If you are a baseball fan, you will likely know the name Billy Beane, you may not know many other former General Managers, but Billy Beane is one name you may know. The reason you might know the name is Billy Beane was the General Manager of the Oakland A’s, the team did the correct thing in terms of farm system of players, but once a player demonstrated above average talent, the wealthier teams would sign the player. The A’s were owned by an owner who besides the money from the league, had the misfortune of playing in Oakland. The big TV contracts were with the city across the bay – the San Francisco Giants. The Giants stadium is beside the head offices of city and more people cheered and supported the Giants. Oakland A’s for a number of years ranked as the lowest payroll costs in the major league, which is not a bad thing, however for most teams to win the championships you need a few quality players who are a better than their peers. Oakland was competitive but it would be luck if they were going to compete.
Billy Beane found a new way to analyze baseball players and how to think about wins and runs. At the time, baseball scouts used to look for intangibles which they believed lead to success. Sometimes it did, sometimes it did not (a baseball movie you might want to watch is Trouble with the Curve with Clint Eastwood). Organizations such as those with little money have to be creative and open to new ideas and Billy Beane was the first to embrace the use of data-driven analytics, mainly because he had no choice. The success of the use of data to look at baseball differently, allowed the team have success on the field. The success meant every team in all major leagues has a data analytics group. If you want to watch the movie starring Brad Pitt it is called Moneyball and/or you can read the book by Michael Lewis titled Moneyball: The Art of Winning an Unfair Game.
After a career in baseball, Mr. Beane is teaming up with former Goldman Sachs banker Gerald Cardinale to raise $500 million in a public offering. Redball Acquistions, a special purpose acquistion company (SPAC) will issue 50 million units which include shares and warrants.
SPACs typically raise money in an IPO to pursue an acquisition without telling their investors in advance which specific company they will buy.
According to an article from Reuters, SPACs have raised more than $19 billion in 2020. Recent raises were by Churchill Capital Corp IV lead by Michael Klein raised $1.5 billion and Pershing Square Tontine Holdings Ltd lead by Bill Ackman raised $4 billion.
Linking to dividend paying stocks, if an investment bank has a record of beating the stock market, everyone believes they have a great system. If they do it for 5 years, the bank will raise more money and there are enough institutions to give them money to do it again. For smaller investors, we have to look at companies making consistent profits and believe they will do it again. The risk reward is much less as smaller investors but buying into profitable companies allows you to increase your wealth and that is a good thing.
There are more questions than answers, till the next time – to raising questions.