TRANSCRIPT
All right, well, it feels like we've reached a nice little quorum already to get started. So thank you everybody for joining. We're gonna do some formal introductions in a couple of minutes, but we have Stuart Goldfarb here, Andrew Durgee and myself, Slava Rubin. We're very excited for today's topic, which is the business case for sports investing. Very timely since even in today's news, there's talk about
a major transaction that actually has not happened. And we'll dive into that in a few minutes. That said, let's move forward. So let's get started with the most important news, the disclaimer. All right. Nothing in this presentation should be construed as any offer to sell securities or a solicitation of an offer to buy securities. All investments involve risk and a possibility of loss, including loss of principle and neither past performance nor forward looking information.
is a guarantee of future results. Now, fast forward to the fun. Who is here with us? Andrew, why don't you start with an intro? Hey everybody, Andrew Dargi, President of Republic. I've been in the blockchain space since early 2010. I joined Republic in early 2019 to build out what was meant to be the first vertically integrated crypto investment bank. Finished that integration about five years ago, four and a half, five years ago.
moved on to a larger digital merchant bank format. If you're interested on the sports side of it, we were known now for being the first one to tokenize the equity of major sports teams. did Watford, which is the English football club recently, who took 10 % of their equity, tokenized that, sold their fans, built utilities into it. And we got dozens and dozens of more that are falling behind it. So we're really excited about this particular vertical, and I'll get into the details of that later. Thank you.
Stuart. Great. Thanks Slava and Andrew. Great to be here. Thanks for having me. I'm Stuart Goldfarb. I'm a partner at the law firm of Cowan Debates, Abrams and Sheppard. I am also a co -founding partner of Ski Partners, which is a platform that combines a commercial rights agency together with a captive capital strategy and an asset management arm.
background. I've been involved as an attorney mostly in the sports and media space for the last two decades, starting off in domestic and international football. I've worked with everyone for soccer, if we're depending on what term we're using. I've worked with everyone from FIFA, the global regulatory body for football to the regional confederations of North America, Central America, the Caribbean, as well as UEFA and others, everyone in the
.S. Soccer Pyramid from U .S. Soccer Foundation, Federation on down and then worked with, you know, others in other sports on the investment side have worked to buy and sell several football clubs domestically and internationally. Our SKI partners platform is a pivot to investing in unique and proprietary sports and media opportunities with an owner focused and operator focused approach that
that we believe are underserved, particularly in global sports. So motor sports, football, cricket, and golf tennis and whatnot. So happy to be here and looking forward to talking about investing in sports and media as an asset class. Amazing. So we obviously have great panelists. Myself, I'm Slava Rubin. I'm one of the founders here at Vincent. We look to democratize access to alternative investing.
We do this with a number of different properties, including our Alternative Investing Report, which is a daily newsletter that you can learn about all this great content, as well as the Smart Humans podcast, which covers alternative investing. So I'm excited for today because we're mixing two of my favorite things, which is alternative investments and sports. So it doesn't get much better.
So with that all said, let's dive in to the next slide. I'm going to just set the table a little bit before we start into the questions, which is for those in the audience, the asset class of sports teams is on the rise. And if you see here, whether it's the major sports teams in the US, the NBA, the NFL, the NHL and the MLB, over the last decade, you've seen some nice increases that have been going on.
Obviously with the NBA, you've seen a massive spike probably related to the new deals that have gone in, but really any of these sports leagues have been outperforming the SMP or at least keeping track and you get the benefit obviously be related to the sports team. So following on to the next slide, there is not a ton of these opportunities. Really, you only get a handful or two of these transactions
that are really happening every year. So the idea that Andrew said that now there's an opportunity for individuals to get involved is a very novel concept, which we'll be diving into more. This was really something that the richest of the rich were only able to participate. And even when they were participating, even then there was only a handful of deals to chase down. So as an example, you see some of the more recent bubbles, they're bigger because the numbers are up.
And obviously they're to the right because they're the most recent. But you have examples like the Washington commanders, which just sold for like $6 .1 billion. And that's an NFL team. Or similarly in Denver, the Denver Broncos sold for $4 .7 billion by the Waltons as if they needed any more reason to have more money. They were able to transact an incredible deal there. Now in basketball, you have the Phoenix Suns that were sold for about $4 billion.
recently as well. And then the Milwaukee Bucks, another basketball team sold for about three and a half billion. I mean, these numbers are insane, considering that I believe most of these owners were coming in the hundreds of millions of dollars of acquisition price. So this is not something that's happening very often. So the fact that everybody on this call can really be thinking about it as an option and how they can be participating is just a very novel idea and why it's timely.
