How hedge fund giant Steve Cohen could change the NY Mets
Hedge fund billionaire Steven A. Cohen is reportedly working on a deal that, if approved, would make him the new owner of the New York Mets. A decades-long Mets fan, Cohen would bring his estimated $14 billion fortune to bear on the Major League Baseball's sixth-richest franchise.
It's not the first time Cohen has tried to buy the team. Here's what fans can expect if the investor succeeds in his latest bid.
Who is Steve Cohen?
Cohen runs the hedge fund Point72, which was formed after his previous firm SAC Capital was convicted on insider trading, paid a $1.8 billion fine and had to close. While Cohen personally was never convicted of a crime, he agreed to a temporary ban from managing clients' money by the Securities and Exchange Commission.
How did Cohen make his billions?
Cohen, 63, launched his first hedge fund in the mid-1980s. Originally, Cohen's strategy was to quickly buy and sell stocks in large volumes — 20 million shares a day — booking small profits on every trade along the way. A trader once described Cohen's strategy as "active trading on steroids."
But with the ascent of supercomputers and high-frequency trading programs, Cohen needed a new strategy. Prosecutors alleged he pushed for getting any piece of information that would give his traders a so-called edge. While that generated profits for his firm, it also led to charges of insider trading.
Cohen avoided criminal charges, but the SEC's settlement included a 2-year ban on starting a new fund. Last year, when the ban expired, Cohen's Point72 opened its first hedge fund and was able to attract $5 billion from investors.
Financial publication Institutional Investor estimated that Cohen made $70 million last year, while Forbes estimates he is worth nearly $14 billion — more than enough to acquire a majority stake in the Mets.
What's his link to the Mets?
Cohen was born and raised in a well-to-do village on Long Island that is 15 miles from Citi Field, the current home field of the Mets. He watched his team's first home game when the club played in Manhattan at the Polo Grounds, and grew up as a lifelong fan.
The Mets eventually moved to Flushing Meadows and played home games at Shea Stadium, where Cohen continued to watch in the 1960s and 1970s. But it wasn't until decades later that Cohen made an effort to buy the team he grew up rooting for.
With the billions of dollars he had amassed from SAC Capital, Cohen became the front-runner to buy the Mets from owners Fred and Jeff Wilpon in 2011, but that deal eventually fell through. One year later, Cohen bought a 4% share of the Mets for $20 million and has kept that share ever since.
Is this a smart money move for Cohen?
At least one sports accounting and taxation expert says yes.
The U.S. tax code allows someone buying a sports team for more than $2 billion to amortize that activity over 15 years. Former Microsoft executive Steve Ballmer used the provision when he bought the Los Angeles Clippers in 2014 and hedge fund manager David Tepper could use the same so-called "goodwill" clause for his 2018 purchase of the Carolina Panthers.
That tax provision means a sports team purchase provides a great tax shelter, said Michael Breit, partner-in-charge of accounting firm EisnerAmper's sports and entertainment group.
"When you see that this is potentially a $125 million tax deduction, that's a pretty good value proposition for people like Steve Ballmer and Steve Cohen," Breit said.
How would Cohen's ownership change the team?
Cohen could "open up his wallet and buy whatever player he wants," Breit said.
Cohen has given no indication publicly that he intends to buy a "super team." However, because of the way MLB's salary cap is structured, there's little to keep Cohen from pilfering the league's top talent and bringing them to Queens.
As for the Mets' top management, it's unlikely to change anytime soon.
Fred Wilpon will remain Mets CEO for five years and Jeff Wilpon will remain chief operating officer for the same time frame, the Mets said earlier this week. Cohen himself would remain Point72's CEO.
What are the next steps for Cohen?
Cohen must first finish his negotiations with the Wilpons on terms that reportedly would give him an 80% stake in the team. After that, the deal would be presented to MLB owners for approval. Cohen needs a commanding majority of owners' approval to finalize the deal.
League officials have not released details about when that vote might take place or commented overall about Cohen's plans to become the owner.
—CBS MoneyWatch Senior Reporter Stephen Gandel contributed to this report.
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Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
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