Big Whiff
Investing in up and coming golfers has been going on for years, and now baseball players are trying to do it:
To supplement his meager salary as a minor league baseball player, Randy Newsom, a pitcher in the Cleveland Indians organization, put up a Web site and offered to sell shares in his future major league earnings to investors. Unfortunately, he failed to register the offer with the Securities and Exchange Commission, so he had to withdraw it.
RealSportsInvestments.com remains online, though, and perhaps Newsom will eventually work out the regulatory kinks. If he does, would a minor league player be a good investment?
Newsom tried to raise $50,000 by selling 4 percent of his future after-tax earnings, which he pegged at $1.25 million. An investor who paid $20 for a single share would be entitled to 0.002 percent of Newsom’s big-league earnings. The minimum major league salary this year is $390,000. But to have a chance at a journeyman reliever’s annual pay of about $1 million, Newsom would probably have to stay in the majors long enough to qualify for salary arbitration (three years) or, better yet, free agency (six years).
Let’s say that Newsom, who played AA ball last year, spends another two years in the minors, earns the major league minimum for three years, then wins a $1 million salary in arbitration for years four, five and six. Your annualized return at that point would be only 17 percent. That’s not so great, considering that it’s a 100 to 1 shot, by some estimates, for a minor leaguer to play even briefly in the big leagues.
Kiplinger
A Hurler’s Investment Pitch
Comments:
Next entry: Ashley's Other Song
Previous entry: Bear Stearns on the Ropes