And the Mavericks, don't forget they just sold last year. Tell us more. Dallas Mavericks, they sold for four and a half billion. Exactly. Mark Cuban trying to get out of his stuff before he runs for president. Or maybe he just top ticked the market. We'll see. We'll see what he was doing. And now the Celtics are up and they'll set the new record for an NBA team. Yes, for sure. And that's all driven by succession planning by the Grousbeck family. So it will be interesting to see
And actually part of that Slava may be something we want to touch on later as well is that private equity firm known as Arctos has a limited partnership stake in that team and they will be realizing one of their first exits when that team is sold. interesting. Meaning like a private equity firm will actually flip their get an exit. Correct. I don't think that they're I don't think that they're selling the entirety of their stake. They're going to roll over some of it, but they will sell a portion.
of their stake as part of the larger overall sale of the club. And the Celtics will set a new record in the NBA. The price they're looking at over six billion. Over six billion. Yeah. That's like NFL teams, right? So that's incredible. And a lot of it is, we'll talk more about as well, particularly when we get into a couple of the other slides, is driven by the new NBA media rights deal, which was just announced about a week and a half ago.
Nice, then do you is a large driver evaluation. Do you know how long that PE firm was in the Celtics? Just to give a sense for the flip? I don't offhand. I wouldn't want to speculate, but Arktos has a very sophisticated, very thoughtful group of people and their entire philosophy is owning limited partnership interests in teams across various leagues. So they're invested into major league baseball teams, NBA teams and others.
and with the likely approval of investments by private equity into NFL teams to come, I would suspect that they'll be looking at those as well. Amazing. Yeah, let's jump to the next slide, which, you know, if people did want to on their couch or in their chair or while they're doing a standing meeting, want to get into a team, there's not that many options, but there are some, there are some.
You know, have Madison Square Garden Sports, you know, has the Knicks, et cetera. You have the Man U, which has gone public. There's the Green Bay Packers, which are, you know, not truly investable shares, but it's nice to say that you are an investor. So these are, you know, some of the examples that are out there. And then part of what we're bringing to market today with Andrew is the fact that you could actually invest into one of these sports teams
as an individual straight into shares via Republic. So these are some of the options that are out there. If my opinion, we'll talk about this more in coming half hour is I think this is gonna become more normal in the coming decade. This is one of those things where 50 years ago, it was probably pretty rare to invest into companies. Now, probably every single person that is listening
has some shares in at least one company, if not many shares in many companies. So it'll be interesting to see if sports teams become one of the diversified asset classes of companies in quotes that people invest into a decade or two from now that it just becomes so normal. Nevertheless, where we are today, which is still on the edge, we're kind of becoming democratized. Next slide. So.
Now we're really just going to jump into some high level questions for our audience. I want to start with why is this the topic that we're talking about? Why is this the interesting topic of the moment that was chosen that we should talk about? So Stuart and both of you, I'm gonna ask to get an answer there, but Stuart, why is this interesting today?
So I think that it's interesting today. It's been interesting for a decade, but I think it's become more of a public facing opportunity over the last few years because of lot of the work that folks like Andrew are doing. But sports on the whole, you know, create joy and people want to be in that business. And I think it touches on people from an emotional standpoint.
I think it touches on people from an interest standpoint, whether they played sports growing up, whether they have children who play sports. As everyone knows, it's the only live content that is truly compelling over the news. If you go back and look at the top 100 ranked Nielsen programs from last year, I think it was 93 or NFL related or sports related programs, mostly NFL. And I think that that sends a strong message to the investor community that these are assets that
could be interesting. What's really driven, I think the news in this is to see the ever increasing valuations of these clubs, some of which I think are certainly both sustainable and growable and others are a little bit of wishful thinking. So it touches on every part of a person's being. And I think that's why people are looking at this and wanna own teams and those who own them,
understand that these are not assets that they will run and then forget about. These are assets that are important to communities. People gather around teams and clubs and sporting activities because it's part of their fiber. so whether it's here or in Europe, owners look at this and going back to the commander's example, Josh Harris said as much, he is a caretaker for this asset until the next owner comes along and we'll take it from there.
And so I think that that's made this a super interesting and tremendous opportunity, certainly for those who can afford to be part of the club. And even for those who may not have that kind of wealth to look at the opportunities as they continue to grow.
