Barring any last-minute glitches, the Cleveland Indians this month will make available to investors some four million shares of stock in the team. If the public buys the shares at the expected price of $15 apiece, Indians owner Richard Jacobs will realize a $56 million bonanza. The NBA's Boston Celtics, the NFL's Green Bay Packers and the NHL's Florida Panthers have made similar public offerings in the past. What makes Cleveland's deal different is that the promise fundamental to the issuing of new stock—give us your money now, and we'll try to make you more later—is being openly breached from the start.
In documents filed in connection with the offering, the Indians concede that they have pushed profits so hard over the past five years that their current growth rate is unsustainable. They also acknowledge that a hefty portion of revenues during those years has come from postseason receipts (never a lock), while saying that increases in player salaries (a lock) "could have a material adverse effect on the Company's value." Nor do the shareholders have any recourse if they don't like the way Jacobs is running the club. His special Class B stock—of which he owns all 2.3 million shares—has 10,000 times the voting rights of the Class A stock the public is getting.
Despite the dim prospects of any return on their investment, die-hard Cleveland fans will likely snap up the stock and brag to their friends that they "own" a piece of the team. That will only encourage other team proprietors to see stock sales as a no-risk way to reap millions. What looks like an ordinary Wall Street public offering is merely another way for an owner to take money out of the fans' pockets and put it into his own.