Basketball Bonds? Brooklyn’s Dinwiddie launches tokenized investment platform

As his Twitter bio says, Brooklyn Nets Point Guard and potential NBA All Star Spencer Dinwiddie is “Just a Tech guy with a Jumper…” and today he’s hoping to get an advance on the that Jumper which is currently valued at approximately $11.5MM per year.

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As reported by Forbes, Dinwiddie is intending to offer an opportunity to have an exclusive access to a portion of his salary. All of this is being facilitated through what are called DREAM Fan Shares, a startup investment platform built on the blockchain technology Ethereum (one of the most widely recognized cryptocurrencies).

He plans to issue a total of 90 SD8 coins which are valued at $150,000 each. If fully subscribed he may open up nearly 40% ($13.5MM) of his contract before getting paid.

According to various sources this offering is securitized through his current $34MM contract.

Initial reports of the plan outlined the offering to be structured more like an equity asset or shares, where the potential upside was tied to Dinwiddie’s final year of his contract, or player option, where a premium dividend happened if he was able to forego his current $12.3M deal with the Brooklyn Nets for a new, more lucrative long-term deal (with Brooklyn or elsewhere).

According to Dinwiddie this is where the NBA saw major issues with his plan, going as far as hiring outside counsel.

“Pretty much what they said was that the player option was gambling,” he told Forbes, “and that would’ve been cause for termination.”

It appears that the two parties may have found common ground now through a less risky option to investors. According to Dinwiddie’s representatives the instrument will be structured as a bullet bond where, over the three years, a coin holder is expected to receive a 4.95% base interest rate monthly, with the full principal paid returned on the bond’s maturity date (which is February 10, 2023).

These coins, if fully subscribed, should then return investors a total of just more than $2MM over the three year period. Beyond the base interest rate, Dinwiddie is outlining the ability to have a more intimate experience with the business of professional athleticism.

For Dinwiddie, this is more than just being a trailblazer among professional athlete autonomy, it’s allowing him early access to guaranteed contracted cash and aligns with his desire to put that money to work through smart investments in technology and other businesses.

Who knows, if his offering is oversubscribed it may even afford him the ability to be picky with ownership of his coin. This would be equivalent to taking on strategic investment in the startup sphere.

The idea of holdings in a professional sport contract is not novel; startups have been trying to have a go at this for more than a decade. Finally though, it appears that the technology and social acceptance of these innovations may now be intersecting with this concept and the fact that a potential all star on one of the most significant NBA franchises is leading the way only helps with validation.

Whether you’re looking to invest or if you’re Spencer Dinwiddie himself, one thing is certain: understand the risks and invest wisely.

This offering aims to launch today (January 13, 2020) to verified accredited high net worth investors, but according to The Athletic, as of last Friday (January 10th) the league is still reviewing Dinwiddie’s revised proposal and the platform is not guaranteed to go live today.

p.s. For the record (assuming my understanding of the initial offering is sound), I’d have preferred that plan and looking for upside on Dinwiddie signing a Max Contract rather than exercising his player option. Back of napkin math: upside of let’s say say $8MM (go from ~$12MM to ~$20MM, and could be higher) which would be more like a return of roughly $3.2MM vs $2MM to SD8 (+ 60%). Far greater exposure to upside while also IMO reducing likelihood of a default.

p.p.s. this isn’t investment advice, do your own homework, don’t take my word for anything and all that stuff you’re supposed to say for investment things. Seriously.

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