And Andrew, what's your perspective? know, obviously a Republic, you could bring all kinds of assets to market. You're bringing a sports team as an offering. We're here doing this panel. Why is this the interesting topic to be discussing right now? Yeah, I think you're kind of in the midst of, you know, what we consider a watershed moment because not only is there changes in what's financially possible changes and what's technologically possible, but you mix that together with
what you're seeing as these massive valuations, it almost is the only next step that's even available, frankly. So we fundamentally believe actually that a lot of these assets are really undervalued. And the reason for that is, is you have a very limited amount of addressable market that can go in and spend Josh Harris, $6 billion type of money into these things. that number is going to get more and more difficult. You have the NFL right now allowing for additional expansion in private equity.
that's going live here over the next couple of weeks, couple of months. And that's simply because they have to, otherwise they're never gonna be able to sell these assets and it will continue to constrict the value. So when you mix that problem at the top level, and then you mix the solutions at the bottom level that now allow for retail participation into these asset classes, or even just maybe accredited participation in these asset classes, that creates a perfect storm.
for not only innovation, but just fundamental change in how you look at the financial assets. We love culture assets, Republic. That's a big area where we spend time, whether that's sports, film, music, because there's a mix. Not only is it something that people look at from a financial side, but there's also this emotional connection ultimately to that asset. And that further drives value. When you add tokenization and the ability to add utilities to these features, then you can create engagement mechanisms. You have a certain amount of assets or certain amount of tokens.
an ownership in these clubs, you can meet the players, travel with the team, you your own areas in the stadium, you have your own entrance, so on and so forth. So it becomes a very, very big win on both sides. Like, you know, usually in a trade, there's kind of a winner and loser in this scenario. Everyone is really ultimately winning. And fundamentally we believe that there is no scenario in the future where you will be a
season ticket holder and not also be an equity holder. If you're attached to the emotional upside of the club, you can also be attached to the financial upside.
Nice. So the Glazer family, which took Manchester United public, the soccer team, and then they have the Tampa Bay Bucks NFL team. The rumor is that that came out today is that they rejected an offer for over $6 billion to sell the Bucks, which is, I mean, phenomenal. was just like a crazy number to put into perspective.
They actually bought the team in 1995 for $192 million, which at the time was a record. $192 million to over $6 billion, and they said no. So how is it that these sports... I'm to know that too, but before that, in May, just a couple of months ago, Steven Ross rejected a $10 billion offer for the Miami Dolphins.
But that is the Miami Dolphins and I'm a huge Dolphins fan so I could totally understand that they're worth a more than that. Same, same. My whole office here is all Dolphins. I hear the phone ringing to you both and I think it's Roger Goodell. nice, nice, nice. So yeah, before we get into, because the next question I'm asked is actually how do you get
actual financial value created in a sports team. We'll dive into the details there, but at a high level at the broad strokes, how is it that we go from 192 million 30 years ago to today over 6 billion and getting rejected? Just how does that happen in 30 plus years to what's your take on that? What are the forces and the trends that have created that? So
So I think it's a great question. And I'm sure Andrew will have an answer that's maybe a little bit different than mine. But I think at end of the day, there's a couple of things that drive this is you both alluded to. These assets are very scarce. The fact is there's only 32, 30, whatever it may be within each of the leagues. And there are people who want to become members of the club. And in order to become a member of the club, you have to pay the price. So the scarcity has definitely driven
the valuations. think from a business and revenue standpoint, the largest driver of value, and I would say for the NFL, but certainly for European soccer clubs in particular, has been media rights. And so at the end of the day, when you go back and look 30 years ago, you'll see, and here's a slide that we've spent some time talking about, and it really lays out how clubs
generate value? How do they generate revenue? Where do the revenue streams come from? And so I think it's important before perhaps I get into the answer on the broader question that Slava asked, maybe just spend a minute or two on this. You can see that, and we're using a slide from Arktos that was done in and around a major league baseball team, the Giants were just one example, but you can see that on the left -hand side of the chart, they show league revenue.
And that lead revenue consists of really three buckets, right? Media rights, which are at the national level. So all of the media deals that are done with the various content distributors, whether they be linear cable streaming over the top networks, whatever it may be, of course, licensing and other events. So, as you can see, partnerships with sponsors, as well as betting, which is still somewhat in its infancy, although it's
starting to become larger and that will certainly continue to drive value. And then anything that the league owns itself. As you can see, the clubs own the league. Each club has an equal share in the league revenue and in this case, it's 1 30th for the Giants. Of course, on the club side itself, the clubs have their own revenue. So again, ballpark revenue, anything that you can think of buying tickets, food and beverage, merch, all of that good stuff.
as well as local media, which in some cases a positive and with some of the recent developments, particularly around regional sports networks has become very problematic for some clubs who rely on local media rights. And then everything that's adjacent to the club itself in real estate in particular has become very important to driving value, building entertainment assets in and around stadiums.
that will keep people on property longer, spending more money longer. You can see it's why the Atlanta Braves just built a new facility, even though they were in a relatively new facility. And there's a lot of talk of building out these sorts of entertainment assets anywhere a new stadium is being built, or even in the cases where stadiums have existed for some time. So when you take the grand sum of this, you'll see, you see this is how clubs generate revenue. The largest portion of
revenue for these kinds of clubs, particularly in the four or if you include MLS, five major leagues is, you know, is media rights. And over the course of time, what you've seen, again, as I mentioned earlier, is that live sports content has become the most compelling content, and really perhaps the only compelling live content. And so there continues to be
increases in rights fees that are paid by the major media networks and obviously the fact that streamers have now become part of this. And those numbers have gone up and up and up. And it's why you see the NFL looking to pivot from 16 games, since they have 17 and now potentially 18 games per year, because the more games, the more value. The fact is that you can look at the recent NFL deal.
