League Dissolves After WPS, magicJack Owner Reach Agreement
After a protracted legal debate between Women's Professional Soccer (WPS) and magicJack owner Dan Borislow, the WPS has officially folded. Borislow's 2011 lawsuit aimed at preventing the league from terminating his ownership rights — following several violations, fines, and other penalties — resulted in the league suspending play for a year while the issue played out in the courts.
Anatomy of a Sports Disaster
The contentious relationship between the already struggling league and the VoIP executive began shortly after Borislow bought the veteran team (then called the Washington Freedom) in 2010. Borislow immediately laid off the 10-year-old team's staff, and relocated it from Washington, D.C. to Florida. Borislow then moved to change the team name to magicTalk, and later to magicJack.
Parting Ways with Puma
The name change created a problem for league sponsor Puma, which supplied the uniforms. Puma was now saddled with useless Freedom inventory, and Borislow reportedly refused to pay Puma for the cost of the new uniforms. The WPS contends that this fractious exchange resulted in Puma's decision not to renew its sponsorship the following season.
Racking Up Penalties
The evolution toward dissolution continued almost immediately, when Borislow was cited for rule infractions after the first home game of the 2011 season for not:
- Displaying sponsor boards
- Uploading video for scouts
- Playing on a standard field
- Having coaches wear Puma gear
- Providing adequate seating for fans
- Accommodating the media
- Making players available to the press
- Providing an ambulance and trained EMS personnel
- Paying the $53,000+ balance the league said he owed
Borislow's second and third home games resulted in more penalties of a similar nature, and the team was demoted in the standings. From there, things only got worse. magicJack's CEO — who had named himself coach — was suspended by the league for "defamatory statements."
VoIP Termination (But Not That Kind)
Termination of ownership rights was floated as a possible solution. Borislow's players filed grievances for inappropriate remarks and conduct, and fear of retaliation. Borislow was banned from the sidelines.
Lawyers for the WPS and Borislow continued their back-and-forth as the year progressed, exploring mediation and hearings. The WPS eventually decided to allow Borislow to finish out the 2011 season as the team's owner. Borislow countered by filing suit, although he later dropped it.
The magicJack team lost in the playoffs in August. The league claimed Borislow owed it money. By October, the WPS had officially moved to terminate Borislow's ownership rights. Borislow once again countered with a lawsuit.
The league, which had hoped to expand from 5 teams to 6, instead decided to suspend operations for the 2012 season. While the intent was to resume play in the 2013 season, the league instead disbanded following the settlement with the magicJack CEO.
magicJack Stock: Connecting Dots?
The settlement between WPS and Borislow was confidential, but on the same day that it was announced, Borislow sold a million shares of magicJack stock to principal shareholders and executives. Reportedly, this was an effort to keep Borislow's personal debt from being tied to his stock, and the transaction included a commitment not to margin or pledge any remaining shares. Borislow still retains 20% ownership of magicJack shares.
This follows on the heels of magicJack withdrawing an offer to shareholders the previous week. In early May, as part of a loyalty rights offering, magicJack announced it would grant qualifying shareholders 1 free share for every 4 they owned. In mid May, the VoIP provider announced it was cancelling its rights offering, saying the company had concluded it "could not go forward with the offering."
I'm not a Wall Street wizard. I can barely remember the meanings of bullish and bearish, and margins and EBITDAs remain confusing to me. Perhaps the soccer and the stock issues are unrelated. Pure coincidence. Players and other interested parties were allegedly informed of the league's demise several weeks ago, after all. The company has also reported losses; the stock price has dropped roughly 30% since early March. But also, perhaps the league issue and the cancelled stock offer are not unrelated. Who can say for sure? The stock market is a fickle beastie.
At any rate, neither of these recent developments are good for soccer fans or magicJack shareholders. That much we can agree on.