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A fire sale is the sale of goods at extremely discounted prices. The term originated in reference to the sale of goods at a heavy discount due to fire damage. A good example would be in Heatons in 1993. It may or may not be defined as a closeout, the final sale of goods to zero inventory. They are said to occur in the financial markets when bidders who value assets highly are prevented from bidding on them, depressing the average selling price below what it otherwise would be. This lowering of the price can cause even further issues because it may be inaccurately perceived as signaling negative information.[1]

Contents

ExamplesEdit

  • Allowing the lowest bidders to purchase land and hotels.[2]
  • Taking advantage of purchasing opportunities by acquiring more companies in the software world.[3]

HistoryEdit

The term is adapted from reference to the sale of fire-damaged goods at reduced prices. In Proceedings of the Fitchburg [Mass.] Historical Society and Papers Relating to the History of the Town Read by Some of the Members the following entry is found:

In December, 1856, the account of an extensive fire in the American House mentions the following occupants: E. B. Gee, clothing; T. B. Choate, drugs; J. C. Tenney, boots and shoes; Maraton Upton, dry goods; and M. W. Hayward, groceries. Maraton Upton removed his stock to No. 9 Rollstone block, and advertised "Extraordinary fire sale; customers are invited to call and examine goods which are still warm."[4]

The term also has a counterpart in "railroad salvage", the discount sale of goods damaged in derailment or other accidents.

Sports usageEdit

In professional sports, a fire sale occurs when a team trades many of its veteran players, especially expensive star players, to other teams for less expensive and usually younger players. Teams usually have a fire sale for financial reasons. The term is generally thought of as different from merely "rebuilding" a team, because during a rebuilding process, teams often obtain players who are already in the major leagues or who are close to being major-league-ready, while retaining at least some of their key veterans (such as a franchise player) while also getting players from their minor league system; most rebuilding teams have few veterans remaining to jettison in the first place. On the other hand, trades in a fire sale often bring a team draft picks and prospects who have little to no major-league experience in their sport, in exchange for proven, experienced veterans. The term comes from the perception that the team is trying to get rid of all its players.

The sports usage of the term "fire sale" is most especially used in Major League Baseball, where the most infamous fire sale occurred in 1997. Weeks after winning the 1997 World Series, the Florida Marlins began trading away several of their high salary players and key cogs in the championship run, with Moisés Alou and Al Leiter among the first of many to go throughout the off-season and well into the 1998 season. This ended any realistic chance of the Marlins' defending their title. They plummeted to a 54-108 record in 1998, the worst ever by a defending World Series champion.

Another infamous fire sale occurred in 1994. The Montreal Expos ended the strike-shortened 1994 season with the best record in the majors. But by the start of the following season, many of the team's young stars had either been traded or lost to free agency. The Expos never really recovered on or off the field from this, and were forced to move to Washington, D.C. as the Nationals in 2005.

The Miami Marlins had another controversial fire sale in 2012-2013 offseason. In a massive 12-player rade with the Toronto Blue Jays, they sent away such players as Josh Johnson, José Reyes, and Mark Buehrle.[5]I

In the 2017-18 offseason the Marlins had yet another fire sale. After longtime owner Jeffrey Loria sold the team to a group led by former MLB player Derek Jeter and Bruce Sherman, nearly all of the team's star players, notably Giancarlo Stanton, Christian Yelich, and Marcell Ozuna, were traded to different teams across the major leagues. The motive for the team dismantling was primarily to help lessen payroll to pay off the organization's outstanding debt. The team's popularity notably declined in 2018 as a result of the fire sale, with the team's attendance falling to the worst in all of baseball.

See alsoEdit

ReferencesEdit

  1. ^ Shleifer, Andrei; Vishny, Robert. "Fire Sales in Finance and Macroeconomics". Journal of Economic Perspectives. 25 (1): 29–48. doi:10.1257/jep.25.1.29. Retrieved 20 April 2018.
  2. ^ "Phoenix has terrible business judgment, and that hurts your wallet". Greenville Online. Retrieved 31 July 2018.
  3. ^ "Buying up software companies in the NASDAQ fire sale". www.designnews.com. Design News. July 5, 2001. Retrieved 31 July 2018.
  4. ^ Proceedings of the Fitchburg Historical Society and Papers Relating to the History of the Town Read by Some of the Members. iii. Fitchburg, Massachusetts: Historical Society. 1902. p. 210.
  5. ^ http://www.usatoday.com/story/sports/mlb/marlins/2012/11/14/many-burned-by-marlins-fire-sale/1705855/