including the two Christmas Day games that were sold to Netflix as a perfect example of alternative means of distributing content and the fact that rights holders are looking to broaden the base of content distribution to include streamers. Amazon's a perfect example of doing a deal with the Black Friday game that was done with the NFL last year and the recent NBA deal. So, yes, it's not surprising that you've seen
these sorts of valuations start in the tens and hundreds of millions and are now into the billions with certain leagues, the NFL being, and the NBA being the two leading examples. And I think as long as sports continues to be compelling content, and I don't see why that would change, you will continue to see valuations rise as Andrew suggested because...
content distributors will always be looking to find and take and distribute that content and obviously sell advertising against it. In fact, the NFL, don't know if you've seen this, the NFL has, I think they've announced that it's CBS, but I could be wrong that whoever is going to be showing the Super Bowl in the coming season has already sold out of Super Bowl ads. Wow. So it's, I'm a believer that
media rights will continue to go up. At some point, somebody will ask the question, as I think the folks at Warner Brothers Discovery did with the NBA, can they write the check? They chose not to write the check, and then they changed their mind and decided, yes, they should write the check. And now there's obviously significant litigation that will go forward. But as long as media rights continue to increase, valuations will continue to increase on everything else,
I think you're starting to see some consistency across the other buckets. Obviously sponsorship is the other big one. But I will say, going back to media, that in my opinion, the next 30 million or 40 million or 50 million fans of sports will come from outside of the United States. And that will also continue to drive media opportunities. This slide, which Stuart was nice enough to share with us, is just so interesting because
I would imagine some of the people listening, including myself, when I think of that $6 billion offer, it's just like this made up number that doesn't really make sense. But when you think about all the potential places to make money, including the, know, 130th Pro Rata or the one X of the sports league, and then 100 % of all these other things.
ticketing, sponsorship, game day revenue, local TV, local radio, real estate, farm system, and of course media rights. There's just so many opportunities to make money. It's very interesting how the assets keep on increasing in value. Andrew, what's your perspective around this third year arc as to how we got here? Being a sports fan, you're in business, you understand a thing about a thing. What are your thoughts? I think it's just important to remember these are bidding processes, right? And markets are smart.
Like I think a lot of times we might forget that when we just see these very large numbers, the people are going in here and doing these acquisitions, whether it's Arctos or otherwise, very much understand what they're playing for. They understand what the table stakes are, right? And so while the numbers seem outrageous, they're certainly justified, you know, within the financial spreadsheets of which they're analyzing this. You you used 30 years, you're using time, right? And I love like,
When we are doing acquisitions for Republic time value of money is like a big part of our, our, our acquisition process. But what's funny is actually here. Time is not relevant. It's almost entirely technology at this point that has driven this. Now Stuart is very right. The next big expansion of growth is going to be into international markets. 100 % everyone is prepping for that. But what you're really looking is the impact of technology that makes it easier for distribution. That makes it easier for access, which makes it easier for monetization.
And that is the road that you're seeing. And I'll give you a great example of why time is irrelevant. We're talking a lot about US -based teams right now. But if you look at a team, say, out of the IPL, which is the India Premier League, which is the cricket league out of India, you could have bought an IPL team for like 10 to 20, maybe $30 million just a couple of years ago. Now they're go for a billion dollars. So that wasn't a 30 -year horizon. That was like a three -year horizon.
And why is that? It's because they were able to leverage off and leapfrog forward using technology and distribution in order to be able to deliver the assets to, you know, and the content to be consumed appropriately, right? 30 years ago, you'd watch one NFL game on one channel with bunny ears or whatever it was to try to get like this perfect stream. And now you can watch it in a hundred different places, a hundred different ways. You can rewatch it a hundred different places, a hundred different ways.
And that's another thing that didn't exist in the past. ultimately, think I would probably get away from that time argument and really understand what is unlocking the distribution that ultimately unlocks the monetization. And when they're going in and bidding on these opportunities, that is 100 % how they're evaluating it. Makes total sense. I'm not going to use time anymore. I'm sorry. We're only going to use technology and distribution, which makes total sense to me.
