Investing in Duffey

[glunn]

If you believe that Tyler Duffey will have a long and successful career then you can invest in his future.

 

http://www.mlbtraderumors.com/2016/04/fantex-franco-schoop-mchugh-duffey-solarte.html

 

"Fantex offers professional athletes an up-front, one-time payment in exchange for a portion of that player’s future earnings both on and off the field. Fantex then sells “shares” of that player to public investors for a set price (thus covering the up-front payment to the player), allowing those investors to turn a profit if said player crosses a certain threshold in his career earnings."

 

Based on some rough math, Duffey will need to earn more than $25 million for this to pay off. If you don't like that bet, it sounds like other bets may become available:

 

"With six big leaguers now on board in addition to 14 athletes from other sports, it stands to reason that the number of professional baseball players willing to enter into such agreements will increase. It’s an interesting proposition for Major Leaguers — not entirely dissimilar from agreeing to an early contract extension; in essence, the players in question are taking a life-changing sum of money early in their career in exchange for limiting their earning capacity once they’ve navigated through their arbitration years and entered their free-agent seasons."

 

If there is any truth to the speculation that Sano has spent most of his bonus money, maybe he will be next. What would investors be willing to pay for 10% of Sano's future earnings? And how will this affect baseball in general?

 

One final quote from the article:

 

"Beyond the long-term impact on a player’s earnings, it also seems plausible that players who enter into agreements with Fantex could be less likely to sign long-term extensions with their current club."

[The Wise One]

Duffey got 2.23 million for 10% of future earnings. I would say that Duffy himself is not too sure of his future. Consider Pelfrey has hung around and will have over 46 million in career earnings. If you can hand around the back of the bullpen JC Romero made over 20 million before retiring in 2012 Crain made 22 million for a short career. Either Duffy is selling himself short, he isn't going to last, ore just got taken to the cleaners by a legal loan shark.

[jsteve96]

Duffey will make millions when he's starting game 4 of the 2019 world series vs the cubs. #TwinsIn6

[FormerMinnasotan]

Duffey will earn his fair share, I'm just skeptical it will be with the Twins. With the log jam of pitchers coming up from the minors who could potentially be better than Duffey (Berrios, Meyer, Stewart, Gonsalves, Jay, and Thorpe) I just don't see a rotation spot for him here.

[Otto von Ballpark]

 

Duffey got 2.23 million for 10% of future earnings. I would say that Duffy himself is not too sure of his future. Consider Pelfrey has hung around and will have over 46 million in career earnings. If you can hand around the back of the bullpen JC Romero made over 20 million before retiring in 2012 Crain made 22 million for a short career. Either Duffy is selling himself short, he isn't going to last, ore just got taken to the cleaners by a legal loan shark.

Pelfrey signed a major league contract when he was drafted, which isn't allowed anymore.  So at the same age Duffey is now, Pelfrey had pocketed $6.6 million and had almost enough service time for arbitration.  Pelf has also managed to come back from missing virtually a full season due to injury twice, which is rather unusual.

 

Romero most assuredly was not at "the back of the bullpen" (if by "back" you mean bottom) during his time with the Twins, or his 2008 season with the WS champ Phillies, both of which were springboards for his future opportunities and salaries.

 

Crain earned paychecks for 11 MLB seasons, that might be shorter than a few guys but it is clearly not a "short career" when compared to all MLBers.  The odds that Duffey or even a better rookie prospect achieves a career of similar length are rather low.

[Willihammer]

Looks like a scam, I would steer clear.

[clutterheart]

The lines between gambling and investing are become increasingly dimmer

[Mike Sixel]

 

Looks like a scam, I would steer clear.

 

Scam on the investors, or the player?

 

It's basically insurance, with microinvestors supplying the money. As clutterheart states, it is very high risk investing.....

[clone52]

 

Pelfrey signed a major league contract when he was drafted, which isn't allowed anymore.  So at the same age Duffey is now, Pelfrey had pocketed $6.6 million and had almost enough service time for arbitration.  Pelf has also managed to come back from missing virtually a full season due to injury twice, which is rather unusual.

 

Romero most assuredly was not at "the back of the bullpen" (if by "back" you mean bottom) during his time with the Twins, or his 2008 season with the WS champ Phillies, both of which were springboards for his future opportunities and salaries.

 

Crain earned paychecks for 11 MLB seasons, that might be shorter than a few guys but it is clearly not a "short career" when compared to all MLBers.  The odds that Duffey or even a better rookie prospect achieves a career of similar length are rather low.

 

All very good points.

 

Not to mention it is great insurance for Duffey.  If his career ends tomorrow, he gets to bank that $2 million dollars.  Sure, if he earns $50 million, he'll lose out on almost $3 million, but he will have made $50 million.  On top of that, Duffy can take the $2 million he gets right now, invest it and make up that $3 million lost or even more.

