terms and conditions in exchange for his cash.”

If you doubt this for a  second, consider the following: according to Belson and Lattman’s sources, the Wilpons can block Einhorn’s attempt to gain a majority stake by repaying his original $200 million investment. Just one catch: Einhorn gets to keep his 30% stake. At zero net cost.

I would call that onerous to the sellers. And a very sweet deal for the buyer.

So David Einhorn is a savvy, aggressive, creative investor. It’s hard to argue with that. But should he ever gain controlling interest of the team, what kind of owner would he be? Far too early to tell, but you got  a hint of his management style when he recently called for Microsoft to replace CEO Steve Ballmer. Einhorn’s Greenlight Capital has amassed a considerable position in Microsoft so people listen when he makes such pronouncements. Shares of the software giant rose after Einhorn’s public statement.

Anyone who would openly question the leadership of Microsoft probably would not be shy about holding his players, manager, front office, fellow investors, and himself  (the guy who has the most to gain and lose, after all) highly accountable.

I think that bodes well for the future of the Mets.

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