Own a Part of a Baseball Player

[redsmetz]

I found this story on Slate.com this morning about an Indians minor league pitcher who is selling shares in his future ML earnings. It's a long article, but I thought folks would find it interesting.

http://www.slate.com/id/2182824

[redsmetz]

My morning paper hadn't arrived when I put this up, but Daugherty writes about this in his column this a.m. - and the kid's a St. X grad:

MLB hurler seeks shareholders

Randy Newsom would like you to own a chunk of his potential major-league career. It'll cost you only 20 bucks.

Here's what you get: a share of a 25-year-old, sidearming relief pitcher who was an all-star in Double-A last summer and who just threw seven scoreless innings in the Arizona Fall League. Ideally, Newsom wants to start the season in Triple-A, pitch well, then get a midseason call-up from the Cleveland Indians.

Here's what he gets: your money and, hopefully, the money of others, up to $50,000, to help him continue to develop as a player without having to work an offseason job or pray the engine doesn't drop out of his 1998 Chevy with 160,000 miles on its odometer.

It's more complicated than that, of course.

What would you expect from a St. Xavier High grad with an economics degree from Tufts? Basically, it comes down to this: Newsom and two friends have formed a company called Real Sports Investments. Their intent is to ease the financial strain on minor-leaguers who were not high draft picks. Their method is to allow the public to invest in them.

Newsom is the guinea pig. "Somebody had to go first," he said. He's offering 2,500 shares of himself, at $20 a share. If he makes the major leagues, investors start making money. No one can own more than 5 percent of the shares; RSI doesn't want people walking ledges over this.

As Newsom explains: "It's not the stock market. If you're doing this solely for financial reasons, it's probably not the investment for you. If you're doing it because you love baseball and want to know you helped a player get to the majors, it's worth thinking about."

And really, why would you play fantasy baseball when you could own a hunk of the real thing?

The idea evolved over time, Newsom said, as he saw teammates struggle financially while trying to advance professionally. If you're making $800 a month playing in Florida's Gulf Coast League, you spend your offseason driving an express truck instead of working on your game.

"First-round draft picks and major-league players can train in the offseason. They can hire nutritionists. Money isn't an issue," Newsom said. "That widens the gap."

Newsom would know. I asked him to provide a self-prospectus. "I've faced a lot of adversity. I've defied the odds," he said. "I was undrafted. I went to a Division III college. I was overlooked in high school. Six or seven guys in my class were as good or better than I was. I've been in lots of situations where I had to turn heads to have a shot."

As with any investment, the potential for loss exists. He throws sidearm. Not many sidearmers in the big leagues. His fastball tops out in the high-80s. Not many like that, either. But his fastball sinks, his slider runs, and in 208 pro innings, he has allowed just seven home runs.

You pays yer money, you takes yer chance.

"I don't think I'm a bad investment," said Newsom. "It's a high-risk deal. I mean, IBM isn't going to blow out an elbow." Neither will IBM develop a back-door slider and win a Cy Young Award and sign for $30 million. It's a simple contract between player and owner: You're buying a share of his future major-league earnings. If he never makes the bigs, you never get paid.

A $20 investor in Newsom would need the right-hander to earn $1.25 million lifetime to break even. Anything north of that, you start raking it in. OK, maybe not raking it. If Newsom made this year the $26 million A-Rod's making, your take would be $416. Still, Newsom and friends hope to attract some clients with high earnings potential. And isn't following a ballplayer more fun than following a corporation?

Newsom has navigated the proper legal channels. He has filed all the needed SEC paperwork. It's very early in the process, but word of mouth has attracted national interest, including an inquiry from the Financial Times.

Meantime, Newsom is for sale. Own your very own hunk of sidearming overachiever. Soothe your Inner Steinbrenner. Twenty bucks. What the heck.

For more information, visit realsportsinvestments.com.

[RedsManRick]

I heard the guy interviewed on BP a few weeks back. If they ever get some decent prospects involved, it has the makings of a very high leverage investment.

[Mario-Rijo]

Quite an interesting idea, Kudos for him. But In this case I think I'll keep my twenty.

