How to Invest in America’s Pastime

You Can Now Purchase Shares of Athletes’ Future Earnings

Last week, we briefly touched on how expensive pretty much everything is nowadays. And it’s not just average Americans who are living paycheck to paycheck. 

USA Today recently reported that about 95% of Team USA — currently representing our country in Paris at the Summer Olympics — is struggling to make ends meet. That’s not particular to Olympians, either. 

The average annual salary for a minor league baseball player is $25,689, according to PayScale. For context, the federal poverty level for an individual is $15,060. So while 20-somethings on farm teams don’t qualify for assistance, it’s possible they’ll only have $5,133 leftover after paying 12 months of rent (average nationwide rent for a one-bedroom unit is now $20,556/year).

But today, as we’re apt to do, we’re taking lemons and making lemonade. And if you’re a sports fan, the opportunity we’ve found this week will only increase your interest in athletics. 

The Growth of Alternative Assets

Investing in alternative assets — or alts — has exploded in popularity over the past several years. According to JPMorgan, alts share in the total asset universe reached 14.9% in 2023, down slightly from 2022’s 15.5%. 

And while alts include crypto, real estate, gold and private equity, it’s a much broader landscape. 

Last year, we wrote about how this trend’s making investing fun again, and about various platforms that, through Regulation Crowdfunding (CF), allow you to purchase shares in SEC-regulated securitized assets like designer handbags, fine art, rare wine collections … and even dinosaurs. 

Now, for sports fans, there’s a new option. Finlete brings together professional athletes and investors, allowing the latter to directly invest in the former’s potential before they make it big. 

The platform has already caught the eye of some big-name investors. Comcast owns 7% of the company, and renowned venture capitalist Tim Draper invested $50,000 in Finlete’s seed round. 

Note: Draper was an early investor in Baidu, Hotmail, Skype, Tesla, SpaceX, AngelList, Ring, Twitter, DocuSign, Coinbase, Robinhood, Ancestry.com and Twitch. To say the guy has a nose for golden opportunities is the understatement of the year. 

So if you’re a fantasy sports junkie, consider sabermetrics a hard science or simply love the feeling of eating a hot dog in the bleachers, this platform is for you. 

How It Works

Before we dive into the Finlete, we should first frame the opportunity. Baseball is a business, and like any corporation, it aims to make the most money out of its investments.  

But if the average annual salary for a minor league baseball player is $25,689, what’s the point of investing? Because the average salary for a major league baseball player is $4.98 million and climbing:

At worst, the league minimum for Major League Baseball players is $825,000/season. And if Finlete is able to sign the next Mike Trout, Shohei Ohtani or Aaron Judge … there could be hundreds of millions of dollars in investment opportunities.  

So how’s Finlete work? It creates securitized offerings for professional baseball players then sells preferred stock of those players until the offering is filled. 

Finlete operates in a regulatory framework that is compliant with the SEC for Regulation CF.  

Dividends are paid twice a year, but for non-accredited investors (us Average Joes), there is a $2,500 investment limit. 

The company cautions that, with few exceptions, there is a one-year lock-up period when investors are unable to offload their shares. Exceptions include:

• Selling them back to the issuer (Finlete).
• Selling them to an accredited investor. 
• Selling them in connection to your death or divorce.
• Selling them to a family member.

Case Study

Finlete’s first — and so far only — closed offering is for Dominican-born Echedry Vargas. The 19-year-old, right-handed second baseman is currently playing for the Texas Rangers Single A affiliate and turning heads with his combination of power and speed. 

We won’t analyze his stats here; that would take 1,000 words of analysis itself. But suffice to say that Vargas is tearing the cover off the ball and burning up the base paths in 2024: 

At age 17, he signed a contract with the Rangers that pays him an annual contract of $10,000/year — or more than $5,000 below the poverty level. However, if he continues to produce and makes it to the big-league level, he could be rewarded with a massive contract extension. 

Shares of Vargas were valued at $8 each, entitling the shareholder to 0.00009% of the athlete’s future earnings. So, for every $20 million Vargas makes in his career, each $8 share receives an $18 dividend. If the athlete makes $100 million in his career, each share will receive $90 in dividends, which equates to more than a 10x return. 

According to Finlete’s website, there are currently three offerings coming soon: 

1. A player for Major League Baseball’s Cleveland Guardians. 
2. A Single A player for the St. Louis Cardinals. 
3. A rookie for the Florida Marlins.

We recently spoke to a financial advisor who stated that investors should allocate no more than 5% of their portfolios to alts — be they commodities like gold, crypto or, in today’s instance, shares of professional athletes.

But if you have a love of the game and a love for speculative investing, we can’t think of a better way to combine the two. 

We’ll be back next Monday with a stock that, despite last week’s market sell-off, has gained 19% over the past five days and is poised for massive gains as it sets its sights on the next frontier.