While Cleveland Guardians closer Emmanuel Clase is firing off 100 mph cutters to try to help his team lock down advancement to the next round of MLB playoffs, the 26-year-old pitcher is also trying out a new pitch: an offering of equity in his future baseball earnings.
The Dominican native is in the midst of selling a portion of his future baseball income to people who buy shares of his stock, which is being sold at $12 apiece. The offering can raise as much as $3.6 million in exchange for as many as 300,000 shares in a sale structured by Finlete Funding, a San Diego-based startup focusing on athlete income-sharing deals. In exchange for the money upfront, Clase will return 3% of his future global baseball earnings to investors.
“You can tell Emmanuel and his agent are very focused on his financial future and they talk a lot about diversifying Emmanuel’s earnings into various investment opportunities,” said Max Eisenberg, co-founder of Finlete, on a phone call. “They were very focused on taking on more capital to supplement his income.”
Based on the guaranteed money Clase has in his contract with Cleveland, it’s a good deal for the closer—at least at first. The hurler has $13.3 million in guaranteed money left in his contract with Cleveland, meaning he’s locking in many multiples of the 3%—$399,000—that he’s potentially forking over. If the offering doesn’t raise the minimum by the time it closes next year, Clase will sell a proportionally smaller stake of his earnings, such as 1.5% if $1.8 million is raised. If investors buy up the maximum for sale, Clase will receive about $2.4 million of the proceeds, with the other third going to Finlete to both cover offering expenses and provide the firm with its take.
Should Clase continue to perform at levels akin to Hall of Fame closer Mariano Rivera, it may be a better deal for investors. Clase has $31.3 million remaining in his current deal if the Guardians pick up two team options, then he’ll reach free agency after the 2028 season. By way of comparison, Rivera earned $169.4 million in his 19-year MLB career, which ended in 2013. Three percent of that would be more than $5 million, or $14.11 a share, if every share available is distributed.
“Mariano Rivera was the best ever. And this guy’s in that conversation. So he’s got a full career in front of him,” said Finlete’s other cofounder Rob Connolly. “How the hell did we land this deal? It’s incredible.”
Finlete is one of a handful of operations that have emerged in recent years to swap cash up-front to ballplayers for a cut of future income. Eisenberg and Connolly started it a couple of years ago and focused on developing contacts in baseball to direct their efforts. An early trip to the Dominican Republic led to Connolly meeting Kelvin Nova, Clase’s agent, who was intrigued by the concept. Fast forward to this year’s All-Star game in Texas and a chance reconnection with Nova led to Finlete inking the Clase deal during the midseason break. Clase is the first athlete to sign one of these deals as an established star, suggesting that athlete income-sharing agreements could be coming into their own.
Finlete isn’t the first or only outfit to pursue such deals with athletes. The most successful is Big League Advance, a hedge fund best known for signing an income-sharing deal with Fernando Tatis Jr. when he was a minor leaguer. Others have popped up to offer similar deals to retail investors, but usually for lesser-known athletes. The most robust type of investment for a cut of future income takes place with racehorses, where similar equity structures have found a lot of success.
But there remains plenty of risks. For one, few relievers have ever combined the longevity and excellence of Rivera and, probably for that reason, they haven’t commanded the long-term, big dollar contracts other position players get: MLB’s top 50 most valuable contracts of all time don’t include any bullpen pitchers.
There is also the risk that, so far, income-sharing deals available to the average buyer haven’t enjoyed great demand. Finlete’s first offering, a share in minor leaguer Echedry Vargas’ career earnings, sold about $80,000 out a potential $500,000. An offering of Denver Broncos’ Baron Browning, from another company, raised $653,000 out of a hoped-for $1 million. As of last week, the Clase offering had closed on $50,000 with another $200,000 committed from investors, according to Eisenberg.
But these deals offer people more than just an investible asset, Finlete founders contend: There’s an experiential and engagement aspect that brings fans intangible benefits. In Clase’s case, everything from a signed baseball to an all-expenses-paid trip to Cleveland to catch a game and meet Clase are available depending on the amount invested. There are also some bonus shares on offer for higher levels of investment, lowering the average price per share. All investors get access to twice yearly Zoom events with the pitcher, and other potential perks like fan gatherings and memorabilia giveaways.
The fan engagement aspect is one reason why Clase elected to go with the Finlete offering and not other options athletes can pursue, like loans backed by their guaranteed money. “What I found really interesting was Emmanuel Clase’s motivation of ‘how cool is it that I can bring my fans along my journey?’” said Connolly. “Whatever team he ends up going to, those fans are fans of Emmanuel Clase.”
Finlete says it is in talks with multiple ballplayers about doing similar offerings, and the idea has gotten to the point that Connolly and Eisenberg feel players and agents are comfortable with them. The real work now is getting fan-investors to take notice.
“We’re not an NFT, we’re not crypto. This is an offering done through the SEC and FINRA,” said Connolly. “This capital is so valuable to a lot of these guys.”
(The number of shares in the sale has been corrected in the second paragraph.)
