Defining Moneyball Upward

Plus: Russia wants to relive the Sputnik glory days ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

December 22, 2022

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Good morning.

It’s not everyday that a celebrity spokesperson disavows merchandise bearing their image, forcing the manufacturer to pull the entire line just three days before Christmas. But that’s exactly what happened Wednesday after “Off My Face” singer Justin Bieber took to Instagram to demand his face be removed from the recently-launched merchandise collection.

On Monday, Bieber urged his followers to refrain from purchasing the “trash” and H&M promptly acquiesced and removed the items from their stores and website. That’s a lot of Ghost shelves three days before Christmas.

Morning Brief

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The Mets are making the Yankees look like cheapskates.

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It’s lights out for a potential AMC acquisition of Cineworld theaters.

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Russia plays catch-up with commercial satellites.

Sports

The 2023 Mets Set to be MLB’s Most Expensive Team

Meet the Moneybags Mets.

The Metropolitans’ Steven Cohen, baseball’s richest owner and CEO of hedge fund Point72 Asset Management, has shattered the record for the most expensive team in MLB history, creating something of an alternate universe in which the Yankees (and everyone else) are but a poor cousin to the Amazins.

Nice Game, Pretty Boy

Infielder Carlos Correa agreed to sign with the San Francisco Giants and was even supposed to attend a press conference Tuesday donning the team’s white, black, and orange jersey. But the deal fell apart because of unspecified issues with his physical exam, the NY Post reported. Like Jackie Robinson stealing home, Cohen swooped in and offered Correa a whopping 12-year, $315 million contract.

The 2023 Mets payroll (so far) is projected to be $384 million, with more than $110 million in luxury taxes to follow. In a not-so-close second, the Yankees have a projected payroll plus tax of $290 million, and the Oakland Athletics are at the bottom of the list with roughly $70 million, which is less than what the Amazins are paying their top two starting pitchers. Cohen is making it rain so hard that those 29 more frugal franchises will reportedly share $55 million of the Mets’ luxury tax payout.

Cohen, whose $17 billion net worth makes him absurdly rich even for a baseball team owner, has been on an offseason spending spree, hoping to return the Mets to their ‘69 and ‘86 glory days. And Correa was just the latest investment:

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Cohen has shelled out more than $100 million for Justin Verlander, Kodai Senga, Jose Quintana, David Robertson, Brandon Nimmo, and Edwin Diaz.

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The MLB has collective bargaining tiers to try and keep the richest owners from just buying up all the best players. If you’re going to offer an athlete $300 million, you better be ready to fork over a lot in taxes as well. The latest threshold was set at $290 million, and was already dubbed “the Steve Cohen tax.”

In an interview with the NY Post, Cohen was unfazed by his extravagant spending and the taxes, saying, “What the heck’s the difference? If you’re going to make the move, make the move.”

Hands Off Your Money: No official decisions have been made, but last month, Cohen and Point72, which managed $26 billion as of July, weighed gating investor redemptions similar to what groups like Millennium Management, Citadel, and Blackstone’s real estate income trust have done. So while Cohen has no problem writing checks like the son of a king, he does take issue with investors who want their cash back.

– Griffin Kelly

Hollywood

AMC Backs Away After Talks To Acquire Cineworld Theaters

(Photo credit: Paul Sableman/Flickr)

To paraphrase the immortal words spoken in Glengarry Glen Ross, a movie that once played on hundreds of AMC screens: Put that coffee down, AMC. Coffee is for closers.

On Wednesday, news broke that AMC Theaters won’t be closing its deal to acquire some Cineworld theaters in the US and Europe following the Regal-theater parent company declaring Chapter 11 bankruptcy in September. Count it as a whiff in windmill-chasing CEO Adam Aron’s post-meme stock quest to “save” cinemas.

Meme Streets

When meme stock traders lifted AMC to near inexplicable heights last year, the company found itself suddenly liquid in a new, streaming-dominated world where movie theaters looked all but extinct. In the process, Aron, who took the company’s reins in 2014, became something of an internet hero, engaging regularly — and seemingly quite earnestly — with new shareholders on Twitter as he publicly vowed to rescue the movie theater business. The CEO then led the company through a series of moves that range from strange-but-somewhat-logical (like launching a branded retail popcorn business) to completely out of left field (like investing in a gold and silver mine).