 

[ThejacKmp]

 

Duffey got 2.23 million for 10% of future earnings. I would say that Duffy himself is not too sure of his future. Consider Pelfrey has hung around and will have over 46 million in career earnings. If you can hand around the back of the bullpen JC Romero made over 20 million before retiring in 2012 Crain made 22 million for a short career. Either Duffy is selling himself short, he isn't going to last, ore just got taken to the cleaners by a legal loan shark.

 

All of those guys didn't blow out an arm either.

[clone52]

 

The lines between gambling and investing are become increasingly dimmer

 

Why does this make it dimmer?  Its an interesting idea.  I'd like to know how people can invest in the players, but going to their website, you have to create an account before you see anything and I don't want to do that.

 

If I invest $100 in Tyler Duffey, I'm risking that money for a potential return.  If I invest $100 in Boeing stock, I'm risking that money for a potential return.  I don't really see the difference.  

[Willihammer]

 

Scam on the investors, or the player?

 

It's basically insurance, with microinvestors supplying the money. As clutterheart states, it is very high risk investing.....

On the investor. The player gets cash in hand, unlike the investor, who is guaranteed nothing as I understand it.

[tobi0040]

I love this concept.  It is a great insurance for a guy like Duffey.  I am not going to invest in his future or anything.  But if I was a guy whose future is uncertain, has over-performed relative to expectations thus far....I think this is a good move for him.

 

And the "investors" are doing so voluntarily, can research the player, the market, and calculate a break even point. 

 

 

[Mike Sixel]

 

On the investor. The player gets cash in hand, unlike the investor, who is guaranteed nothing as I understand it.

 

So, like options, or other financial instruments?

[tobi0040]

 

On the investor. The player gets cash in hand, unlike the investor, who is guaranteed nothing as I understand it.

 

Billions of dollars are moved each day on the stock and bond market with the exact same premise.  You give up money today based on speculation of future earnings.

[Willihammer]

Go to Fantex's website and get a quote on, say, Alshon Jeffrey. There are 800k outstanding shares but no volume at all. Once Fantex gets your money, you are stuck with an asset that guarantees no payouts and you can't sell. Its a scam.

[Riverbrian]

This is all fine until investors start shorting Duffey. 

 

 

 

 

 

[markos]

I've been thinking for a while now that something like this was bound to show up. The earnings gap between many of the long-term extensions (including the team options) that buy out free agent years and just going through arbitration and free agency has been fairly substantial - and potentially growing. There have been a few bad extensions, but overall the owners have saved a ton of money on them. It isn't surprising that some kind of third-party financing/insurance is trying to fill that gap. 

[tobi0040]

 

Go to Fantex's website and get a quote on, say, Alshon Jeffrey. There are 800k outstanding shares but no volume at all. Once Fantex gets your money, you are stuck with an asset that guarantees no payouts and you can't sell. Its a scam.

 

But it is up to the investor to research what he or she is buying.  Your quick research indicates that there is a lack of interest on the re-sale market for Alshon Jeffery.  If an investor does no research in something like this they will get burned, but so will an investor who blindly purchases a stock because they heard someone talkng about it.

 

Very few investments have gauranteed payouts.  Even bonds which are safer than stocks, if the company goes under or is in doubt, the price of the bond goes way down. 

 

Arian Foster did one a year or two ago where the break-even point was $30M in career earnings or so.  The odds are stacked against a veteran NFL running back with an injury history earning that much.  But I have no qualms about the player taking 10% of that up front to protect himself.  Buyer beware, maybe but they know the risks going in.

[Willihammer]

That breakeven point is bunk. There are no guaranteed payouts, how many times do I have to say that. All payouts go to Fantex. Fantex redistributes them at its whim (likely the minimum needed to keep selling new IPOs).

 

Practically speaking, these aren't equities at all. They're debt notes with 1-15 year expiration, not convertible at term, and coupon rates of... "???"

[Otto von Ballpark]

Yeah, it sounds like this is more of a (bad) investment in Fantex, than an investment in a player like Duffey:

 

http://blogs.reuters.com/felix-salmon/2013/10/18/bad-investment-of-the-day-fantex-edition/

[Loosey]

This actually isn't a bad plan from Duffey's perspective:

 

1) It hedges the risk he flames out in the future, essentially it's an insurance policy that he hasn't paid for yet.  The risk is he will have very high premiums if he becomes very good.

 

2) If Duffey makes $50M over his career he owes Fantex $5M.  So Fantex has made $2.5M profit over the course of Duffey's career.  If Duffey invests correctly with his current $2.5M.  He could potentially make that lost $2.5M back in the same timeframe he would earn $50M contract. Say 10 years for simplicity sake.

