Since the Bowie bonds in '97, efforts to sell shares of athletes' earnings have flailed. Will Vestible be different?
Sports gambling and fantasy already provide an outlet to bet on performance
I read with a smile this story in Front Office Sports on the latest attempt to securitize an athlete's earnings https://frontofficesports.com/bear-market-for-sacks-and-ints-the-difficult-road-of-sports-stock-markets/. These pitches–buy a share of an athlete’s future earnings–have been around for a while. And it is real business with private investors who put money into young Latin American soccer players with a claim on their future earnings https://en.wikipedia.org/wiki/Third-party_ownership_in_association_football. Big League Advantage similarly does this for minor league baseball players https://bigleagueadvantage.com/about/#story. These outfits are controversial, but more on that later.
Now, I say I smiled because when I got into sports writing in 1998, one of my first stories was an effort by slugger Frank Thomas to sell a portion of his future earnings to institutional investors https://archive.nytimes.com/www.nytimes.com/library/review/060798cashflow-review.html. Thomas’s deal and others like it at the time–as are the past and current iterations-remain the children of the Bowie bonds of 1997. The musician David Bowie raised $55 million selling a share of his pre-1990 songs, a transaction that spurred a wave of celebrity bonds like Thomas’.
The latest effort highlighted by Front Office Sports is a company called Vestible that is selling shares in a sliver of Denver Broncos linebacker Baron Browning’s next contract. The article points out these efforts have largely failed. The question is why? On the face of it, isn’t this a way for fans to become more attached to their favorite players? After all, the Green Bay Packers have raised hundreds of millions of dollars selling worthless stock to fans, Vestible at least will actually trade on an exchange.
There are two types of these transactions: the one where professional equity privately invests in an athlete, and the ones like Vestible that sell public shares. The best known example of the latter was Fantex, which lasted four years before folding in 2017 amid tepid demand. The idea was the shares would rise and fall on the players’ on field performance, and any off the field business they had.
Many of the recognizable players who used Fantex were NFL players–Arian Foster, Vernon Davis, Mohamed Sanu–and so the injury risk factor was an issue (that and most NFL contracts are not guaranteed). In fact the Foster IPO was delayed because of an injury. Fantex found weak demand, and smallish investments from fans. Sanu’s contract with Fantex paid him $1.5 million for a share of his future brand related earnings, but the IPO didn’t raise even half that sum so the company had to fill in the rest https://www.conductdetrimental.com/post/mohamed-sanu-wins-1-1-million-arbitration-award-against-fantex
There just isn't a huge demand to buy a share of an athlete's earnings, especially when the player is already established so the terms are not going to be as favorable to the investor. Why Browning, a star in the making going into his contract year, needs money now I don’t know, but it doesn’t take a market savant to know his next contract should be large. So the stock should be priced to reflect that.
I also wonder with the surge in fantasy sports and sports gambling (including prop bets), if there are already wide outlets for fans to bet on players. It's not quite investing in a share of a player, but either way the gamble is on athletic performance.
I don’t know much about Vestible and wish for them to prove me wrong and to create a better mousetrap. Given Vestible will focus on current players, it should at least avoid the criticism heaped on the third party equity deals–the funds that invest in up and coming players-for allegedly exploiting young and often impoverished athletes. These funds will point out the athlete might not succeed and still gets his or her money (I don’t actually know if these funds have invested in female athletes), and the funds provide the training base that makes future success possible. I don’t see a problem with that, and have even seen proposals that colleges should offer students deals where they pay lower tuition in exchange for future earnings. So the concept is certainly not unique to sports.
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Interesting trend of athletes at the NFL Combine avoiding league mandated obligations, from media (Marvin Harrison Jr.) to medical (Caleb Williams). Players receive nothing but some swag from NFL partners like NoBull (the league owns part of the company), and are fodder for yet another NFL media spectacle televised on the league-owned network. One has to wonder when top players stop coming. Would Williams have dropped from the number one pick had he not shown up? I don’t have to answer that. These players are not under contract, why are there media obligations? No one really thinks Harrison won’t go in the top five picks (most mock drafts have him at four with the Arizona Cardinals). For the run of the mill Combine participant–and these are all elite athletes–they are probably happy to get exposure and answer teams’ questions. But that doesn’t mean they shouldn’t be paid something. The same can be said of The Draft. No one paid Will Levis to sit in the green room, cameras trained on him, as he slid out of the first round last year as part of the soap opera the Draft has become. But it's a soap where most of the actors are unpaid. Now, the players as they bear hug the Commissioner don’t look too upset, but that doesn’t make it right. Pay the players something for the Combine and Draft.