Wednesday, November 24, 2010

Papa Ricketts Speaks

A friend alerted Ivy Chat to a speech Joe Ricketts, patriarch of the Ricketts fame, gave a while ago. It was recorded and the video was posted on YouTube for posterity. In the speech, Joe gave some very revealing information on the new ownership of the Cubs. Very troubling information.

First, we learn that Tom Ricketts screwed around while at the University of Chicago. And he screwed around at Wrigley Field.

"(Tom) did not graduate in four years. He did not graduate on time."

Not only didn't Tom graduate on time, but he didn't bother to tell his parents who showed up at graduation that he wasn't going to graduate! "I'm not going to get my sheepskin!" said Tom to Dad. Thank goodness for Brother Pete getting it for Tom and delivering it as a Christmas present.

Why was Tom late getting his piece of sheep? Well, he was at too many baseball games.

"I'm listening to my son tell me all of the games he went to and how he got sucked in and I said, 'Tom! It just occurred to me I paid a fortune for you to go to school and you came over here and watched baseball.' 'Yeah dad, but it turned out OK, right?'"

Yeah, Tom. It turned out just fine. As it would for anyone else who had a billionaire for a father.

Now, Dad starts to talk about the sale.

"Why would I want to buy a baseball team? Or any sports team. I'm not a fan. I'm not a spectator."

So, Joe not only doesn't know what he’s getting into, he also says why would *I* want to buy a team. Not "we" or "the family" as Tom is so fond of saying. Joe knows that this is his team. Sure, maybe the kids will run it, but this is his investment. What this tells us is that major decisions about the team, at least those requiring outlays of cash, are going to have to be cleared through dad.

So, how does Tom get Dad's attention? Money.

"Let me tell you dad. They sell every ticket, every game, win or lose."

Let's ignore whether or not this is factually correct (it really isn't and Aisle 424 has a decent breakdown of the historical attendance). What got Dad’s attention was cash flow.

Huge red flag if you are a Cubs fan. If you are a fan who wants the team to win, you want an owner who wants winning first and cash flow second. You want the guy who owns the team as a plaything. As his fancy yacht that costs him far more than he makes on it but he gets to show off to his friends. The minute you have an owner who is first concerned with profits, you have... well, an owner like the Tribune.

Joe then discusses the negotiations. Long, hard, arduous, and ultimately to the point where Joe and eldest son Pete said, "We're done. Tom, we're not behind you anymore. You either draw the line in the sand and they come over and settle and take this thing or you have to give up." Joe says that this was on a Friday. Tom understood, went back to the Trib, and on Monday they had a deal.

So, the deal got done because the patriarch and the eldest son got firm with the younger, too-busy-watching-baseball-instead-of-going-to-class son. And that got the deal done. Makes you see how Tom got so easily faced by Illinois politicians a few days ago.

Now, one of the things many people have wondered about Tom is how strong his own business is. There are lots of bond traders out there. You would think that a guy who starts a firm to be an underwriter and wholesale distributor of fixed income securities and structured notes would be able to do pretty well considering his family connections to the TD Bank Financial Group. Such a company should be able to get good access to new issues of bonds and securities and make a decent profit. Seems like things weren’t so easy for Tom:

"He loves it and it's just starting to do well now. He’s been at it 10 or 15 years."

It took him THAT long to finally be successful at something he should have had not only a decent bit of knowledge about but plenty of access to deal?

Well, Dad told him to choose between bond trading and the Cubs:

"If you take my money, and you start this business, you buy this baseball team, you have to go over and run it. Because I don't, I don’t want to be exposed to risk. … I don't want you to be distracted by your first love."

Again, Dad states very clearly that the Cubs are being bought with his money. Dad also tells how Tom sold part of his stake in the bond firm so that Tom could be "sort of financially independent." Wouldn't a guy who is the son of a billionaire with a U of Chicago degree, 10 or 15 years in bond brokerage who now owns the Cubs already be financially independent? And it's pretty obvious who Tom is depending on.

But the last 30 seconds of the video is the most revealing about future of the Cubs. First, Dad notes that everyone loves Tom. This video appears to have been taken on April 22, 2010. Of course everyone loved Tom then. The season was three weeks old. One wonders if Dad still thinks this way.

Then Dad ends with this quote from Tom:

"(Tom) does tell me that, 'We got the ingredients, Dad. We got the management and we got the players, so we've got the ingredients to win a World Series.'"

This speech makes a bunch of things clearer, specifically why Crane Kenney and Jim Hendry still have their jobs.

Joe Ricketts knows nothing about sports and is only interested in the Cubs as an investment. An investment of HIS money. Tom is a goof who wanted to buy the Cubs, but could only convince his dad to give up the cash if the business made sense.

Would the Joe Ricketts who gave this speech give his son $400 million to buy a team if Tom told him, "We have to fire the president, the general manager, the minor league director, and unload half the players. We’re going to eat a lot of money to do this and the team will probably have a lousy record for a few years while we clean house. Oh, and the last time the Cubs had a lousy record, seats went empty and they were only refilled by overspending on players."

No chance in hell.

Good breakdown, Chuck. (And thanks for the link)

It really is an unsettling video, but at this point, not at all surprising.

What do you think happens if they don't get money from the state? They say they don't have a Plan B, but you know that PSLs have to have been part of any conversation about raising money from the fan base.

Part of me wants everything they try to fail spectacularly so they have to sell again and cut their (Joe's) losses.
Regarding the Ricketts selling the team, is that even possible at this point? Seems like the Ricketts family overpaid as it is, and the team is unlikely to increase in value under their (thus far) extremely unimaginative stewardship.
If you have a bad investment and it starts losing money, does it make better sense to hold on to hoping that it suddenly starts making money or do you sell it so that your future losses are avoided?
They aren't losing money. The chance that this team sells anytime in the next three to five years is less than that of me starting to like Alfonso Soriano.

Good work. As always I enjoy your take on the team.

keep it up!

Chuck wrote:

"They aren't losing money. The chance that this team sells anytime in the next three to five years is less than that of me starting to like Alfonso Soriano."

That would seem to be about the same odds of this team winning a pennant.

I want to apologize for not joining the "Ricketts suck" parade with you earlier. I am absolutely disgusted with the way this offseason has played out.

Aaron B
Aaron, I don't think the "Ricketts Suck." I think they were an unknown coming in and, what we've learned since, is not very confidence inspiring.
Post a Comment

Subscribe to Post Comments [Atom]

<< Home

This page is powered by Blogger. Isn't yours?

Subscribe to Posts [Atom]