[D-Man]

This is brilliant. The money is big enough in MLB nowadays that the economics actually make sense from an investment point of view.

This reminds me of an article I read awhile back about how starving artists in NY have joined together to create a risk-pooling agreement, whereby half of all their revenues from art sales are shared with the co-op of starving artists, and the other half they can keep for themselves. This concept is great because it makes the art world more efficient. Van Gogh only sold one (!) painting throughout his life. There may be lots of great, starving artists out there. . . If the economics can change the art world, think about how it could change competition in baseball.

With that said, how about the risk of insider trading, i.e., a well-endowed shareholder greasing the skids to get "his guy" an MLB job and/or accelerating his artibration schedule?

Or. . . Imagine an investor paying for a player's strength coach or--gasp--underwriting the kid's purchase of "The Cream and The Clear" (ahem)?

[dougdirt]

This is brilliant. The money is big enough in MLB nowadays that the economics actually make sense from an investment point of view.

This reminds me of an article I read awhile back about how starving artists in NY have joined together to create a risk-pooling agreement, whereby half of all their revenues from art sales are shared with the co-op of starving artists, and the other half they can keep for themselves. This concept is great because it makes the art world more efficient. Van Gogh only sold one (!) painting throughout his life. There may be lots of great, starving artists out there. . . If the economics can change the art world, think about how it could change competition in baseball.

With that said, how about the risk of insider trading, i.e., a well-endowed shareholder greasing the skids to get "his guy" an MLB job and/or accelerating his artibration schedule?

Or. . . Imagine an investor paying for a player's strength coach or--gasp--underwriting the kid's purchase of "The Cream and The Clear" (ahem)?

That is why there is a limit to how much stock one person can buy, and its relatively low. Likely to prevent such things.

[NorrisHopper30]

This is brilliant. The money is big enough in MLB nowadays that the economics actually make sense from an investment point of view.

This reminds me of an article I read awhile back about how starving artists in NY have joined together to create a risk-pooling agreement, whereby half of all their revenues from art sales are shared with the co-op of starving artists, and the other half they can keep for themselves. This concept is great because it makes the art world more efficient. Van Gogh only sold one (!) painting throughout his life. There may be lots of great, starving artists out there. . . If the economics can change the art world, think about how it could change competition in baseball.

With that said, how about the risk of insider trading, i.e., a well-endowed shareholder greasing the skids to get "his guy" an MLB job and/or accelerating his artibration schedule?

Or. . . Imagine an investor paying for a player's strength coach or--gasp--underwriting the kid's purchase of "The Cream and The Clear" (ahem)?

The stocks are limited, DO NOT get into this if you are doing it for investments.

Newson explained this as well on McCalister's show today.

[MrCinatit]

If I could pay 20 bucks for some Jay Bruce stock, I would be there.

[rotnoid]

My mother in law slipped me a twenty on my birthday with a note instructing me to blow it on something frivelous. This might be just the thing. Could be fun to follow this kid through the minors and look for box scores every day. If it was my twenty, I'd probably hang on to it, but I think she'd be glad to hear I found something crazy to do with the money. It's only twenty bucks, I just might do it.

[BoydsOfSummer]

I'm bullish on Verlander and Braun.

[RedsManRick]

I'm bullish on Verlander and Braun.

I'm bullish on Google :-P

[redsmetz]

Here's a follow up from this morning's NY Times.

Buying Low: Minor Leaguer Takes Stock of Himself

By ALAN SCHWARZ

While the pending trade of Johan Santana to the Mets has shaken up Major League Baseball, a relatively unknown, submarine-throwing farmhand who might never reach the big leagues has also spent the week rattling his sport’s economics.

Randy Newsom, a reliever last season for the Cleveland Indians’ Class A and AA affiliates, set up a Web site through which fans and other outsiders could purchase a piece of his future major league earnings. Through Thursday, Newsom had sold about 1,800 shares of himself at $20 apiece. Each share afforded the bearer .002 percent of his career pay, uniting his goals with investors who hope he makes it big.

