Commentary: Stables and Stability
Just about everyone knew Michael Neuman was in trouble when his boss, Magna Entertainment chairman Frank Stronach, showed up at a June 19 California Horse Racing Board meeting to pledge $24 million in improvements at Santa Anita Park in Arcadia and Golden Gate Fields in Albany. Nearly $16 million of that is expected to be spent on synthetic surfaces at the two tracks—Santa Anita is slated to get Cushion Track and Golden Gate will install Tapeta Footings once it cuts through environmental red tape from city officials. The balance of Magna’s investment is expected to go into much-needed improvements in Santa Anita’s stable area.
Only a month earlier, Neuman, hired by Stronach as chief executive officer in late February, outraged regulators and horsemen after he sent a letter to the CHRB saying Magna had no plans to renovate Santa Anita’s backstretch. Stronach pledged to fix the barn area when he bought Santa Anita in December 1998. “We can start on some new barns and dorms very soon,” he told The Blood-Horse in a January 1999 interview.
When Stronach showed up at the CHRB’s recent meeting, he told California’s racing commissioners he planned to “severely reprimand” Neuman for the letter. Two days later, Magna announced that Neuman was leaving his post.
The revolving door at Magna didn’t start with Neuman, a former executive with Echostar, the company that owns Dish Network. Since Stronach formed Magna Entertainment in February 2000, there have been six CEOs: banker Jerry Campbell; former television executive Mark Feldman; longtime Stronach ally Jim McAlpine; banker Thomas Hodgson; Stronach, on several occasions; and Neuman. Only McAlpine, who served from January 2001 until his “retirement” in 2005, lasted more than a year. Neuman, who reportedly will receive $1 million in “parting gifts,” shares the shortest tenure, at four months, with Feldman.
This isn’t how Stronach built his automobile conglomerate, Magna International, into a hugely successful company. It isn’t how he runs his racing and breeding operations, which have won a total of seven Eclipse Awards.
Stronach continues to talk about transforming racetracks into entertainment destinations. In his 1999 interview with The Blood-Horse, Stronach spoke of turning Santa Anita Park into a “horse theme park.” The plans, never adopted, would have called for the destruction of most of Santa Anita’s grandstand. Stronach did tear down Gulfstream Park and built an expensive facility that installed slot machines in 2006. Most racing fans didn’t like the new Gulfstream Park, in part because it was changed from an old-fashioned racetrack with thousands of outdoor seats to one that emphasizes indoor dining rooms.
Based on the anemic revenue of Gulfstream Park’s 1,221 slot machines—they were generating what must be an industry low $68 per machine in May—casino patrons don’t like the new Gulfstream, either.
Magna’s stock (ticker symbol: MECA) is trading near a 52-week low, with a closing price of $2.75 July 2. The company has recorded hundreds of millions of dollars in losses and doesn’t seem to have a grand plan to turn things around. One thing an investor considers before buying stock in a company is its management team. Looking at the turnover in the CEO’s office at Magna will not inspire confidence in any investor.
Stronach attended the CHRB meeting, in part, he said, to restore the reputation he must think that Neuman has damaged. “We can’t forget the people on the backstretch,” he told the commissioners, adding, “I always pride myself to keep my word.”
Better late than never, perhaps. It’s been more than eight years since Stronach pledged to do something about Santa Anita’s stable area.
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