Investing in Athletes

We’re kicking off 2023 with a look at investing in athletes.

Pro sports provide us with so much joy and anguish. We cheer for our favorite teams. We laugh, we cry, we boo. The truth is, we’re already invested in athletes. We invest our time, energy, delight, and frustrations every time we watch a game.

But what if you could take a swing at investing in athletes directly? To invest in their journey and share in their upside — not just emotionally, but financially?

Suddenly there are new ways to do exactly that.

In this issue we explore exciting new athlete investment platforms like Finlete, Chisos, and more.

This is a really interesting space — and one that has huge implications for the future of alternative investing.

Let’s go 👇

The world’s richest athletes

We all know sports salaries are enormous if you make it big:

• The NBA is unmatched when it comes to average salaries. Steph Curry is earning $45m this season.
• NFL players are starting to rake in $50m+. Aaron Rodgers is the highest (non-injured) NFL player after inking a three-year deal that pays him $57m this year.
• World Cup hero Lionel Messi‘s on-field salary of $75m is a drop in the bucket compared to the $740m he’s brought in for his team, Paris Saint-Germain F.C.
• Mexican boxer Canelo Alvarez is ranked #1 in the world, and also has the highest salary at $85m

But it’s off-field where the money really starts flowing in:

• LeBron James earns twice as much from sponsorships ($82m) than his salary ($41m).
• The Jordan brand, mostly thanks to Air Jordan sneakers, is worth about $10b.
• Shaq made much of his money from films and investing in franchises like Five Guys and Krispy Kreme.
• Other retirees like David Beckham, Ronaldo and Peyton Manning have all built generational wealth through business and branding empires.

Investing in athletes indirectly

Investing in athletes indirectly has been a reality for ages.

Arguably, the most “classic” way to invest in athletes is through trading cards. These have been around since the 1860s and are enjoying a post-covid resurgence that, while a bit bubbly, is still no doubt elevated from previous decades.

Investing in rookie cards is a common way of betting on future stars. A card’s price is heavily tied to an athlete’s long-term success – not just as a player, but as a “celebrity” too.

There’s also my personal favorite: investing in a sports fantasy league. DraftKings is the world’s most popular daily fantasy platform, while ESPN dominates league-based fantasy.

Direct investing in athletes

But now, there’s a new way we can invest in athletes. And it may just change the shape of sports and investing for good.

That’s right, you can now buy equity in athletes directly.

Professional Athlete Investment Tokens

It all started with Professional Athlete Investment Tokens, or PAINTs, an asset class born from the blockchain back in 2019.

These are hosted on various platforms, but they’re all essentially the same: Ethereum-based tokens representing a stake in athletic contracts.

NBA player Spencer Dinwiddie was the first athlete to get involved. His token “SD8” was set for release to accredited investors, with a $150k min investment.

The idea was pretty simple: Token holders would be paid out a portion of Dinwiddie’s contract, with interest. In return, Dinwiddie would receive payment upfront to fuel other business ventures.

However, the NBA blocked the move before it could take off, citing conflict of interest and gambling. (An odd claim, given the NBA has been 100% friendly to legalized sports gambling for a while now.)

Anyways, despite the challenges, Dinwiddie’s idea has held strong and become the foundation for several new athlete investing platforms.

Finlete

Finlete is a new Comcast NBC-backed crowdfunding platform for fans to purchase shares in promising athletes, and get a small cut of their future on-field earnings.

If an athlete you’ve invested in lands a contract, you’ll get 0.00001% per $50 share. The average MLB salary in 2022 was $4.5m/year, so if you bought a single $50 share of an athlete who signs a three-year $13.5m contract, you’d receive $135, or a 2.7x return.

Now, athletes don’t always get huge signing bonuses, so Finlete focuses on players with a ton of potential who may be overlooked.

The first player they just announced is Dominican baseball player Yerry Rodriguez, a pitcher on the Texas Rangers 40-man roster.

The company is also planning cool ways for fans to interact, including contract signing parties and 1-on-1 virtual meet-and-greets.

Finlete has a pre-launch waitlist, and is offering exclusive early access to Alts subscribers. You can be the first to know when they sign new athletes (and get the first crack at investing) by going to finlete.co/alts.

I’m excited about Finlete’s future potential as an “AngelList for athlete investing.”

Globatalent

Globatalent calls itself the world’s first “Sports Neobank”.

It’s a mobile app that lets you directly invest in young athletes from across the globe, using blockchain to distribute tokens. Each one represents a single share of an athlete.

The market is intended to be liquid — you can either trade your athletes daily, or hold them for the long term.

Tokens are available for a range of sports: Formula 1, tennis, even esports are all represented.

