Two small words that describe why I'll never, ever buy stock in MSG
As an investor who loves special situations and an avid sports fan, one would think that the spin-off of a company that has assets including a professional sports team would be right up my alley. Unfortunately, I cannot bring myself to by stock in Cavlevision's recent spin-off Madison Square Garden (MSG). Two small words describe why...James Dolan.
Let's say that you were the owner of a company and you brought in a president or CEO who was singlehandedly responsible for destroying your company's performance for half a decade. One would think that that individual would be fired, but would you honestly consider bringing them back a mere two years later to essentially run your organization again? Of course not, but that is exactly what James Dolan and his infatuation with Isiah Thomas are doing with the New York Knicks.
Thomas was hired as by the Knicks as their President of Basketball Operations in December of 2003. By the end of the 2005-2006 season, the Knicks had the league's highest payroll and its second worst record. During his tenure, Thomas dolled out bad contract after bad contract and the organization was in complete turmoil. His teams consistently spent the most money and got the worst results in the league. Thomas was eventually fired by MSG more for his involvement in a sexual harassment lawsuit that the organization lost to the tune of $11.6 million. Hewlett-Packard (HPQ) just fired its superstar CEO Mark Hurd for violations that weren't anywhere near as egregious as Thomas', and here the Knicks are brining Thomas back into the fold.
A repeat of such events would not be a positive for investors in MSG. Take a look at the latest headline on the Isiah Thomas / Knicks soap opera from the New York Daily News:
Now that Isiah Thomas is back, Donnie Walsh needs to plan his exit from the Knicks and James Dolan
As for Walsh, the smart money says Thomas is his successor-in-waiting. The transition may not take place for another two years, but it's coming. Here's the thing: Why wait? Walsh should force Dolan's hand today.
Fire the Knicks before they humiliate you.
Walsh doesn't need this aggravation. Not at this stage in his life and career. This is a man who has faced two major surgeries in less than two years while still managing to extract all the bad contracts he inherited from Thomas.
Go now and Walsh leaves the organization in better shape than he found it. The New York City Sanitation Dept. will give him a plaque for cleaning up the biggest mess in town...
Walsh is too respected by his peers to take orders from Dolan via Thomas. We know Walsh has no use for Thomas and therefore can't work with him or more precisely work for him. Full autonomy? Please. Thomas is calling the shots now.
There is too much distrust and bad blood already for this to be anything less than a terrible marriage. The fact that Dolan can't see that Walsh has done a solid job tells you all you need to know. This is the same guy who blames the media coverage for nine straight losing seasons.
So quit, Donnie. Resign. Walk away. You've already said you'll stick it out because you're a class act. But you deserve better.
Donnie Walsh has successfully cleaned up the complete mess that Isiah Thomas left him. The addition of Amare Stoudemire this off-season instantly makes the Knicks a better team, perhaps even one that will squeak into the playoffs and get the company some of the financial windfall that comes from getting there.
Furthermore, the Knicks are now in good shape salary cap-wise. There's a good chance that they will be able to add another solid player to their roster such as Carmelo Anthony or Chris Paul. It would be hard for Isiah to screw up this team enough to prevent them from getting better in the short-run, but as a long-term investment I don't want any part of any organization that's run by him or James Dolan.
This isn't venom being spewed by a disgruntled fan of the New York Knickerbockers. While I am a fan of basketball and played it nearly every day for the better part of a decade I have no love for the Knicks. I'm just an unbiased sports fan who is disgusted by how this once-great organization is being run.
I'd love to hear others' thoughts on MSG. Is spin-off an attractive enough investment opportunity to overcome incompetent management? It could very well be, but I for one will not be along for the ride. If anything, I'm considering shorting the stock in CAPS.