20 years for the first technology. So come on. I think we're, I think we're in good shape. We only use, remember turning, having to change the channel and then my remote was plugged into my television. don't know how you, I think I'm losing control, losing control. We only covered the four major leagues, in the U S we didn't include the MLS, but how about soccer in general? and I'm not, it's not a question about MLS specifically, but rather soccer, how is,
soccer similar or different, Stuart? So I think soccer can be quite similar. It is the one truly global sport. Basketball will suggest that they are also global, which they are and will continue to grow. soccer is truly the one global sport. And I think going back to Andrew's reference to the IPL cricket as well will continue to grow, including the fact that we just recently held the men's T20 Cricket World Cup here in the US.
But I do think that soccer has been, there you go, my friend. You got a hat. I served as general counseling chief operating officer and guide. I was gonna say something, but nothing. No swag whatsoever. So other than they did give me, I don't know if you can see that or not, but whatever, it was a nice coin. So, but look, going back to soccer, there was a rush to look at soccer clubs in Europe in particular, just about 10 to 12 years ago.
some of the first people into those clubs from abroad were Americans, folks like Jim Pilata from Raptor who acquired AS Roma, Gillette and his partner who acquired Liverpool and whatnot. I think what you've seen over the course of the years with European soccer in particular, is that again, media rights have continued to drive valuations.
as, you know, again, whether it's streamers, whether it's cable, linear, whatever it may be, is, you know, as Andrew said, the technology has changed. So there is more opportunity to distribute the content. There's also, of course, sports adjacent content, as you've seen, for example, with Formula One, and the sort of drive to survive and whatnot. And I think what's happened is that people recognize that there was an opportunity to buy into those clubs at relatively low valuations.
and introduce American style business principles and hope that, particularly related to sports and hope that that would continue to drive value because in many cases, European clubs up until probably about 10 to 15 years ago were run essentially as family businesses and they were passed down from one generation to the next. And while they were run with the sophistication of the family that was running it,
it wasn't necessarily run as a business. As I mentioned, it was run as a benefit for the community. That's changed. And so there has been a mad rush to acquire soccer teams, particularly in Europe, but valuations globally have gone up. Now, if you look at European clubs, they've expanded exponentially and some of the most valuable properties in the world, Real Madrid, Barcelona, Manchester United, as we've talked about, Man City, as well as others.
in Europe. then of course, people have started looking outside of Europe into South America, in particular Asia, what the folks in Saudi Arabia are doing with the the Saudi pro league may have seen they're throwing around quite a bit of money. There was an offer made to Vinicius Jr., who's a Real Madrid star, to to come and play with them for the next 10 years at an annual salary of $350 million a year and pay the $1 billion, 1 billion euro buyout.
to Real Madrid. So I think soccer continues to be a very, very valuable opportunity. I think, you know, there are some nuances in investing in soccer that we can talk a little bit more about, particularly in Europe around promotion and relegation and also in some cases, sharing of league rights. As we discussed with MLB, there's not always an equal sharing for many years in La Liga. Real Madrid and Barcelona saw the vast majority
the generated at the league level. So there are some differences and of course there's major league soccer here in the U .S. where valuations have grown exponentially over the last decade or so as well.
You mentioned promotion and relegation. So potentially words that some US sports fans might not even understand what you're saying. So what is that and how does that impact an investment? So I'll lay it out and then I'll turn it over to Andrew because he can talk to it from the Lockford perspective and how it's factored into their thesis on investing in a second division club.
That's just a descriptor of where the club is currently placed. It's not a comment on its quality or certainly its play on the field. So even here in the United States, in Europe and elsewhere, there is a pyramid of soccer leagues. At the top you have your Division I league. Below that you have multiple second, third, fourth, fifth division leagues where there are still professional clubs competing.
And that's because the leagues have a limit on the number of teams that can play generally under FIFA rules, but also under rules that they themselves have implemented. So for example, know, 18, 20, 22, whatever it may be, it's usually 20 or less. And what happens is that the teams that finish at the bottom of the upper level league, let's just use division one as an example, usually the bottom three teams in the table,
because there are no playoffs in Europe. Those three teams are automatically relegated or sent down to the second division league and the top three teams that have the three teams that have finished at the top of the division two league are automatically promoted up to the top tier league. And with those promotions and relegations come very different financial consequences. So when you get promoted and you move up to the division one league, you then have access to
at the league level, pro rata, generally pro rata sharing of the league media rights, which at the division one level are exponentially greater than they are generally at the division two, division three and below levels. When you get relegated, depending again on the league that you're playing in, there's usually what's called the parachute payment. And so the leagues will provide funding to those three teams that have been moved down in order to soften the blow because they will no longer receive those kinds of revenues.
once they were in the second division. So I think it's very important to understand that if you're buying, and this is generally everywhere outside of the United States and Australia, if you're buying a football club, understand that it could be promoted, it could be relegated, and you need to understand the financial consequences of that as you make your investment. As we discussed, and I'll share with everyone, my philosophy is just if you're looking to make an investment,
in this space in a soccer club that is in a league that has promotion or a pyramid that has promotion or relegation, you should absolutely not count on promotion in order to see a return on your investment. And the phrase that we all use in the space is that the ball is round. And that's basically suggesting that you never have any guarantees that your club will be promoted. There are many people who've invested with the thought that they would be promoted to the Premier League and then be awash in media rights money.
