In case you missed it late last week, reports broke – and a source confirmed – that the Ricketts Family is considering selling minority shares in the Chicago Cubs, in part to raise cash to fund the Wrigley Field renovation and development project. Chairman Tom Ricketts has now, himself, confirmed that the possibility is on the table.
“Any time you’re looking at privately financing a big project like this, you’re going to look at all your different sources of potential financing,” Ricketts told Cubs.com. “Most teams are owned by dozens of investors. It’s unusual for anyone to own 95 percent of the team. We’ll look at whether or not that fits for us. It is non-controlling minority shares.”
This is, to me, both simple and obvious, but that hasn’t been the reaction from all corners. Since writing about the possible minority sale, I see an erroneous take repeated again and again: this means the Ricketts Family can’t afford the Wrigley renovation.
“Affording” the renovation, I suppose, means … paying cash for the project? If so, virtually no one in America – not even most billionaires – could “afford” a $500 million project. Why? Because they don’t keep their money in “cash”; they keep it in investments. Like stocks, bonds, real estate, and businesses. You know, businesses like the Chicago Cubs.
Would the Ricketts Family be “affording” the renovation project if they paid for it straight out of Cubs revenues? How about if they took on a huge amount of additional debt? Is that “affording” the project?
No. Instead, the Ricketts Family is selling a portion of one of their many assets – one that has appreciated massively in the last few years, and thus makes sense to sell off a little bit to capture that gain – and it just happens to be the Cubs. This is no different than if they were to sell off a chunk of TD Ameritrade stock, or a chunk of some other business or property they own. I suppose it’s the whole Cubs connection that is throwing folks for a loop, but don’t be confused here: yes, it’s interesting that the thing the Ricketts Family is considering selling to fund the renovation is the Cubs, but it is, in some ways, a coincidence.*
*(Knowing the ownership structure of the Cubs, of course, we can say that it’s not entirely a coincidence. But I don’t want to go too far down a misleading road. The only salient point here is that it really doesn’t matter what asset the Ricketts Family sells to open up cash for the Wrigley deal. They had to sell something, because people don’t just keep $500 million in Benjamins lying around.)
As Ricketts said, most MLB teams are owned by a wide variety of owners, so this move is pretty much in lock-step with the norm in the industry. It just so happens that it could be a good time to sell a portion anyway, with an impending need for cash. Were the Ricketts Family selling a portion of the team to pay off debt (or to get out from under the crushing weight of the Bernie Madoff scandal, as was the case with the New York Mets when they did this a couple years ago), this would be an entirely different discussion. As it is, the Ricketts Family is considering selling a portion of the team to get funds to then invest right back into a part of the organization.
In other words, selling a portion of the Cubs isn’t proof that the Ricketts Family can’t “afford” the Wrigley renovation. It is them affording the renovation. The “can’t afford it” narrative is literally backwards.
The other piece of this to keep in mind: should the Ricketts Family sell a chunk of the Cubs, and use the proceeds to pay for the renovation (rather than just pocketing it), the “value” of the Cubs and Cubs-related assets increases, right? The Cubs with a renovated Wrigley Field are more valuable than the Cubs with a dilapidated and antiquated Wrigley Field. So, in that way, all that’s really happening is the Ricketts Family, the Tribune Company, and whatever outside investors come into the picture, are investing in the Cubs and Wrigley Field, and expanding its value (probably just about commensurately with the investment). The Ricketts Family is no worse for the wear in the long-run, but, more importantly, neither are the Cubs.
The story here probably should have been some variation of, “see how serious the Ricketts Family is about using its own assets to fund the renovation?” Instead, it somehow became the opposite. Years of losing and dwindling payroll – however explainable those things may be – will do that, I suppose.
A final point to reiterate: what’s being consider are minority shares that would not entitle the buyer to a real “voice” in the way the organization is run. From where I sit, that’s the most important part of this whole story. The last thing we’d want to see is the Ricketts Family come in, finally start seeing through a long-term plan, only to then have multiple voices come in and disrupt things. If you read my financial piece, you know that I’m extremely bullish on the long-term future of the organization both from a baseball and business perspective. The sale of minority shares in the team will not impact that view, for me, in any way.