Want the Braves to Dump Melvin? Not Gonna Happen

So…What About Upton?

Melvin’s contract obligates the Braves to an additional $46.35 million between now and the end of the 2017 season.  Some have asked about insurance for his contract, given the injury.  David O’Brien and Will Carroll (@injuryexpert on twitter) have an answer:

So that’s to say… no.  If he’s not out for 90 days, then the Braves likely pick up no help whatsoever there.

Liberty Media, being a publicly traded company, thrives on two things:  profit and stock price.  As of this writing, they are currently trading at roughly $39.48 per share – up well over 1% for the day and sitting at a new 52-week high.  After seeing the annual report, one bullish analyst trimmed their future forecasted outlook for LMCK to $54 a share (from $64).  Still obviously optimistic, though less so than before.

To meet price targets, the company needs strong results from all of its subsidiaries – including the Braves.  You can see just how low the margin is for the team ($42 million profit on $261 million revenue in 2013; a possible $5 million loss in 2014 against $251 million revenue for 2014).

If the team were to cut ties with Upton, that’s a $46 million check that they would have to write in 2015… $31 million more than the expectations for 2015.  That number goes directly to lower revenue, and in turn to lower profit.  It would immediately throw the club into a “loss” for 2015 – at a time in which they are already borrowing $100 million  – at least – to finance the new stadium, never mind fronting costs for the “mixed-use” development (costs to Liberty being around $90 million).  It’s just not a recipe for corporate success.

Yes – you can argue that the company has sufficient cash holdings and assets to just write that check and be done with it.  But that’s just not how profitable companies do business. Stockholders want to see consistency; financially conservative decisions – nothing rash, nothing done out of haste or short-sightedness.  That’s actually why the new stadium deal is a winner for LMCK – it’s a long-term investment that even the stock analysts are on board with.

Even if Melvin Upton Jr represents a “sunk cost”, it’s one that is set up to be paid over a three year period at no interest, which for planning purposes is a lot more palatable than a single bulk check.

So if you’re looking for Upton to be released… it’s just not going to happen.  Not now; most likely not next year either.  The financial environment just isn’t conducive to that being done at this time. Certainly not from Liberty Media’s perspective.