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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% 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% 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%. 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. Keep in mind, too, that players on the fast track to stardom don't need or want your money. The big payoff would have to come from your ability to spot an overlooked A-Rod toiling away in Duluth or Sioux Falls or some other distant outpost. It might not turn out to be profitable -- but it sure would be fun.
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