 

[tobi0040]

 

That breakeven point is bunk. There are no guaranteed payouts, how many times do I have to say that. All payouts go to Fantex. Fantex redistributes them at its whim (likely the minimum needed to keep selling new IPOs).

 

Practically speaking, these aren't equities at all. They're debt notes with 1-15 year expiration, not convertible at term, and coupon rates of... "???"

 

Are you suggesting that if Duffey goes onto make $50M, 10% of that goes to Fantex and they don't have to give it back to their investors?  That would not just be a bad investment, that would be illegal. 

 

I get that there is no liquidity, or ability to re-sell your shares.  And I get that there is no guarantee payout.  But isn't Tyler Duffey simply hedging the fact that he has no guaranteed payout with a willing participant here? Who both share the upside on a pro-rata basis?

[Otto von Ballpark]

 

Are you suggesting that if Duffey goes onto make $50M, 10% of that goes to Fantex and they don't have to give it back to their investors?  That would not just be a bad investment, that would be illegal.

Read the link I posted above.  Fans aren't buying a share of Duffey's future earnings.  They are buying a share of a "brand tracking stock" on Duffey, that is measured at the sole discretion of Fantex.  I guess it's not illegal (it's spelled out in the terms of the purchase), but I'd say it's more than a bit deceptive.

[tobi0040]

Read the link I posted above. Fans aren't buying a share of Duffey's future earnings. They are buying a share of a "brand tracking stock" on Duffey, that is measured at the sole discretion of Fantex. I guess it's not illegal (it's spelled out in the terms of the purchase), but I'd say it's more than a bit deceptive.

The devil is in the details. Good article, here is another that suggests the "tracking stocks" are moving in direction one would expect (up for players performing and down for those not).

 

But given there is nothing forcing the players to pay their earnings to fantex and their investors and the terrible track record of players spending money, it is hard to look in the future and not expect lawsuits.

 

 

 

 

http://fortune.com/2015/03/31/athlete-stock-exchange-fantex/

[clutterheart]

 

Why does this make it dimmer?  Its an interesting idea.  I'd like to know how people can invest in the players, but going to their website, you have to create an account before you see anything and I don't want to do that.

 

If I invest $100 in Tyler Duffey, I'm risking that money for a potential return.  If I invest $100 in Boeing stock, I'm risking that money for a potential return.  I don't really see the difference.  

 

Maybe chance will smile at you and you will get your money back.  But you are not "investing" in a player.  You have no ownership, the player is not telling you how he/she will use that money to build for the future.  

This an "investment" is like investing in your ability to pick the trifecta.  

 

Good Luck!

[The Wise One]

 

Pelfrey signed a major league contract when he was drafted, which isn't allowed anymore.  So at the same age Duffey is now, Pelfrey had pocketed $6.6 million and had almost enough service time for arbitration.  Pelf has also managed to come back from missing virtually a full season due to injury twice, which is rather unusual.

 

Romero most assuredly was not at "the back of the bullpen" (if by "back" you mean bottom) during his time with the Twins, or his 2008 season with the WS champ Phillies, both of which were springboards for his future opportunities and salaries.

 

Crain earned paychecks for 11 MLB seasons, that might be shorter than a few guys but it is clearly not a "short career" when compared to all MLBers.  The odds that Duffey or even a better rookie prospect achieves a career of similar length are rather lo

The point was that a career does not have to be that long to earn a large sum of money.  Crain's career was shortened by injury as he was done by 32, a shortened career for a reliever. Semantics arguments. Romero spent a few years as set up, not the majority of his career. Again, if you feel that as a starter or reliever, if you think you are going to have a decent career,  20 million is obtainable, be it as a mid to back rotation starter like Pelfrey, a long career with a few good years, or  a shortened excellent career. Taking the money, to me, is a sign the maybe Duffy is not very certain of his future

[glunn]

 

 Taking the money, to me, is a sign the maybe Duffy is not very certain of his future

 

If I were Duffey I would take the money, if for no other reason than the possibility of an injury. Also, if Duffey is highly successful, then the other 90% will be ample for his financial security.

[The Wise One]

If I were Duffey I would take the money, if for no other reason than the possibility of an injury. Also, if Duffey is highly successful, then the other 90% will be ample for his financial security.

All you have to do is make it to your arb years. The reality is that Fantex sells shares at $10 a pop. For Duffey to get his money they would have to sell over 200,000 shares. Great publicity for the company. A little publicity for the company

[The Wise One]

All of those guys didn't blow out an arm either.

They fixed Pelfrey's arm, Crain never came back from the shoulder. Houston bet over 3 million that he could