and have spent considerable sums to do so. And again, because the ball was round, they have not been promoted. And of course, there's always the risk of relegation. So it is a significant consideration in any investment in any jurisdiction where a promotion or relegation is implemented. Andrew, maybe you want to take it a step further. Yeah. And I think what you really touched on too on the end is the fear of regulation is real. There's actually a really
prominent club in the UK that has been in the Premier League for a long time, raised a lot of money, and then they ultimately got regulated, which was Leeds. And there's an impact on that. So when we look at, when we were trying to decide which club we wanted to do first, actually we really loved the idea of doing a club in the Champions, a Championship League, because we felt that it had created the most potential upside for the participants. Watford traditionally has bounced between
the premiership and the Champions League. So that ended up being like a perfect target for us. Because ultimately how it works in our systems is those who participate, the retail investors that participate in that offering have the same financial rights as the ownership. So if they get promoted and the ownership is taking profits off the team, which can often happen, then they have to, pay that pro rata out to all the other people that participated in that offering. And so there's a real opportunity there. And also when you're looking at teams in general,
If you're looking at Liverpool at $5 billion, the chances that it's going to double to 10 billion over the next four or five years is probably unlikely. While if you look at a team in the championships league, that's maybe Walter was valued 175 million pounds. If it gets promoted ultimately to the premiership, then it's very easily doubling its value.
you know, there's a little bit of mechanics there when you're identifying like what's the right investment, what you're looking to do. If you're looking at it exclusively from a financial standpoint, a lot of times you're looking at sports assets or culture assets. It's not a financial, purely financial decision. It's also an emotional decision. The reason that we love sports assets at Republic is it's a multi -generational asset. And there's not a lot of those, right? So when I'm saying multi -generational, mean, if I look, you're...
Slava is a Miami Dolphins fan, so he suffers as much as I do. My grandfather is a Miami Dolphins fan. My father is a Miami Dolphins fan. I've been a 15 year Miami Dolphins season ticket holder, which is an incredibly abusive relationship. My kids are Dolphins fans, right? So as you go down, this asset lives nearly indefinitely, right? And so when you're looking at what the value of that asset is and how long it will exist for, it's just an entirely different asset class.
and ultimately a new asset class for retail or credit investors. And that's a really, really fun place to sit when you're unlocking an entire new environment of something that is not only financially driven, but emotionally driven. So for those who are listening, if you have any questions, we're going to use the Zoom Q &A functionality. Some people have already sent questions in advance. Log them in there. We're going to go through questions in about 10 minutes. But Andrew, thanks for that color.
we've kind of talked around it, but you know, most of these opportunities, whether it's Josh Harris or Matt HBA or whatever, these guys are billionaires. These people are billionaires. I don't know how many billionaires have called in today's webinar to learn about this topic. But what about the everyday person and what are the opportunities? And really the Watford opportunity that we've talked around is that the Republic team and Andrew have figured out how to work with, with Watford.
to carve out a piece of the actual ownership and give it to the people as an opportunity, right? And that is quite innovative. My question for you Stuart first is an abstract question is how do you see this evolving is becoming more normal? And do you see like where's the tenure arc headed? And then to Andrew, you know, what exactly is the opportunity and how did you make that happen? Okay.
So Stuart, give us the abstract having nothing to do with Watford specifically, and then Andrew, give us the specifics. Yeah, I think you will see more and more of this, and particularly as it's done successfully, as Andrew and the Republic team have done. I think that there will be more teams who look at this as a viable opportunity to raise capital and beyond just the financial piece, what Andrew said, also increase fan engagement.
the sorts of that Andrew and the team have put in place obviously are much more so than just about financial investment. And it's also about engagement and any additional engagement is something that clubs are looking at because it opens the door to opportunities to generate additional revenue. At the major league level, it's going to take some time. The leagues don't generally allow these sorts of investment opportunities without sort of a full blown IPO.
I'm very much on the fence about whether sports teams make good public companies. We've spent a lot of time looking at these sorts of opportunities from a SPAC perspective, which would ultimately to SPAC being something called a special purpose acquisition company that is essentially formed for purposes of merging into a target and becoming a public company. Anyways, it's really just another way to go public. And I'm not convinced that teams should be public companies. It creates a whole host of governance issues.
and liability around governance. But I do think that minority interests are something that, you know, particularly at perhaps the second, third division levels of various sports, whether it's minor league baseball here in the US, whether it's a group like USL that's been very successful over the last decade in building a second division league, so essentially a league that sits under Major League Soccer.
