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Katherine Burton and Tom Maloney | Oct 07, 2022
(Bloomberg) — It’s make-or-break time for Steve Cohen’s version of Moneyball.
Since buying the New York Mets two years ago, the hedge fund titan has wasted little time flexing his $12.8 billion fortune, building the most expensive roster in Major League Baseball so quickly that owners and players imposed a new cost — the so-called “Cohen tax” — for big spenders. It’s a far cry from the strategy of Billy Beane, a former Mets first-round draft pick, who popularized sabermetrics some two decades ago by making the most of a tight budget with the Oakland Athletics.
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Cohen, 66, is undeterred by such spending constraints — the weakest among the top US sports leagues — when it comes to the team he’s supported since childhood. The Mets are playoff-bound for the first time in six years, with a shot at the franchise’s first World Series championship since 1986, when he was just a young trader at a second-tier New York brokerage.
For as much as Cohen’s freewheeling ways have altered the Mets’ course, so too has the franchise changed him. At his hedge fund, Point72 Asset Management, performance has lagged behind some of its biggest rivals for the past few years. But insiders say the hyper-competitive boss whose catch phrase has long been “Do you even know how to do this f-cking job?” is giving his portfolio managers more breathing room.
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His legacy is shifting as well. Cohen’s previous claim to fame was a 30% annualized return atop a firm, then called SAC Capital Advisors, that paid a record $1.8 billion fine to settle a seven-year federal insider-trading probe. Now he’s more like Mr. Met than the inspiration for Bobby Axelrod of Showtime’s Billions: This year there were almost 2,000 mentions of Cohen in the press connected with the team, compared with 23 citing insider trading.  He and his wife Alex have ambitions to reshape Queens by developing the Willets Point area, possibly obtaining one of three casino licenses designated for downstate New York.
Cohen, though, says the biggest difference over the past two years is that he’s having more fun. And everything else — cementing his status in New York, raising the table stakes in professional baseball, spending less time obsessing over his hedge fund — is an offshoot of that.
“The firm’s a lot bigger than me today, which is actually very liberating,” Cohen said in a May 2021 interview with Jawad Mian, author of Stray Reflections. “I’m happier, my employees are happier, my life feels better, feels more fulfilling. It’s kind of a cool place to be.” 
The Mets will face the San Diego Padres on Friday at Citi Field in the first game of a best-of-three series. They missed a chance to earn a bye and avoid a potential early matchup with the league’s top team, the Los Angeles Dodgers, after being swept by the rival Atlanta Braves in a three-game series last weekend. Cohen flew down for those contests and people familiar with the matter say he was despondent after the string of losses.
Still, it’s a minor setback relative to the final years of SAC Capital, which Preet Bharara, then the Manhattan US Attorney, called part of a “criminal enterprise.” The firm pleaded guilty in 2013 to reaping hundreds of millions of dollars in illegal profits and allowing a culture of criminality that rewarded brazen insider trading. The Justice Department’s effort to root out market cheating in the wake of the 2008 financial crisis netted scores of convictions and guilty pleas.
Cohen, who consistently denied wrongdoing, was never charged or sued, though he agreed not to manage outside money for two years. He declined to comment for this story.
After the firm’s guilty plea, he changed its name to Point72, returned client capital and traded using his own fortune. By early 2018, he was back to managing money for outside investors.
Cohen still trades a small portfolio every day, holds calls with his portfolio managers on weekends and runs day-to-day business at Point72. But his time — and his competitive streak — has also shifted to baseball. He personally tweets during games, responds to texts on roster changes and talks to Billy Eppler, the Mets’ general manager, about once a week — often on weekends.
In the two years since Cohen owned the Mets, his $26 billion firm has posted positive returns, but has lagged behind his biggest competitors including Citadel, Millennium Management and D.E. Shaw. In 2019, his 16% gain topped all of those hedge funds except Citadel. Point72 has never managed more money, about a third of which is Cohen’s.
The firm has also changed over time, with fewer seasoned risk-takers overseeing big pools of capital and more younger managers who are now experiencing the most volatile markets of their careers.
Meantime, Cohen is applying a hedge fund-like approach to running the Mets.
As the richest individual MLB owner, he’s pressing his monetary advantage — what traders might call an “edge.” The team has a 2022 payroll of $314 million, according to data collected by Spotrac, a sports data provider. That’s not only well above the lowest luxury tax threshold but $24 million over the “Cohen tax” limit, introduced at the beginning of the year in the new collective bargaining agreement, at least partially in response to concerns about his spending.
This kind of penalty — a “competitive balance tax” in MLB parlance — isn’t new. Many big market teams, from the crosstown Yankees to the Dodgers, have exceeded the threshold multiple times. But by design, it’s meant to become draconian in a hurry: For each incremental dollar over $230 million, teams must pay a 20% rate, with surcharges as high as 60% on top of that. The base rate increases to 30% in the second consecutive year and 50% for the third year onward, meaning Cohen would face a 110% tax rate for repeatedly breaching his namesake limit.
The Mets’ losses are more than $100 million annually, according to people close to the team. Cohen’s reaction to the higher tax nicknamed for him was pride: “Better than having a bridge named after you,” he quipped to reporters as spring training opened.
