4 ms·
Frank McCourt's tenure as owner of the Los Angeles Dodgers is a good illustration of this dynamic. He purchased the team with effectively no cash, he and his fa
by nonameiguess 5y ago
Frank McCourt's tenure as owner of the Los Angeles Dodgers is a good illustration of this dynamic. He purchased the team with effectively no cash, he and his family proceeded to treat it as a collateral asset to take out lines of credit to buy themselves personal luxury goods, bankrupted the team, then when the league forced him out, he sold for a profit and made a few billion dollars anyway thanks to the value of MLB television contracts and that's just the way being rich works, I guess.
- lotsofpulp 5y agoThat is the way that betting correctly on the future value of an asset works. There are many people who have lost money the same way because the value of the asset went down and so they walk away with nothing.
- mvid 5y agoIf the downside is walking away with nothing on a bet that you put nothing on, then I think it’s always worth the risk
- lotsofpulp 5y agoSure, but those kinds of deals are rare, especially absent corruption. A cursory Wikipedia search shows the baseball team owner referenced above put up significant real estate as collateral.
- solveit 5y agoYes, all the downside falls on the lenders because that's how investing money works. If you can get someone to loan you hundreds of millions, you should (in a purely economic sense) take it because all you can lose is everything you have.
- spoonjim 5y agoHe used effectively no cash but pledged his Boston parking lots as collateral for the debt. So if he had defaulted on the debt his lenders would have gained ownership of the Dodgers AND of the Boston parking lots.