But I think from a major league perspective, when you talk about the four or five major leagues here in the U S I do think that it will take a lot more time to get to the point where the leagues are comfortable with having any sort of public ownership stake in part because they don't want to share their financials with anyone. And, and for good reason, because you're one of 30 or 32 or whatnot owners sitting around the table and dividing up billions and billions of
dollars at that level. that's my take on it. But I do think that you'll continue to see it. And with folks like Andrew and others who are out there in the space, continuing to try to drive the opportunities and of course, the technology advancements in and around crypto and whatnot. Certainly, I think that that's something that you might see more of, but not at the major league levels. Right. So Stuart painted, let's call it a realistic picture, not exactly the rosiest of how easy it is to make this happen.
But yet here's Andrew with the Republic team and a campaign online right now where it's live and real. So kudos to the team for accomplishing that. So my question there is how did you make that happen? And what exactly is the opportunity? Yeah, Stuart's not wrong. It is not easy. It actually is extremely difficult. We wanted to do one of these initiatives for the last five or six years. But the truth is that the technology was only really there within the last six months. And that's why we were really able to get it over.
And there's two types of innovations that are happening here. It's also just not the technology innovation, but there's a lot of legal innovation that had to be done to get there. the public is really a marriage of technical engineering and legal engineering. That's like who we are as a business. And because we are licensed across jurisdictions, we can run these types of offerings in a very compliant framework that can run in Europe and the US and Asia, all simultaneously, all compliant.
So you had to all those rails or Republic had to build all those rails over the last eight years in order to be able to facilitate these types of offerings. And it costs us roughly $120 million to do it. So it's not easy first and foremost, but now we are here and now we have found ourselves in this seat of extreme interest. And I think, you one of the pieces it's really important to keep in mind is it's simply not just owning
the equity of the club, right? It's having additional access and engagement with the thing that you very much care about. And vice versa. Now the club has the ability to be very engaged with a fan base that's also now ownership. And how that engagement works and how you look at it will just fundamentally change how clubs and fans will interact on a go -forward basis. You know, I think one of the things I find particularly interesting is, especially when we look at expansion teams.
like when teams are looking to open up into new markets and you have the ability to day one, have an innate fervorous fan base who are now also equity owners and also fans day one. So when you look at leagues adding additional teams and franchise, that's a very, very hot topic with us. You know, Stuart thinks it's a very long time before we're gonna sign one of the big four, but funny enough next week.
I take a trip to go sign one of the big four. So actually it's not that far off. Maybe almost exactly seven days in fact, from where we are right now. That's huge. Cause literally one of the questions we have in the Q and A is calling out how am going to be able to get into the NFL or major league baseball? Because I don't believe it. Yeah. NFL is going to NFL stuff. There's bylaws that don't allow this type of offering at the moment. But we've, we had
one of the major NFL teams in our office last week. We had another one of the major NFL teams with us a couple of weeks before that. Everyone is aware of this. the trick is like, how do we structure this and do this in a way that makes sense? Stuart actually hit the nail right on the head, actually, probably the bigger issue, which is gonna be, how do you deal with just financial disclosure? That's like a real problem for a number of owners that are particularly careful about that.
But there's also a movement that's gonna take place when the leagues are aware of it, that once a couple of the big four do this, it starts to look really strange if a number of teams are allowing fan participation and you're a team that doesn't. And it will create a lot of unique social pressure that will change. I think still early days, still a lot of work to do. And outside of just simply the...
convincing the leagues to be comfortable with this. There's also the other side, which is there's a lot of education that still has to be done with the fan base to understand what it is that they are actually buying. And I will say in the Watford deal, that was an area that if I could go back in time, I would spend more time on and we are going to do on a go forward basis. Because as we met with the fan clubs, as the offerings were going live, they still struggle to understand what is the actual thing that they are buying. And so that will get easier over time as we do more of these types of offerings.
Watford was absolutely huge success for us. It beat our expectations like in the first couple of days, which was fantastic. but there's still a lot of wood to chop on both sides in both directions, but we're in a very good seat. If you came to me six years ago and said, Hey, how would you feel about Republic doing this six years from now? I would be over the moon excited. And, you know, we, found ourselves now kind of at the top of that mountain. fun times. a question that's come in.
and also piggybacking off of your Watford real life example, there's thousands of people that are invested millions of dollars and that number will continue to go up while the campaign is open. What is the timeline slash opportunity for financial return? Meaning is this in a week, in a month, in a year, in a decade? Are there any expectations? What's the liquidity? These are kind of just setting up like the understanding for the listeners.
