Are you bored with the cash, stocks and bonds in your retirement portfolio? Then perhaps it’s time to spice things up with shares in an NFL outside linebacker.
Recently, Baron Browning of the Denver Broncos offered investors a slice of 1% of his future earnings. Those interested can buy into his IPO for $10 per share on Vestible, a new platform for investing in athlete incomes.
Fans may see a tantalizing opportunity, but investors should stay on the sidelines. Athletes, for all of their virtues, are an unusually risky investment best left to the clubs and teams that know and employ them.
Sports and speculation have always gone together. For centuries, gamblers have used the best information available to them. Likewise, professional scouts use data and their gut to predict the long-term trajectory of talented athletes.
Occasionally, they get it right. In 2000, for example, 30 teams passed on Tom Brady before the New England Patriots picked him in the sixth round of the NFL draft. For the Patriots and their emotionally invested fans, he represents perhaps the greatest value in the history of the NFL draft. The returns — Super Bowl after Super Bowl — speak for themselves.
Meanwhile, for financially minded fans, Brady is reminiscent of buying low on a stock and then reaping years of outsized returns. According to Vestible, it’s the model that inspired the creation of the company’s athlete investment platform. As the story goes, the founders were watching football in a bar when one said to the other: “Man, if I could have bought stock in that player when he was in college, I’d be a millionaire.”
It makes intuitive sense, especially over beers. But there are crucial differences between a stock and an athlete.
The problems start with information transparency. Like many football players, Browning has an injury history (knee, hip and back problems) that’s caused him to miss games. Vestible lists that history in his IPO prospectus, as it should.
But even if investors were to have access to Browning’s X-rays and other medical data (and they won’t), they can never get inside his head to know how those injuries affect his performance. Worse, even if Browning wanted to divulge that, say, back pain slows him down (to be clear: there’s no evidence it does), the Broncos almost certainly wouldn’t allow him to do so for fear of tipping opponents to a potential gameday vulnerability. Investor concerns won’t change the team’s stance, either; the NFL and other leagues have strict injury reporting rules.
For investors, there’s an added layer of danger in this information asymmetry. Some self-aware players may decide that they have more to earn from an IPO than they do from what they fear will be a brief career. So, they might pursue the IPO knowing that their investors will likely come out as losers in the deal.
The risks haven’t stopped entrepreneurs and athletes from trying to sell shares in themselves and their income since at least the late 2000s. Some of those past platforms and investments have failed, in large part because they’ve mostly attracted small shareholders who were everyday fans, not money managers.
For example, most individual investors in Fantex, a platform that sold shares in several NFL players during the 2010s, owned fewer than 10 shares, which, according to the Financial Times, implied investments of less than $100. Most likely, they viewed their purchases as unique souvenirs.
Vestible appears to attract a slightly more moneyed — or, at least, enthusiastic — fan. As of Thursday morning, 322 investors have put up a total of $374,790 for Baron Browning shares. Those modest sums — at least by big-time pro sports standards — haven’t dissuaded other athletes and entrepreneurs from thinking there’s a lot more money to be had. According to Sportico, there are at least four additional, recently formed investment funds.
If they follow Browning’s model, these funds likely won’t be enriching fans. According to the prospectus, Browning would need to earn over $100 million during his career for the shares to earn back the maximum amount - $1 million - that investors can put into it. As noted in the document, the average linebacker’s career lasts less than three years. Three years into his career, Browning has earned $3.47 million.
It’s possible — though not likely — that he could surprise everyone and have a long career with a series of big contracts. For now, fans hoping to share financially in that success are probably better off investing in Browning trading cards or shares in broadcasters who televise Broncos games.
Browning’s salary, whatever it ends up being, is best left entirely to him.
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