That meme stock magic has completely vanished this year. AMC’s share price has plummeted some 80% in the past 12 months, leaving its stock ticker below where it traded in pre-pandemic 2019. When Cineworld went under late this summer, it looked like a sensible deal for AMC to widen its footprint. Instead, the two companies now appear further apart than a rom-com couple at the second-act break:

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AMC says the acquisition would have been financed partly through the issuance of its preferred stock and debt financing provided by Cineworld’s post-bankruptcy lenders. However, the company claims the deal fell apart partially due to Cineworld not providing said lenders with important non-public documents and forecasts.

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On the other hand, the failed deal may come down to simple dollars and cents. Late this summer, AMC announced a preferred share program to raise capital with a special dividend named APE for “specific” shareholders — but discussions broke down after the APE shares slipped from trading above a dollar to just $0.69, sources told the Wall Street Journal.

Still, AMC getting their hands on Cineworld theaters remains a likely outcome. “[The company is] kicking the tires and making a big deal of walking away,” Wedbush Securities analyst Michael Pachter told The Daily Upside. “They may pay a small amount to take over a handful of locations, but likely will just pick them off in bankruptcy.”

The Way of Water: AMC’s liquidity is starting to run dry. In an August earnings report, Aron boasted that the theater chain still had “more than $1 billion of liquidity” from the meme stock run, but one fiscal quarter later, the company announced it had burned through almost $180 million in cash en route to an overall $270 million net loss — despite an increase in revenue. Worse, some box office analysts are expecting an even weaker theatrical slate in 2023 than in 2022. Paging James Cameron: to avoid termination, the movie world, somehow, needs many more Avatar sequels.

– Brian Boyle

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Space

Russian Space Agency Sells Bonds To Fuel Satellite Program

Russia put the first-ever artificial satellite Sputnik into orbit in 1957, but these days its industry is for the birds.

The head of Russia’s space agency Yuri Borisov said in an interview Wednesday that the Kremlin plans to rectify that by selling debt to raise around $710 million to plug into satellites. Borisov acknowledged that Russia has fallen behind the US and China on satellite launches.

Passing Over You Like a Satellite

Satellite launches have become more of a private sector business since Sputnik. Companies including Musk’s SpaceX and British OneWeb have launched thousands of birds, and more competitors are on the way. Amazon has a division dedicated to building its own constellation of commercial satellites and has already booked spaces for them on rockets with three separate companies including Blue Origin, owned by Amazon founder Jeff Bezos. China’s space program has also been gathering momentum thanks to a nascent commercial sector, and has launched a record-breaking 59 orbital missions so far this year.

The ramping up of the commercial space race has sent a Cold War-flavored chill down Russia’s spine, with SpaceX shipping Starlink satellite equipment to Ukraine to bolster its internet infrastructure:

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Borisov said Russia produces around 15 satellites per year. To put that in perspective, Starlink launches its satellites in batches of around 60 and currently has over 3,200 in orbit. The FCC has granted Starlink permission to launch 12,000 satellites, and the company says its goal is to one day top 40,000.

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Racing to catch up with the US and China on satellite dominance will be expensive, and, as an industry, satellites don’t promise a great return on investment. Starlink is still a money-loser for SpaceX, and OneWeb had to be bailed out by the British government in 2020 after declaring bankruptcy.

Tally-ho! If Russia is re-learning how to run in the space race, the UK has just begun toddling. The British aviation regulator issued licenses to Virgin Orbit which would allow it to conduct the first-ever satellite launch from Blighty using a converted Boeing Max 747. This comes just one month after Britain’s first-ever spaceport got its launch license. So in the future, you can expect to see fewer bluebirds over the white cliffs of Dover.

– Isobel Asher Hamilton

Extra Upside

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Are you ready for some: YouTube nears a deal for NFL’s Sunday Ticket package.

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Mr. Zelensky goes to Washington.

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