On May 29, 2007, Citigroup stock ended the day at $50.28, little changed from the day before. One hundred and three weeks later, on May 22, 2009, Citigroup closed at $3.67, up slightly from its last close.
The story of Citigroup’s long fall from international behemoth to beached whale has been told often enough. But there’s a lesson here, if we’re smart enough to pay attention.
What does the stock price tell us? Nothing – only the simple truth. If you want to buy Citigroup, you can buy it all day for around three-and-half bucks a share. And if you bought it at $50, tough luck!
Examining the chronology of the U.S. Olympic Committee deal, it’s clear that the outlines were laid down during the palmy days of the late, lamented boom:
$32 million in certificates of payment from the city? No problem!!
$16 million in free money for the Olympic Training Center from some wacky special improvement district scheme? The check’s in the mail!!
Today, the world’s a different place.
If we were starting from scratch, it’s doubtful that the USOC could get a fraction of the “retention payment” that was negotiated back during the sweet times, when money flowed like water and a passive citizenry simply shrugged at the $53 million cost of keeping their Olympic Majesties in town.
But judging by statements public and private from both elected and appointed city officials, they don’t realize that the world has changed since 2007, or 2008. They’re figuratively lining up to buy Citigroup at $50 a share, apparently unaware that the market has gone south – way, way south.
In any negotiation, you’re powerless if the other party realizes that you can’t afford to walk away. If you’re a struggling contractor and your potential customer realizes that you’ll go broke unless you get the job, you have no leverage – you’ll be lucky to break even on the deal.
If you want a raise and your boss knows full well that there are no jobs out there, and lots of well-qualified job seekers, you’ll be lucky to keep your job, let alone get a raise.
And if you’re the City of Colorado Springs, whose officials have repeatedly stated that they’ll do just about anything to keep the USOC in town, you have less than no leverage.
The “negotiations” currently in progress between the USOC, the city and various other interested entities are just proposals for cost-sharing. The USOC wants its $53 million and it doesn’t much care who writes the check, as long as the check clears.
But let’s take a coldly unsentimental look at the deal.
Setting aside the national governing bodies and the Olympic Training Center, what exactly do we mean by the USOC?
It’s a major nationwide nonprofit whose leadership is currently domiciled elsewhere.
Lisa Baird, who heads major marketing, lives in Connecticut. CEO Stephanie Streeter, who periodically visits Colorado Springs, lives near Chicago.
If the organization’s leadership is headquartered elsewhere, what’s left?
It might be that we are, in effect, the USOC’s India. What we might have, after the dust is settled, will be a six-story office building filled with perfectly nice people making a decent living carrying out the day-to-day operations of the organization.
That’s fine – and we’re glad to have them here. But there are hundreds of such buildings in the Pikes Peak region, each occupied by perfectly nice people making a decent living by doing their best for their employers.
The city, to the best of my knowledge, has never offered any of these employers $53 million just to keep on keepin’ on.
Maybe it’s time to take off the blinders, to come blinking out of Plato’s cave and look at the world as it is. Sure, we’d like to keep the USOC in town – and we’d also like to find buried pirate treasure in our back yards, win Powerball and lose 25 pounds by the middle of June.
There’s a difference between the desirable and the possible, just as there’s a difference between wishful thinking and cold reality.
In today’s economic climate, are rival cities lining up to throw money at the USOC? That’s doubtful, given the financial problems that beset every city and every state. Is the USOC ready to throw away the tens of millions already invested in the Olympic Training Center and go somewhere else? That’s equally doubtful.
The city, although its negotiators are too timid to realize it, has the whip hand in the deal. I tried to get in touch with Donald Trump to get his advice, but no luck – he was busy. But based on the Trumpster’s past deal-making, here’s what he’d probably say.
“You just tell those airheaded jocks that they’re lucky to live in the Springs. New York, Chicago, L.A. – do you know what you’d have to pay your employees? And you think they’re gonna pay you to go there? Get real!! Tell you what, we’re gonna take our $53 million, buy 15 million shares of Citigroup, and use our investment muscle to move a big Citi subsidiary to Colorado Springs – now that’s economic development!”
Think we’re bluffing? The new Citigroup building at 27 S. Tejon will be ready for occupancy this fall … and Citi’s paying cash at move-in.
John Hazlehurst can be reached at John.Hazlehurst@csbj.com or 227-5861.