Financing a young professional sportsman in exchange for a portion of his future income is what several start-ups are offering to private investors, a new market that is perfectly legal but which has some agents cringing.
In February 2021, Dominican Fernando Tatis Jr signed a monster 14-year, $340 million contract with the San Diego Padres baseball team.
He will have to donate nearly 30, according to the estimate of several American media, to Big League Advantage (BLA), which financed his professional debut, at 18, and will multiply his bet by at least ten.
Investing directly in a player is nothing new. Football saw hundreds of players hand over their rights to investment funds in the early 2000s, before the practice was banned by the International Federation (Fifa) in 2015.
What is more is that the placement is now open to the general public and no longer the prerogative of a handful of wealthy individuals. An evolution made possible by a new law and an effective regulation since 2016.
«We created Finlete because we wanted to break down that barrier between athletes and their fans.»explains Rob Connolly, managing director of this Californian company, which counts the cable operator Comcast among its shareholders.
Finlete is awaiting approval by the American financial market watchdog, the SEC, which would be a first for a platform open to all investors, regardless of their heritage.
«We want to offer a stock around 25 dollars» part, which would give the right to a share of the future income of a player, describes Rob Connolly, claiming to have already several thousand candidates on a waiting list. The shareholder will be able to resell his share on the platform via a stock exchange.
«predatory practice»
Until now, most of this nascent industry was linked to baseball, whose system of affiliated minor leagues is a source of wealth, with several thousand candidates for the MLB queen league.
But the Swiss company Fantium has launched into tennis and Commonwealth, another start-up initially specializing in the shared ownership of racehorses, will soon offer to invest in young golfers.
The latter receive 75,000 dollars per year over three years, in exchange for 30% of their income over this period, a percentage which then decreases to 10% in the sixth year, the last of the contract.
The money is placed in an account jointly controlled by the player and Commonwealth, «so we have full visibility on how it is spent»says general manager Brian Doxtator.
At Commonwealth as for Finlete and most of their competitors, the sportsman will have nothing to repay the money invested if he does not break through among the professionals.
For the moment, the start-up only accepts qualified investors, that is to say with a minimum level of assets or income.
«But eventually we will be able to sell shares for $100, as we already do with horses.»provides Brian Doxtator, but also to authorize resale via the site.
«It has become a predatory practice»denounces, on condition of anonymity, a manager of a sports agency about this form of investment. «This can be incredibly dangerous, because you are giving up significant earning potential in exchange for very short-term gains.»
«We hope to see the government regulate» these practices and put in place «safeguards»he adds, «but it is too early and people do not yet understand this sector as a whole».
Asked by AFP, the SEC declined to comment, as did the MLB players’ union.
«My ambition is to eradicate predatory contracts»says Brian Doxtator, who cites the example of unscrupulous actors offering 50,000 dollars to a young talent for 50% of his income «over 10 years. It’s just crazy.»
The fact of being registered with the SEC will force it to be transparent, he assures us, in particular on the financial parameters of the commitments signed by the players.
«I understand» the reservations of some, «but it must be understood that some athletes do not have supports […] and are forced to give up […] due to financial difficulties»describes Rob Connolly. «We want to give them the opportunity to realize their dream.»
Le Revenu, with AFP
2023-06-02 08:42:15
#individuals #investing #future #athlete