You won’t find current greats like Djokovic or Mahomes on the app, but you might find the next one.

Carry.golf

Pro tour golf players are some of the highest-earning athletes in the world. And since there are fewer injuries, golf careers also tend to last longer than other sports (unless you count “golfer’s body” as an injury)

Carry.golf is an investment platform for golf lovers. It lets you invest in budding golf stars as they embark on their journey to stardom. In the short-run, fans get exclusive dinners and rounds of golf with their sponsored athletes.

If the athlete makes it to the pros, they compensate investors directly based on their earnings.

Like Finlete, Carry’s goal is to provide a “runway” for players to kickstart their golf careers. Believe it or not, golfers aren’t born rich. (Shocking, I know!) Without fan funding, many could never access the training, equipment and branding to make it to the pro tour.

Carry.golf is illiquid and risky. It’s also only open to accredited investors.

However, the team is dedicated to “democratizing” the industry (anyone else starting to get tired of this term?) and does plan to release a digital marketplace.

EVO

EVO was founded in 2021 by John Norman, father of motorsports athlete Ryan Norman.

The platform follows the same philosophy as many of its competitors — to provide budding athletes the financial support to follow their dreams.

However, instead of investing in athletes directly and trading them like stocks on a market, EVO is essentially an athlete investment fund. (The term they use is “Athlete Development Company.”)

The company has a team of professional scouts who develop a portfolio of athletes. You buy into the EVO fund, and they distribute 5% of pro-rata revenue to shareholders. The more their athletes succeed, the more you earn.

Investments aren’t open right now, but they will be accepting new accredited, non-accredited and international investors soon.

In the meantime, there is a fund for investing in athletes which is open right now…

Chisos Capital

Chisos Capital is like a VC firm with a twist. They invest directly in people at a very early stage.

Chisos is a fascinating company. They seek out people with something unique — a unique talent, a great idea, or just a ton of promise — and invest $15k – $50k toward their careers, through something called a Convertible Income Share Agreement.

Chisos is run by a guy named Will Stringer, a person I’ve come to know fairly well over the past year.

I first encountered Will through discussions around our ALTS 1 Fund. Then, he reached out a few months ago after our (somewhat controversial) issue on investing in people, and that’s when I discovered he was running Chisos.

To date, Chisos has released two funds, each containing a portfolio of individuals from all walks of life. The sectors vary from technology, to education, to food, and more.

But their upcoming fund, Chisos Capital Fund III, is where things get juicy.

Their third fund will focus exclusively on investing in grassroots athletes.

The team is reaching out to executives, scouts, and agencies to find the next big player. And Chisos has already invested in a left-handed minor league pitcher in the Philadelphia Phillies organization.

This “proof investment” will be warehoused until Fund III closes. They expect to begin raising for Fund III in Q1 2023.

Athlete stock exchanges

Different stock exchanges allow users to ̶i̶n̶v̶e̶s̶t̶ gamble in the careers of pro athletes, and the value of professional teams.

The leading exchange is probably Mojo.

Mojo is a sports stock exchange based on an athlete’s end-of-career statistics. An athlete’s stock price rises or falls based on projections Mojo’s algorithm makes. It has been recognized by the New Jersey Division of Gaming Enforcement as a sports wagering.

Currently, the site allows users to buy shares in 400+ NFL and college football players. If a holder keeps their stock to the end of an athlete’s career, they get a payout based on the stock’s price at the time of retirement.

Interestingly, professional athletes have a banked value, ensuring that a stock won’t drop to zero and will never fall below that banked value.

There are other similar stock exchanges to Mojo:

• Prediction Strike and PlayerSX also have marketplaces for player stocks
• SimBull and All Sports Market allow fans to buy stocks in teams

Investing in sports teams

Investing directly in pro sports teams isn’t yet widely available. The public market is still developing, which is just as well, since most owners would likely prefer private ownership anyways.

But are a handful of exceptions.

Green Bay Packers

Fans can buy stock in the National Football League’s Green Bay Packers. In fact, their most recent fundraising in March 2022 brought in $65.8 million, which will go toward ongoing construction projects at Lambeau Field.

But owning a slice of the Packers isn’t all it’s cracked up to be.

There are 3 major benefits:

1. Voting rights
2. An invitation to an annual shareholders meeting
3. The ability to purchase exclusive shareholder-only merchandise

The shares have no financial value, don’t pay dividends, and have no protection that other securities enjoy. Shares cannot be resold, except back to the team for a fraction of the original price.

Oh, and there are no discounts on tickets either. Shareholders pay the same price as everyone else!

Manchester United FC

You can invest directly in one sports team on the New York Stock Exchange — the venerable Manchester United soccer team ($MANU).

