This is fiction. FICTION. I don't think the conspiracy theory espoused below is true, even remotely. To be perfectly clear: THIS IS FICTION AND I AM NOT SUGGESTING, EVEN IN THE SLIGHTEST, THAT BUD SELIG IS MASTERMINDING A BIG CONSPIRACY.
But man, it sure was fun to write this.
Hit the jump, would you?
It took you ten years, but you squirreled away $100,000. Stuck it in CDs, money market accounts, and the occasional blue-chip stock. So when you met Ernie Badoff, the timing couldn't be better.
Badoff was a friend of a friend. You didn't know much about him at the time other than he had a way of turning money into more money. A lot more money. Returns of 3x were common; 5x wasn't unheard of. All in six months time. Pure, unadulterated, magic.
You met at a party and that evening, he sent you the email: "I am going to make you rich, but it's complicated. Send me $100k and your confidence. I'd love to have you as part of this scheme." You were drunk and the potential excited you. Online banking has never been so dangerous -- a few clicks later, Badoff had all of your money.
After a six month freakout, another note came: "Here's $500k. Thanks!" And bam, half a mil.
Humbled by the experience, you turn back to responsible investing. You return the $100k to your various mostly liquid investments. You take another $100k and buy the frozen banana stand in Coney Island you've been working at all these years -- at that price, robbery, but the owner wants to retire and move to a Bluth Retirement Complex. You take another $250k and use it as a down payment for a house worth about twice that. The last $50k you toss at a five fledgling internet startups -- Rent-A-Goldfish.com, Rate-My-Poop.edu, SBNation.com, BoogerExchange.net, and AdultBabyPicures.co.uk.
Fast forward three years later. Your house is worth the same amount and you've not paid down the mortgage and your $100k in various liquid holdings is worth roughly the same. Four of your five internet investments have gone belly up, but that SBNation investment is now worth $350k -- on paper, at least. (Bullseye!) And the banana stand, it's now worth $500,000 -- and you want to expand. After all, there's always money in the banana stand!
You go to the bank and borrow $300,000, using the banana stand as collateral, and offering a personal guarantee on the loan in case the banana stand burns down or something. Because this fictional story needs to tie up a loose end, there's some weird clause in the loan document which puts a lien on your house, so you can't sell it unless you pay the bank back first. (Whatever, it's less weird than what's happening in MLB.)
With the money, you expand. Three banana stands, one each in Prospect Park, Madison Square Park, and in the crown of the Statue of Liberty. You expect each to break even within 18 months and within a few years, be worth $500k, just like the Coney Island one. You're already a paper millionaire -- now it's time to turn paper green. Or, yellow, frozen, and tasty.
And now, you're in the big leagues. You get a phone call from the top banana, Spud Belig, inviting you to join Mmmm, Love Bananas ("MLB"), an exclusive organization of the top banana vendors, frozen or otherwise, in the country. The only other MLB members in New York City are Hal Stein and Hank Brenner, who together own a multi-million dollar banana-themed sex toy company, the New York Yank-Mes. (Don't laugh, the A-Rod, their biggest seller, at over $250,000 annually, is used by Cameron Diaz!)
You're flying high. Everything's coming up Milhouse.
And then... crash.
Badoff is arrested. It turns out that he used your $100k to pull off a complicated confidence scheme, where he pilfered $1 million from old age homes and children's hospitals around the country. He kept half for himself and gave you, his apparent partner, the other half. Of course, Badoff blew his 500 big ones on cheap women and expensive cigars (or do I have that backward?), so while he's going to jail for a long, long time, the old ladies and sick kids are suing you -- yes, you -- for the $1 million. The smoking gun: that email he sent you, which in retrospect, is an obvious code, using the LWOES method. (That stands for "Last Word of Each Sentence.")
You're worth more than $1 million, but if you lose, it'll cost you just about everything. Let's run down your assets:
1) Your house. Worth $500k, but you owe $250k on the mortgage, so net $250k. Oh, and you can't sell it without the first $300k going to the bank because of the banana expansion loan.
2) Various near-cash assets. $100k.
3) The Coney Island banana stand. $500k, but with $300k in loans taken against it, so net $200k.
4) The other three banana stands. $100k each, but not yet making money. Probably, collectively, worth a bit less than $300k, but long-term potential of a lot more.
5) Your super-minority stake in SBNation.com. $350k, but totally intangible and almost totally illiquid. Can't sell it, can't borrow against it, can't eat it, can't live in it, and would probably have to sell it at sizable discount to liquidate it.
Total assets: $1.3 million, but only $100k or so in a liquid form. If you lose the lawsuit, with attorney's fees, you probably lose everything. The lawsuit is what we call a "death blow," so you decide to fight.
Then, the sick kids and old ladies make you an offer: $300k and call it a day. Good news: You'd do that if you can. Bad news: You can't really do that without selling off the banana stand business. And you can't do that because you've been selling frozen bananas your whole life, and you'd be left with nothing but your house, no job, and no other skills. So, you vow to fight.
Take on a minority owner in the banana stand. That person would fork over the $200k, get 25% ownership (which is way too much, given the debt you keep poo pooing), but have no power, no rights, maybe get discounted day-old frozen bananas, and well, basically be a total and utter moron. With Ronald Dump now running for Ambassador to Kenya, your most likely candidate for "utter moron with lots of money" is out of the picture. Minority owner: Unlikely.
Bad bad bad.
The only people -- at least, in the banana novelties business -- who have it worse? Court McFrank of Los Angeles. He and his wife collectively, own a frozen banana stand which, above it, has their two bedroom, two bathroom apartment. And they're getting a divorce. The home/business combo is worth $750k easy (comparable to yours, before debt and expansion) but the McFrank's divorce and previous poor management have destroyed its value. MLB has stepped in, trying to broker a deal (they don't want LA to lose its most impressive banana novelty store!). Rumor has it that MLB will, on behalf of the McFranks, take a bargain base
And this, my friend, is your ticket out.
It's well known that you and Spud Belig have been good friends, ever since a few years ago when the Banana Growers Association went on strike and you helped Spud push back. (Also, rumor has it that you and Belig play "Hide the Banana" on occasion.) Belig approaches you with an offer you can't refuse:
1) You sell your house and New York banana stand franchise for $600,000. Ray Devil, owner of the Tampa Bay banana sex toy company, has long wanted to enter the frozen banana treats market. (Who can blame him? He's up against the A-Rod *and* the Big Papi, while his best seller is the inconsistent BJ Upton!) You'd be taking a 25% haircut, but hey, no one made you give money to Badoff.
2) You'd give $300k to settle the claims against you.
3) The other $300k, plus your SBNation stock, would go to McFrank. In exchange, you'd get McFrank's franchise and his house, free and clear.
So you'd end up keeping that cash you have, and basically starting over as the owner of one lonely banana stand, out in LA though. Which, given your weird obsession with the Dodgers, probably suits you fine.