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Aeneas Hunter
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Joined: 12 Jul 2005
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 Posted: Thu Sep 12, 2019 8:55 pm Post subject: Spencer Dinwiddie Turning His Contract into an Investment Vehicle? |
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According to the article, other athletes have looked at doing this, but apparently Dinwiddie is actually going to do it. It sounds to me like a payday loan on steroids.
| Quote: | Dinwiddie, according to multiple sources, is starting his own company to securitize his NBA contract in the form of a digital token as he begins a three-year, $34.36 million extension with the Nets. It’s unclear how much of the contract amount he wants to raise upfront, but it would likely be less than the total amount, according to sources.
So how exactly would this work?
In a securitization, the borrower gives up some future income in return for a smaller lump sum payment. But the borrower, in this case Dinwiddie, then has more money to immediately invest than he otherwise would.
A token is a digital currency term. The bond exists in the digital currency world. Instead of buying the bond from a broker, it is through a token.
According to sources, this Dinwiddie bond would pay investors principal back and interest, which would be covered by what the Nets owe him. |
The Athletic (paywall) |
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LuciusAllen
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Joined: 24 Sep 2005
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| Posted: Sun Sep 15, 2019 4:24 pm Post subject: |
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| Such an odd concept on its face, but leave it to Wall Street to find a way to turn pretty much any asset or liability into an investment product. I expect that this practice will only grow over time. Young prospects would be riskier investments, and players/actors/etc with signed, guaranteed contracts will be much lower risk. |
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audioaxes
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Joined: 26 Apr 2004
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| Posted: Mon Sep 16, 2019 2:57 pm Post subject: |
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I can see trying to cash out on a long term annuity for a big investment but I think its silly to do something like this to cash out a 3 year guaranteed contract
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(bleep) Kawhi |
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activeverb
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Joined: 17 Jun 2006
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| Posted: Mon Sep 16, 2019 9:24 pm Post subject: |
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| LuciusAllen wrote: | | Such an odd concept on its face, but leave it to Wall Street to find a way to turn pretty much any asset or liability into an investment product. I expect that this practice will only grow over time. Young prospects would be riskier investments, and players/actors/etc with signed, guaranteed contracts will be much lower risk. |
It really isn't that odd; it's really not much different than buying a government bond. Instead of loaning money to the government, you're loaning money to an NBA player, secured by their guaranteed contract. The only risk is if you think the team or league will go bankrupt and won't pay off the contract, which is pretty unlikely. |
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governator
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| Posted: Tue Sep 17, 2019 5:34 am Post subject: |
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| JG Wentworth-esque |
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LakersRGolden
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Joined: 13 Jan 2002
Posts: 7922
Location: Lake Forest
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| Posted: Tue Sep 17, 2019 4:33 pm Post subject: |
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| activeverb wrote: | | LuciusAllen wrote: | | Such an odd concept on its face, but leave it to Wall Street to find a way to turn pretty much any asset or liability into an investment product. I expect that this practice will only grow over time. Young prospects would be riskier investments, and players/actors/etc with signed, guaranteed contracts will be much lower risk. |
It really isn't that odd; it's really not much different than buying a government bond. Instead of loaning money to the government, you're loaning money to an NBA player, secured by their guaranteed contract. The only risk is if you think the team or league will go bankrupt and won't pay off the contract, which is pretty unlikely. |
Just don't buy into an Antonio Brown backed guaranteed contract. |
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Laker's Fan
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Aeneas Hunter
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Joined: 12 Jul 2005
Posts: 31763
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| Posted: Thu Sep 26, 2019 9:39 am Post subject: |
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| Quote: | Brooklyn Nets guard Spencer Dinwiddie will soon become the first pro athlete to turn his contract into a digital investment vehicle when his company and token name, “$SD8,” go public for investors. The project will be backed by Dinwiddie’s three-year, $34.36 million contract extension and will bring him an upfront lump payment.
In a secured investment vehicle such as this one, the borrower gives up some future income in return for a smaller lump sum payment. But the borrower, in this case Dinwiddie, then has more money to immediately invest than he otherwise would. A token is a digital currency term. The bond exists in the digital currency world. Instead of buying the bond from a broker, it is through a token. |
| Quote: | For Dinwiddie and his investors, the prime appreciation is designed to come during his player option season in 2021. Dinwiddie has a player option worth $12.3 million for the 2021-22 season. By opting out and earning more, it will, of course, create a major return for him — but also investors.
“What better way to be invested in a player as a fan than to have some level of skin in the game,” Dinwiddie told The Athletic. “With the way mine works, if I play well in that player option year and we split the profits up the first year of my new deal, it greatly appreciates the return on this investment vehicle. It allows you to get up in that 15-percent range in a return, like a growth stock, and that’ll be something most guys won’t beat. |
| Quote: | | Dinwiddie told The Athletic that he will also start a reserves system to ensure investors have security in case things go awry: $1 million in cash flow, $1 million in a public Bitcoin entity and $1 million in physical gold. |
| Quote: | What are your plans for your money, and what’s your vision?
My vision is … a lot of these guys take money deals from banks, getting charged between 7-to-12 percent. So these guys end up under water before they even start. There are also guys who go broke within four years or so, out of the league because they’ve established a certain lifestyle that they can’t keep up once they’re out of the league. From a player’s sense, I want to figure out how I can help.
So if it’s a smaller rate, like three percent, we’re going to be able to do things with our own money that is more prudent. If we lock up our money from the start, we can live off the interest from the beginning so you don’t get caught trying to manage a lifestyle you can’t keep up. If we were to lock up a large amount of our money from the start, then we would be able to live off our interest from the beginning. For example, if you get your money up front — like $10 million — and you establish a lifestyle that is $200,000, $300,000 a year, in theory you will be able to keep up in perpetuity. I want us to keep our money from the start, use our investment interests and keep up our pace.
From an investor’s and fan perspective, we have a recession coming up. This (bleep) is beating down the doors. I hope it’s a win-win for everyone with my process.
For instance, if I’m a billionaire and an owner approached me and said, ‘Hey, you want 49 percent of the team, you have to give me $1.5 billion, but I’m keeping all voting rights, I’m keeping all powers, keeping everything.’ I’m going to look at him and effectively say, ‘Hell no, I’m rich. I’m not going to do that.’ But if you offer that to the fans, they’re not going to point to the CEO or point at anything. They’re going to be able to sit in the stands and say: I own .00001 percent of the NBA team and I’m a super fan and this is why I matter and why I’m here. |
The Athletic (paywall)
This sounds like something from a Douglas Adams novel or a Terry Gilliam film. |
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Laker's Fan
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Joined: 27 Jun 2002
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| Posted: Sun Oct 13, 2019 5:59 pm Post subject: |
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Dinwiddie insisting he's going forward with his plans and that the league can't stop him. This is definitely an underappreciated development in the NBA. So many implications to this if it can get off the ground.
I wonder who bears the risk of default in a lockout. Does that risk fall to the token holder, or is the player liable? If the players are effectively decoupled from the risk of lost salary from a work stoppage, that would flip the leverage in CBA negotiations pretty significantly. On the flip side, if the token put the risk of interruption on the investor, while also keeping clear other income and assets of the player, I would imagine there would need to be a pretty steep discount rate to get to a present value. I guess as a novelty, you could see an arbitrage |
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