More than a year ago Charlotte Hornets forward PJ Washington Jr. and investment firm SportBLX started offering investors a unique way to, as their tagline says, “Go beyond being a sports fan.” How? Give the now-23-year-old money that he will invest how he sees fit and share in any eventual profits.
The goal: Raise $1.07 million. The total so far: $9,700.
“It’s a new idea. If you really think about it, it’s a great concept. It’s just the newness of it, I think it’s hard for people to wrap their heads around the idea,” said Paul Washington Sr. in a phone call. The elder Washington is PJ’s father, agent and CEO of PJ Washington Inc., the investment entity for the NBA player. “PJ, by doing this, he can increase his fan engagement. Then he’s able to sell shares to investors or fans, and I’m the CEO of the company. So, he’s creating wealth for his family, and he’s creating jobs.”
The idea is the first of its kind approved by regulators: PJ Washington and SportBLX sell up to 10,700 preferred shares in the business for $100 a piece. Washington then uses the money “to advance … brand management, wealth management, strategic investments, data analytics, consulting and other business operations associated with PJ Washington, Jr.,” according to the offering prospectus. Not included in the equity offering: any salary PJ makes from his NBA career, endorsements, or other investments made with non-SportBLX-raised funds.
The funding effort got off the ground through WeFunder in September 2020, raising $7,800 from 18 investors in its first month, according to figures disclosed periodically on the WeFunder website and tallied by Sportico. The fundraising window, originally scheduled to close that December, was extended when the effort had gathered commitments of just $10,100 (the entity stopped disclosing the number of investors last November). The window was extended again to February and at least three more times after that. The latest deadline pitched to investors was this past Sunday, but the page is still accepting investment pledges right now. All told, committed funds peaked at $12,700 in May—well short of the $100,000 minimum WeFunder states is needed to close the fund raising and begin investing.
The pitch to investors is a mix between fandom and finance. Fans buy shares and, depending on the commitment, get perks like a monthly email newsletter (minimum $100), two Hornets tickets ($10,000), and an autographed jersey ($100,000 or more). The offering was expanded recently to catch the NFT trend, throwing in one of three limited edition PJ Washington NFTs, distributed at random to shareholders. The investment side offers fewer enticements: There are no specific investments targeted, and a 5% annual dividend on shares isn’t guaranteed. Come June 2030, investors would receive their initial capital back, although likewise it isn’t guaranteed, and they could lose all their money. WeFunder and SportBLX fees eat into any potential profit, too.
“There is no reason to believe a top athlete has any particular money management skills, and indeed if he is spending his time doing the things he needs to do to stay in the league, he shouldn't have much spare time to be mastering finance,” Victor Matheson, a Holy Cross economics professor specializing in sports business, said in an email. “I mean, most people trying to actually make sound investments would rather hand their money over to a person formally trained in financial planning, who actually manages money for a living, than to a largely unknown third-year NBA bench player.”
For SportBLX, which has successful fractional racehorse offerings, the PJ Washington effort was to be the start of a series of athlete- and team-related securities. “What we’ve designed in sports, and you see that in our first basketball offering, is a relatively safe participating preferred that pays a mid-single-digit coupon, investors get liquidity at the end of the term, and we’ll also have secondary trading available in the future,” explained Joseph De Perio, SportBLX CEO, in a September 2020 phone call. The company was preparing a baseball effort similar to Washington’s at the time, according to De Perio. Since then however, no non-horse effort has been filed by SportBLX to the Securities and Exchange Commission, according to a filing search. De Perio didn’t respond to recent requests for comment.
Newness of the idea, as Paul Washington suggested, could be part of the difficulty, even as flavors of this idea have been tried before: Baseball hurler Randy Newsom tried to sell shares to investors in return for a cut of his potential MLB earnings in 2008, an effort regulators spiked. In 2013, Fantex sold securities connected to the cash flows of endorsement deals athletes signed with the firm, but closed the effort to new investors in 2017. Most notably, Padres superstar shortstop Fernando Tatis Jr. traded equity in potential MLB earnings for cash upfront as a minor leaguer.
PJ Washington Jr. is the first to offer retail investors access to the investing acumen of a pro athlete. It’s not unreasonable: Athletes have a reputation for superior insight into youth culture and could be expected to see better deal flow by virtue of their celebrity. Those are reasons pros have been included in management of special purpose acquisition companies the past year. “Think about Uber and Lyft before they came out: Nobody thought that would work either,” added Washington Sr.
“It pays off if he’s successful; I hope he is,” Ronnie Watkins, a PJ Washington Inc. investor through WeFunder, said in a phone call. A recent retiree in Grosse Point Woods, Mich., Watkins said he previously doubled his money on a handful of Fantex offerings he bought during the middle of the last decade. “I play the stock market a lot and stuff like that. These are little investments I just play with. They’re interesting.” Watkins added that he’s not considering pulling his money, despite the longer-than-expected fundraising period.
Paul Washington said he and his son, who declined to comment, are also committed to making the effort work. He framed their relationship with SportBLX positively and understands the challenges the firm faces selling a new idea in a pandemic. In the long term the father has faith the effort will pay off for his son, who is averaging about 9 points a game this season, playing with a knee injury. “When he’s done playing in 15 years or so, he can look back and say, ‘From that investment, I have this coming in.’ He’s taking money off the table to save and invest, instead of losing money on cars and clothes. He’s being frugal and very financially savvy with this whole structure.”
The problem is if investors don’t commit more money to the player, the deal may never close.
“I don’t understand why there’s no appeal, with all these kids getting into GameStop, Robinhood and all that stuff,” added investor Watkins. “Why wouldn’t there be any interest in him?”