It’s a change from the team’s previous owners, the Wilpons. The family was criticized for not spending enough after the collapse of Bernie Madoff’s Ponzi scheme ensnared both them and the Mets.
Cohen is more than just a spendthrift, however. Through his hedge fund, he’s harnessed some of the elements that made Beane a revolutionary figure for America’s pasttime. A few Point72 quants, including Sameer Gupta, head of data at the hedge fund, have lent their expertise to the team. Statistics and algorithms can help decide everything from team roster, to where an outfielder should stand on the field, to which pitch should be thrown to which batter.
He’s also investing in the Mets minor league system, a long-term play that can improve available talent and reduce the need for free agents.
Another lesson from money management that Cohen is applying in drastic fashion: the need to cut one’s losses quickly.
His first year after buying the team for $2.4 billion was marked by tumult: He hired Jared Porter as general manager, but fired him after less than two months when it emerged that years earlier he’d sent explicit messages to a reporter. Zack Scott took over in the interim, but was fired after an arrest on drunk-driving charges.
On the field the team started strong in 2021, before an epic second-half collapse cost the Mets a playoff spot. Cohen fired Luis Rojas, the manager he had retained after buying the team, and brought in veteran Buck Showalter to replace him in December. The three-year, $11.25 million deal was the highest ever for a Mets manager.  
It was one of Cohen’s many big moves in the offseason. A year after signing shortstop Francisco Lindor to a $341 million contract, the Mets gave pitcher Max Scherzer the largest per-annum deal in baseball history with a $43 million salary — almost as much as Oakland’s entire team. Scherzer said a video call with Cohen left little doubt he would do whatever it takes to win.
“I’ve witnessed nothing but that — every decision and everything we’ve done is in service of that,” Eppler said in an interview at Citi Field. Cohen has yet to say no to any requests since he joined the team in November, he said.
But one of the most telling signs of Cohen’s deep pockets — and history in the cutthroat hedge fund world — came later with the decision to release Robinson Cano in May. Cano, 39, an eight-time All-Star, was still owed about $40 million for the two years remaining on his contract. Cohen and management ate that cost and freed up his roster spot for more promising players. 
“The idea that a team owner’s is going to eat $40 million so that he could have a slot for the 26th player on the bench is extraordinary,” said Marc Ganis, co-founder of Sportscorp, a Chicago-based advisory firm and a friend of Cohen. 
The Mets finished the regular season Wednesday with 101 wins, the second-most in franchise history. Money can help ensure a spot in the playoffs — the teams with the five highest payrolls all advanced to the postseason this year. A World Series title is another matter.
Sports-betting companies are offering roughly +900 odds that the Mets win the championship, meaning bettors would profit $900 from a $100 wager. Those are the best odds to win among Wild Card teams competing this weekend, and trail only the Dodgers, Braves, Yankees and Houston Astros — all potential opponents should the Mets advance in the postseason.
Regardless of whether the Mets go all the way and validate Cohen’s spend-big-to-win-big mentality, deep-pocketed billionaires are circling professional baseball, as they have in other sports. It’s a development that could make the league much less competitive for the teams that can’t blow out their budgets.
Ted Leonsis’s Monumental Sports & Entertainment and Carlyle Group Inc. co-founder David Rubenstein are weighing a bid for the Washington Nationals, and also told key backers of the Baltimore Orioles that they’d consider buying the team if it comes up for sale, Bloomberg News reported in August. The Los Angeles Angels are also looking a new owner.
“We’re about to go through a period of transition in Major League Baseball,” Ganis said. “There’ll be less concern about the fresh blood, fresh money and fresh ideas that Steve brings as new owners come in.”
Baseball is already fighting to stay relevant in a competitive sports media environment. MLB agreed last month to implement a pitch clock, ban defensive shifts and increase base sizes starting in 2023 as a way to spice up the game after seeing attendance and TV viewership decline in recent years.
Cohen, for his part, is improving the experience for players and fans alike. He’s spent money on the stadium and next year will install a better scoreboard. Players are getting better care — nutrition, physical therapy and sports psychology — and an upgraded family room for their kids.
Of course, nothing reverses those trends quite like winning. The Mets’ turnaround under Cohen has bolstered attendance at Citi Field, which has drawn an average 33,308 fans this year, up from 28,164 in 2018, when the team finished 77-85. 
Each of the Mets’ National League East rivals — the Braves, Nationals, Philadelphia Phillies and Miami Marlins — has won a World Series since 1986, some more than once. The frustration among fans has boiled over from time to time, including last year’s “Thumbgate,” when Mets players began celebrating successful plays with a thumbs-down gesture in response to booing.
“I know it’s only baseball, but you can’t believe how people are passionate about this,” Cohen said in the Stray Reflections interview.
“I bought the Mets — people say, well, that’s a vanity play,” he said. “But I said, if I can turn this team around, I can make millions of people happy. I mean it sounds hokey, but that’s exactly why I did it. The magnitude, the amount of lives I could affect, would be remarkable.”
To contact the authors of this story:
Katherine Burton in New York at [email protected]
Tom Maloney in New York at [email protected]
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