MLB teams seeking market inefficiencies to gain an advantage over competitors have stacked their front offices with data-crunching nerds (I use the term affectionately). Maybe teams also should consider hiring some meme-lord saboteurs.
New Mets owner Steve Cohen has suffered a huge financial loss because a group of Reddit message-board posters decided to damage hedge funds by pumping up the value of GameStop Corp. stock. That would be an amazing sentence in any other time, and for any other team except for the Mets. It’s not so amazing when the star-crossed Mets end up connected to a bizarre story driven by the Extremely Online generation.
The GameStop stock saga could end up benefiting the Braves. Cohen already has started fulfilling his pledge to spend big on Mets payroll. Braves owner Liberty Media has no incentive to drastically increase payroll with general manager Alex Anthopoulos doing more with less. Would Cohen’s reported loss of $750 million-plus change his plans to keep spending?
Cohen has sought to reassure nervous Mets fans. He made light of the GameStop situation in a Twitter post Tuesday. When a poster asked Cohen whether his financial losses would affect the Mets’ payroll, Cohen replied: “Why would one have anything to do with the other(?)”
That’s quite the shrug for a person who lost $750 million in a matter of days. According to the New York Times, Cohen’s Point72 hedge fund also has lost 15% of its value this year. Point72 managed about $19 billion in assets before the GameStop frenzy.
I suppose it’s possible the big losses are no big deal for Cohen. Forbes estimates he has a personal net worth of $14.6 billion. Or maybe Cohen figures the rules will be changed to protect hedge-fund investors like him now that small-time investors are taking advantage of them. That’s already happening: online trading platform Robinhood and broker TD Ameritrade have restricted trades of GameStop stocks and other companies targeted by the online posters.
The GameStop saga began when Reddit posters noticed that institutional investors were “shorting” the stock last year by betting they’d profit once the video game retailer tanked. One of those investors was Melvin Capital (Reuters reports that Cohen’s Point72 has about $1 billion under management with Melvin). The WallStreetBets subreddit crowd ruined Melvin’s plan by buying up the stock, increasing its value by about 700% this month and causing short sellers to abandon it.
The “short squeeze” put Melvin Capital in financial peril. Cohen’s Point72 transferred $750 million to the fund managed by one of his former employees, Gabe Plotkin. Melvin received a total of nearly $3 billion in aid. But Plotkin told CNBC on Tuesday afternoon that the fund had conceded defeat by closing its short position on GameStop.
We should soon get a clue whether Cohen’s losses will affect the Mets’ payroll. The team reportedly is in the running to sign top free-agent pitcher Trevor Bauer. The Mets have never paid the luxury tax. They almost certainly would have to do it to sign Bauer.
Their 2021 tax payroll is about $180 million, which is $30 million below the threshold. Bauer’s salary should exceed that figure. (The Mets also could use a center fielder and reportedly are in talks with Jackie Bradley). The Mets will be overflowing with pitching if they sign Bauer and if right-hander Noah Syndergaard makes a successful return from March elbow surgery.
Dan Szymborski’s ZiPS projections at FanGraphs forecasts a 4.4 WAR for Bauer, sixth-best for National League pitchers. Mets ace Jacob deGrom (5.1 WAR) ranks fourth. The Braves have a good rotation, and their top two projected pitchers are Charlie Morton (2.8 WAR), Max Fried (2.7). (Mike Soroka, recovering from an Achilles surgery, is projected to compile a 2.0 WAR.)
The Mets with Bauer would challenge the Nationals for the NL East’s best staff. Unlike the Nationals, the Mets have a good lineup to back up the pitching. It’s the Mets, so you expect injuries to pitchers and other bad luck. But they are on the cusp of becoming another powerhouse for the Braves to contend with in their chase of an NL pennant.
The Braves have been able to look down on the Mets for most of the past 14 years. New York won the East in 2006 before going on to lose Game 7 of the NLCS to the Cardinals in the final inning. Since then the Mets have won one division title and finished fourth seven times. They won the pennant in 2015 but have no playoff victories since.
The rebuilding Braves were two games better than the Mets in 2017. They’ve won the past three East titles while the Mets finished fourth, third, and fourth. The Mets spent roughly $41 more on salary than the Braves over those three seasons. They’ve had low payrolls for the New York market.
Cohen already is changing that. The Mets have $162 committed to 2021 salaries, fourth-most in the majors. It’s $15 million more than the Mets spent in 2019, the last full MLB season.
The Mets acquired star shortstop Francisco Lindor in a trade this month and plan to sign him to a long-term contract before he becomes a free agent after the season. In December, the Mets signed All-Star catcher James McCann (four years, $40.6 million) and reliever Trevor May (two years, $15 million). Right-hander Marcus Stroman accepted the team’s $18.9 million qualifying offer in November.
As of Thursday afternoon the Mets were getting the fourth-shortest odds (6-1) to win the NL pennant behind the Dodgers (2-1), Padres (4-1) and Braves (5-1). Adding Bauer would probably at last pull them even with the Braves on the betting markets. The Mets cleared $5.2 million in payroll and opened a rotation spot by trading lefty Steven Matz to the Blue Jays on Wednesday night.
One reason the GameStop story makes Mets fans nervous: previous owners Fred Wilpon and Saul Katz were caught up in Bernie Madoff’s Ponzi scheme. Wilpon later paid $162 million to settle a lawsuit filed by a trustee seeking to recover funds from investors who profited from the scheme, knowingly or not. Mets fans rejoiced when Cohen bought the Mets from Wilpon and Katz for a record $2.475 billion and became the MLB’s richest franchise owner (the former owners retained a 5% stake).
At his first news conference as Mets owner, Cohen pledged that they would spend like a “major-market team.” The Mets last won the World Series in 1986 (with help from Bill Buckner). Cohen said he’d be disappointed if they don’t win another one within 3-5 years, if not sooner.
That was before Cohen got involved in a battle between message-board posters and hedge funds. The posters are winning so far. Cohen is among the losers. Maybe he really does consider those losses pocket change. Or perhaps meme lords will indirectly affect the NL East race.
It’s a very American (and Mets) story.
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