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Indians Owner Is Pitching the Stock After Slide

October 15, 1998| Bloomberg News

Think the Cleveland Indians hit bottom when they lost the American League pennant to the New York Yankees? Think again.

On Wednesday, a day after Indians shortstop Omar Vizquel grounded out to end the American League championship series, the stock of Cleveland's parent company sank to a new low of $5.38 before closing at $5.63, down 25 cents, on Nasdaq.

Another postseason failure by a team that hasn't won a World Series in 50 years may have been all some fans needed to dump their shares of Cleveland Indians Baseball Co. Others may fear that the loss of Series revenue will make it tougher to earn a profit this year.

The stock is down 63% since owner Richard Jacobs sold a minority stake of 4 million shares for $60 million, or $15 a share, in June. Jacobs controls 99% of the firm's voting rights through ownership of a separate class of shares.

The problem for serious investors is the company's growth prospects. The Indians have sold every seat since 1996, a Major League Baseball record for consecutive regular-season sellouts.

"What do you have when you buy a stock certificate other than something to put on the barroom wall?" asked Paul Much, a sports franchise analyst with the investment bank Houlihan Lokey Howard & Zukin.

Jacobs is trying to convince investors that the Indians stock is more than a souvenir. He said last month that he will use the Indians as a vehicle to create an entertainment and leisure company.

For now, the Indians may be victims of their own success, which includes four straight division titles. Last year, they earned extra money from an appearance in the World Series. The loss to the Yankees will make it tougher to keep pace.

"Every postseason game is incremental revenue," said Rick Burton, director of the Warsaw Sports Marketing Center at the University of Oregon. "This stock could decline until spring training, when hope springs eternal."

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