Wednesday, November 05, 2008

Sports Fantasy, Stocks and IPOs

Over the past few years, fantasy sports leagues are getting more and more competitive. Just a decade ago, the victor’s sole prize was bragging rights. Now, the winner’s purse could be in excess of $1 million (A recent WSJ piece just described a fantasy football league for the Wall St. elite with an entry fee of $100,000). I just learned about a TV channel dedicated entirely to fantasy football! And, once a season, many husbands skip out on family obligations in order to meet with their league on fantasy draft night.

So, you might ask, where am I going with this? Let me throw out a wild idea about where I see fantasy sports going. Professional athletes will incorporate themselves like a publicly listed company and trade in financial markets. How will this happen? Let me just throw out some ideas.

For an IPO to occur there are 3 key players involved: The company wishing to go public, the investment bank who assists them and markets their shares, and the regulatory bodies that govern both throughout the process.

The company will be the pro athlete, the investment bank will be the pro team that acquires the athlete, and the regulatory body will be the sports organization, like the NBA, NFL, NHL, etc.
The athlete will trade based on their earning power / potential earning power over the life of their career (maybe even after retiring, as some athletes make more money after their sports careers end).

The increasing competition in sports has been paired with increasing illegal activity—anything from performance enhancing drugs to spying on practices to forging birth certificates. Additionally, the federal courts are also playing a bigger role in litigating the illegal activity in professional sports, trying to “clean up the game.”

This could be an effective way for sports fans to hold professional athletes more accountable for their actions. Because their company (the athlete) would be much more transparent, via annual and quarterly reports filed with their respective regulatory body, illegal activity would be much more difficult to pursue without consequences.

This is a wild idea, and it would take a dissertation to fill in all the gaps, but this is a step I see fantasy sports taking within my lifetime.

Aaron Konen


Anonymous said...

I liked the article , if you want to learn more about fantasy leagues and see how big they are try football in Europe or South America. They have become in huge strong markets.qyuider

Anonymous said...

Why oh why on earth would athlete's take such a bad position as to incorporate themselves on the open market?

One thing wer're forgetting is this. Athletes have no need for capital. They are in such a dominent position that financing is not necessary. How lucky for them.

Fantasy speculation has no viable purpose in professional sports.