Dozens of minor leaguers had expressed interest in also going public through Newsom’s new company, Real Sports Investments, he said. Unfortunately for Newsom, however, his plan did not exactly thrill M.L.B., the players union or the Securities and Exchange Commission.

Offerings shopped over the Internet must be registered with the S.E.C., and Newsom’s was not. After speaking with a lawyer for M.L.B. on Thursday afternoon, Newsom decided to table his idea to work with authorities on a venture they would approve and perhaps even support.

“We want to pause to hear everyone’s concerns,” Newsom said, adding that he would refund $36,000 to his hundreds of investors. “This idea is not going away. This is assured by the amount of fan support, and the amount of players we talked to, that the support is there. The spirit of this idea will go on.”

That idea, Newsom said, was to supplement minor leaguers’ meager wages — usually about $8,000 for a five-month season — while building a unique bond among fans and players.

“People get up and look at their players’ stats every day, and root for them as they go through the minor leagues,” said Newsom, who is considered only a marginal major league prospect because of his below-average fastball. “This can be the same type of thing, where fans have a tiny vested interest in hoping a guy does well.”

Converting future earnings into upfront revenue is not new in business or sports; David Bowie has sold his royalty rights in the form of offshore bonds, and young golfers are often backed by speculative businessmen. Here, rather than collect inanimate rookie cards, fans would invest in tiny pieces of real farmhands.

Under the tabled plan, whereby he would have sold off 5 percent of any future major league income, Newsom would have needed to earn about $2 million for his shareholders to break even. That would have required a career of at least three full seasons, which for a player of Newsom’s caliber — he called himself the “quintessential antiprospect” — is unlikely.

The average major league career lasts between four and five seasons and the average salary stands at $2.8 million. But those figures are boosted by the small minority of players who play seven-plus years and score eight- or nine-figure contracts. Most earn around $450,000 a year for a few seasons — when they are among the 10 percent of minor league hopefuls who reach the big leagues even for one day.

Then again, under Newsom’s structure, a $100 investment in Mike Piazza when he was a lowly Dodgers farmhand in 1990 would have ultimately been worth about $6,000.

“If you’re looking at this solely as an investment opportunity, then we’re probably not the place for you,” Newsom said. “We want to add to the spectating experience for fans, and at the same time do something good for the players.”

Newsom’s plan, first reported by Baseball Prospectus and picked up by several other Web sites, caused a stir among club executives. A minor league player’s selling a piece of future earnings probably runs afoul of major league guidelines designed to insulate players from gamblers, as well as union rules regarding payments to and from agents.

Officials at M.L.B. and the union would say only that they were aware of Newsom’s idea and were discussing its ramifications.

If nothing else, Newsom’s venture highlights minor leaguers’ hidden financial hardships. Their annual salaries must cover housing, meals, clubhouse dues and more, leaving many minor leaguers — some of whom support families — sharing two-bedroom apartments with three or four teammates. Jon Searles, a pitcher in the San Diego Padres system last season, joked that a trip to Quiznos was “living large.”

Searles said he loved Newsom’s plan from a player and fan standpoint. But Searles, who also happens to have an economics degree from the University of Pennsylvania’s Wharton School, had some concerns about whether Newsom could attract blue-chip, profitable prospects to participate.

“Don’t get me wrong — $50,000 can be everything to a player in the minor leagues,” Searles said. “But the risk of them committing 5 percent in perpetuity for a quick $50,000, there’s a break-even point where only players who aren’t characterized as prospects might do it. And rational investors will assess those percentages.”

Newsom has heard the doubters and insisted his well-meaning idea is only emerging from its cocoon. He has been a little distracted, too — he has also been studying for his Law School Admission Test on Saturday.

“I’m hoping I don’t have to go to law school until I finish my career at 40 or 42,” Newsom said with a laugh. “We’ll see.”

His shareholders may be watching.

[DannyB]

I think,when I was a kid,I either read a book or saw a movie about a player that did this.

[Degenerate39]

If I could pay 20 bucks for some Jay Bruce stock, I would be there.

I'd buy several shares of Jay Bruce's stock. That's easy money right there.