Fractional Ownership: The future of Sports Financing

Fractional ownership in sport will grow steadily throughout 2024...and I don’t mean celebrities buying clubs. As contracts become more negotiable and many sports need alternative revenue sources, then clubs, athletes, and associations will consider alternative routes to financial stability.

I believe there will be 3 key routes:

Sale of Ground

In many ways, this is the simplest option as there are fewer variables, and it is easier to evaluate true value.

If a ground were to be valued at £100 million (an allowance could be made in value for the desirability of the fans to own a piece of the ground), then we could offer the following scenario: A prospectus is created explaining to fans what is happening and why it is good for the fans, club, and shareholders.

- The assets of the ground are placed into a holding company controlled by the club's shareholders. 100 million £1 shares are issued.

- 20 million shares are offered to fans via the Lokkaroom platform and connected to smart contracts inside a marketplace system. We believe that no more than 20% should be offered initially.

- There is a minimum and maximum share limit, let’s say £100-£5000. This avoids any claim on over 2% ownership, which can cause some issues. If you have institutional investors, then this can be handled without the need for a public listing.

- The shares will also have a trading platform area, so fans can buy and sell similar to a trading desk. This will sit alongside other security assets that will be on offer.

-Fans can trade shares in the asset indefinitely, and this creates revenue for the Club, the marketplace, and the license holder as there would be a small charge per trade.

Sale of Benefits

The basis of this offer is that the fans can buy a seat in the stadium that comes with added and variable benefits. It can be for a lifetime, or there could be 10- and 5-year options. Ownership can be traded at any time via the trading desk.

- This can carry variable values and timelines, so everything needs to be detailed and agreed for each offer carefully. Simple and well-communicated messaging will be essential, so the buyer has no case for recourse.

- There are multiple bolt-on options for all sales, i.e., name on seat, hospitality, concessions, so all must be certain of availability for the duration of the contract.

- The revenue raise here could be more, though the costs could be significant compared to option 1, as the club would have to build new services that are not presently available.

- There is an option to package in a virtual package with tangible benefits. For example, the owner receives something delivered pregame like a shirt, programme, and link to a private match viewing (I know this has ramifications with the Premier League but could be a possible deal made also it works in many other sports).

- There is an option in the future for taking this model for digital seating.

Fractional Ownership of a Player’s Contract

The world of sport is changing fast. The NIL ruling in the USA in 2021 will have a significant effect on future contracts for all sportspeople in all countries. Already players are amending and creating new contracts to realise their image value, and it’s not for the club’s benefit.

At this time, there is no way to securitise this and to sell back to the fans; however, we believe that this is possible and that through our platform and your licenses, we can offer these contracts to players and then trade them.

The core focus here is new players or those in sports that do not receive the high salaries. It is about volume and the potential to own a contract in a sportsperson that then could move according to their success. Think Emma Raducanu or Guido Migliozzi (Golfer). Once a template is understood, we can then look to offer more mass market opportunities.

- Everything can run from a marketplace and be part of the club’s system.

- All owners of shares would have their own wallet, which has multiple uses. We have a wallet like this, and it is built and operating.

- A player creates a company, and all contracts for NIL and playing run through this contract.

- The contract is broken into 10,000,000 shares (even if they are 1p or £1).

- 20% are offered to fans over a fixed time period, could be 5 or 10 years.

- Fans then earn a monthly dividend based on the income of the player.

- The player gets an upfront lump sum to help progress their career, get new training facilities, trainers' equipment, etc.

- Specialist FCA and SEC licenses are required as well as some local licensing in some territories.

- The contracts could be as small as £10k and as large as £100 million we believe the average will
start at approximately £2-500k.

- Every contract would need license holder sign off

- Fans can then trade these contracts on our trading desk and depending on how well the sports
professional is doing the shares could move in value significantly.

- This will replace a lot of online gambling in the future and there will be a significant number of
professional traders who will seek out up and coming future stars.

- A limit of ownership needs to be put on each contract

- No shareholder has any rights to the player.

- All the finance is centrally controlled and auto paid instantly.

- Payment to the account is also auto controlled and agreed at contract with access given to the
trading account.

- No player can affect the contract once signed.

Summary

There are many more details to consider and discuss but the framework is there to start the initial
construction. We have looked at this for over 4 years and watched as sports and contracts evolve. It is now inevitable that this will start to be an alternative source of income and quickly establish itself as a source for fan ownership, club revenue and sponsor engagement. Look out for new announcements in 2024 by smaller clubs and individual athletes as they test the market to assess interest.