I got served an ad selling shares of an athlete’s future earnings. That got me interested in the concept. In this case, they are selling shares of Emmanuel Clase’s earnings.
The pitch:
The math on this particular deal makes it a definite no go for me, but I found the concept interesting. I could see something like this possibly working better for NFL deals lacking guaranteed money. Players could get more cash effectively guaranteed by investors.
Did they offer to let you pay in 4 monthly interest-free payments on Klarna, or Recurly, or Affirm, or Sezzle, or some other similar service?
Lol no.
Probably better to diversify such an investment. How one does that is to somehow buy shares (become a partner, pool with others, etc.) in the companies already investing in future earnings.
One guy? Why this guy? Why is this guy not on the top athlete-investing firms?
Shouldn’t someone just tell this player to take the money he gets and go to college and get a degree in something useful?
do we get a share in those earnings too?
I don’t think so. You won’t get a share of his WalMart greeter wages, either.
My guess: gullible fans will help them get much better returns than the private equity guys offering these. They are likely correct if they get enough interest, but this particular deal is so heavily structured to the athlete’s benefit they won’t get anyone beyond suckers IMO.
There could be a middle ground, where the athlete gets a better deal than the PE guys are offering but fans can still see a meaningful return.
Another article on the topic:
I should add that I think Clase is a great
Real Sports (RIP) did a segment on this.
These deals allow some Minor Leaguers to live and work in a lot more comfort cuz otherwise the Minor Leagues suck.
Fernando Tatis has done this since it allowed him to focus on making the major leagues. This IMO is a problem with the MiLB system and not the players or the people investing in them.
https://www.marketwatch.com/story/fernando-tatis-jr-s-340-million-contract-will-be-shared-with-a-firm-that-invested-in-him-as-a-teenager-11613679240
Yup.
Pro/rel would solve this.
Owners would rather not.
Most American sports would be far more interesting if there were promotion and relegation.
Kind of hard to justify spending over a half-billion on a new ballpark, however, if there’s a chance a team will be relegated to the minor leagues.
Or maybe the minor leagues will be more competitive and people will start watching those games
Oops. Though if you’re a shareholder, I … guess you don’t care, because you knew you were getting the money anyway?
This is where I wonder how far MLBPA lets it go. Though, while these guys are in the minors they’re really not MLBPA’s problem as we saw during talks about salaries paid to minor league players.
Doing teh actuarials on this: if Vargas even makes $10 million in MLB, then $1 million gets set aside for investors. At 100,000 shares, that’s … [re-checks the math] … $10. Which, for an $8 investment is nominally positive, but I suspect you might be better off throwing it into the stock market along with all your other investible money. If he really is a diamond in the rough, and he goes on to make $30 million a year for 10 years, a share would be worth $30 a year, or $300 over his playing career. That’s a pretty good rate of return, but I’m guessing if you expected value that it’s a lot lower.
Plus: if he makes $30 million, is that 10% before taxes, agent’s commission and union dues? Because if it’s after, that 10% turns into more like $1.5 million a year, if that, so it’s $15 a year. Which, again, isn’t bad, but the expected value just cranks down a little more.
I could certainly see limiting how much of their future earnings you could sell off.
Both sides need this protection. The player needs an incentive to play and the investors need to know that their investment isn’t going to be diluted.
I wouldn’t want to invest in a portion of a 10% stake in Dak Prescott’s future earnings only to find out that he’d sold a 50% stake to another investment group and his agent was taking 8% and he was only keeping 32% before taxes.
This is gambling & speculation, not investing (which makes it bad, IMHO)