Sports Outside the Beltway

Investing in minor leaguers

More and more teams are discovering that the most cost effective way to build a team is to draft well. Athletics Supporter demonstrates how this worked in the case of drafting Mark Mulder. (h/t Baseball Musings) If you want to build a team, invest in minor leaguers.

It might also be a way to build a portfolio. Writing in Slate – “Bullpen Market” – Josh Levin tells of a minor league pitcher’s who’s selling his future earnings.

Yesterday, I bought a professional baseball player. It only took a minute. I surfed over to Real Sports Investments, clicked the “Buy Now” button, and purchased six shares of Randy Newsom. Along with my Slate colleagues John Swansburg and Dan Engber, I am now the proud owner of 0.0096 percent of a minor-league pitcher’s future major-league earnings. Mr. Newsom, I wish you a long and prosperous career—emphasis on prosperous. If Newsom makes $1,000,000 over the course of his major-league career, the Slate investment group will take a loss, earning a piddling $96 on an initial investment of $143.82. If he makes $10 million, we’ll get $960. And if he makes Barry Zito money? I won’t be retiring early, but I’ll be able to watch my baseball-playing property on some nice plasma TVs.

The 25-year-old Newsom, a midtier relief pitcher in the Cleveland Indians organization, is the first pro baseball player to hold a self-IPO. Real Sports Investments, the company Newsom hatched last year with two ex-ballplayer business partners, is fantasy baseball minus the fantasy. Newsom is selling off 4 percent of his potential MLB earnings at $20 per share. (A 15 percent “player valuation and share allocation fee” and a 2.9 percent “online processing fee” bump the price up to $23.97). A total of 2,500 shares will be offered, netting the pitcher $50,000 if they all get sold. As of today, investors can only buy shares; selling and trading will come soon, once RSI launches a snazzier Web site. And according to Newsom, this isn’t a “one-player thing”: In an interview with Baseball Prospectus, he says RSI is in talks with lots more minor leaguers.

Once upon a time baseball cards were thought to be great investments. I suppose with the popularization of statistical analysis, they could still be, but why not invest in a baseball player. Actually, there’s a possible reason not to.

Will it work as a market? Jeff Ma, the co-founder of ProTrade and the leader of the Vegas-busting MIT blackjack team, says it’s a winning concept for minor-league ballplayers like Newsom. A ballplayer’s career carries substantial risk, Ma says, and it makes sense to shave off potential wealth in exchange for insurance against never getting a major-league payday. (If Newsom doesn’t make the majors, his investors get nothing.) Ma is skeptical, though, that players with higher earning potential will care to participate, and without these higher-tier prospects, the market won’t be as attractive to investors. “You’re not talking about Barry Bonds or [future stars like] Billy Butler or Tim Lincecum selling their future upside,” Ma says. “How many people will want to speculate on the Randy Newsoms of the world?”

My guess (especially after reading the article) is that people might invest, but probably less with the idea of making money on the deal than in being invested in a professional athlete and whatever psychic benefits that brings.

Once upon a time – maybe even as recently as 20 – 30 years ago – being a part owner of a minor league team was not out of reach for a middle class investor. Now he could, at least, invest in a minor leaguer.

Crossposted at Soccer Dad.

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  • Soccer Dad linked with Investing in minor leaguers...

Definitely invest in Rookies, Thats what Nike does .
Smart business move.
Peace …Iron Mike

Posted by Educated Bet | January 29, 2008 | 08:09 pm | Permalink

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