The team is owned by the Glazer family, who holds the majority of shares.

The MANU stock was IPO’d at $14 per share in 2018. With rumors the team is on the verge of being sold, the stock has recently skyrocketed to more than $22, a price not seen since 2018.

While you can’t invest directly in any other professional sports teams in the US, you can certainly invest in the parent companies who own them.

New York Knicks and New York Rangers

You can invest in the iconic basketball and hockey teams through the Madison Square Garden Sports Corp ($MSGS).

Atlanta Braves and F1

The Atlanta Braves and Formula 1 Racing are owned by Liberty Media, a mass media conglomerate that also owns SiriusXM.

Back in 2007, the conglomerate acquired the Braves for $1.5 billion. A decade later, they bought F1 for $4.6 billion.

Initially, the Braves and F1 were listed under the same holding company. Last November, Liberty Media created spin-off holding groups that allowed a more direct investment into the Braves and F1.

Now, you can invest directly in F1 through The Formula One Group ($FWONK) on the NASDAQ. The Braves ticker symbol on the NASDAQ is $BATRA.

Rogers Communications

Rogers Communications (RCI) is the parent company of the Toronto Blue Jays.

Rogers Communications also owns a 37.5% stake in Maple Leaf Sports and Entertainment Ltd., the parent company of the Toronto Maple Leafs, Raptors, Argos, and Toronto FC.

Despite doing business mainly in Toronto, Canada,  $RCI  is listed on the New York Stock Exchange.

Invest in athletes’ companies

There’s no shortage of products or companies endorsed by athletes. Publicly traded companies include Nike, Adidas, Under Armour, and Callaway Golf.

But there are also opportunities that athletes are taking advantage of right now.

In 2022, LeBron James became the first active player to reach billionaire status. His main investments include part ownership in the Fenway Sports Group, and his film studio SpringHill Entertainment.

In 2012, James invested $1m for a 10% stake in Blaze Pizza. In doing so, James also became a spokesman for the relatively unknown pizzeria. By 2020, James’ equity stake in Blaze Pizza stood at $40 million. He also reportedly owns 19 franchises.

For an investor looking to ride James’ influence as a company spokesman, it costs between $600k and $1.1 million to open a Blaze Pizza restaurant.

Athletes have access to private investments that the public at-large does not. In recent years, athletes have made headlines for investing in fintech, tequila, and real estate. Many of these investments require large capital outlays and is only accessible to high-net-worth investors.

Investors looking to get in on the same deals as athletes typically need a well-connected network. But every so often, savvy investors can follow how athletes invest in startups and catch seed funding opportunities.

Risks of investing in athletes

Investing in athletes is inherently risky. It feels a bit like venture capital: Most investments probably won’t go to the moon, but you have to take swings if you want to hit a homer.

I see two big disadvantages here:

1. Low chances of success. Let’s be honest about the odds of success here. Yes, if you fund a winner, you’re golden. But less than 2% of college athletes turn pro.
2. On-field earnings only. Let’s say a player you’ve funded does go into orbit. Terrific! But FECs (Future Earnings Contracts) have, so far, applied only to player salaries. Earlier in this issue we talked about how 35% of athlete earnings are from endorsements, but FECs don’t have anything to do with those.

Closing thoughts

Indirectly investing in athletes is nothing new. You can buy a player’s rookie card or jersey, follow the ups & downs of their career, or play fantasy sports.

But sports betting doesn’t really benefit anyone directly. Athlete investments, on the other hand, most certainly do. And it’s what makes this such an exciting movement.

From an ethical standpoint, I’m always a bit weary of direct human capital contracts in general. But I think providing humans liquidity based on future earnings is a net benefit to everyone.

I think the best part of investing in grassroots athletes is you become your own scout. You get to watch their highlight reels, follow their games, and put your money where your mouth is.

It’s also one of the better (and more logical) uses for a blockchain. Trading player tokens based on mounds of data, stats, history and knowledge is a far better use case than trading pixellated apes based on rampant speculation.

To be clear, this is definitely a high-risk investment. Sure, there’s always a chance you can find the next Barry Bonds. But most young athletes never develop an epic career.

But the allure is huge, and the future of investing in athletes is already here. Buying equity in pro and up-and-coming athletes brings a new meaning to the phrase “supporting a player.”

Again, when you watch sports, you’re already investing emotionally.

Why not financially as well?

Disclosures

• None of the authors have direct financial interests in any assets or investment opportunities mentioned in this issue.
• None of the assets or investment opportunities mentioned in this issue are held in our  ALTS 1 Fund .
• This issue may contain affiliate links. This means we may collect a share of sales or other compensation if you purchase something through these links.