Yep, great questions. So you did a 10 % return a 10x return. Obviously, you can't promise anything. But what's how should the listeners be thinking about an opportunity? Yep. And all the financials are on on on on the offerings page so people can go dive into it. I'm going to murder the numbers. So like, don't hold me to the numbers. But I think they took something like 30 million in profit last year. And
And I think before that maybe something, some similar number, something like that. And so what does that mean as financial return? Well, when a club owner says, hey, I'm taking profits out of the club. Well, in this instance, when they would take profits out of the club, they would have to pay pro rata to the equity, the other equity minority holders, just like they would any other minority holder. Now it's really easy for them because it's just one line item on their cap table and it all runs through an automated system that we've built. So, and then just all goes into the Republic accounts for everybody. So it's actually really, really clean.
but also would not be possible without blockchain. Because if you had to send, you know, one, two, $3 dividends to a bunch of people in like paper checks, it's just financially not possible to do that in a way that makes sense. But with blockchain and we can use stable coins and we have banking rails that allow that to all be done at a much more cost appropriate. anyway, as far as, you know, what returns look like, it's just simply about how well the club performs.
ultimately how much, what are the profits that they're able to generate over that period of time. But the club owner themselves has the same financial rights as the participant. And that's the really important piece that we want to impart on everybody. far as liquidity, go ahead. Go ahead, ahead, As far as liquidity goes, so this will trade in secondary markets as a real world asset, it is locked for one year. So it's a security, it's locked for one year. But once,
the unlocking period happens, then it will trade on our secondary market. And we have a partnership with INX, which is a digital security exchange where that will trade exclusively, at least initially. And then most likely then we'll find its way in other exchanges. But INX definitely will be the first place where that variety of these other security tokens for the other sports teams that we're working with will all trade. So you've got a year out. Now, every club won't necessarily follow that same rule.
they wanted to do it a year because anyone who's a US participant is locked for a year. If we did it without US participants and it was just international, we wouldn't have that same security lock requirement that exists within the US. They wanted to set a level playing field for everybody. So because US participants are locked for a year, everyone is currently locked for a year. All right, we have a question from. I just wanted to ask Andrew a question on the terms of the securities.
Do the shares or equity that's being acquired and it's being offered through public, are those voting shares or are they non -voting shares? Right, that's such a good question. So they are non -voting shares, no voting rights and no information rights in the Watford offering. Now other clubs are looking at this separately and there's even a scenario where it's, hey, at the end of the one year lock or if you choose to hold your asset for longer, maybe it becomes a voting share. There's a lot of...
A lot of fun gamification that can be built into this natively, which I think most likely you will see, but at least in the WAD, for instance, in that particular offering, those shares are not voting shares. All right. Questions are coming in. We're coming in towards the end of the hour. Feel free to send in whatever questions. We're going to do a little bit faster lightning round now. So we have David asking a question. A CTO of team combat league .com gearing up for season three, helping to promote them.
Is it too early to think about opening up the league for investment? Andrew is very happy that you asked that. You should follow up with him. What's your email, Andrew? Andrew at republic .com. He wants to hear about your opportunity. He wants to have your product on Republic. So we're to move forward. Next question is, can you explain this? Is this equity, is it one token equals one share of equity? Is that how it works, Andrew? In Watford, I
believe that it is. I do not think that we are fractionalizing it further. I gotta be careful with that. I can't remember if that's where the team ended up settling up, but it's widgets. So it doesn't really matter ultimately. It's how it shakes up. I'm gonna cut you off for the sake of more questions. Do you have to be accredited to invest in Watford? In the US, yes. And outside the US? No. Okay, got it.
And if you want to invest in Madison Square Garden on the public exchanges, you don't have to be accredited, but you do have to be accredited for this opportunity. The simplified answer is really it's a private investment opportunity that, and hence you have to be accredited as part of SEC rules. Is that fair? That's right. It's done through what's known as a Reg D exemption, which only allows accredited participation. There will be other offerings in the future that will use what's known as either a Reg A plus or Reg CF.
opportunity which will allow retail participation, US retail participation. Okay, great. So we've been talking only about teams, which is all great. There's also a little bit of a trend that's a little bit more nascent, I would say, of investing into players and trying to get the returns of individuals. Do you think that's an interesting space? And do you think that will get equal momentum more or less? Short answers, Andrew. Short answers.
People have tried to do this. Spencer Dinwiddie tried to do this at one point with his contract. There is just league rules that are very limiting for those types of opportunities, particularly in the US. Outside the US, less stringent. Stuart? Agreed. I think you'll see it actually happen with football or soccer players in leagues across Europe. World Cup 2026 coming to the US.
Will this have any impact on investability?
man, World Cup is interesting because it's really teams. We have spoke with national teams. The path is not clear there yet, but it's something definitely that we're interested in. a huge World Cup fan. Actually, I have my World Cup trophy here from Qatar. So I don't think that we know yet how we would deal with that in that framework and that format.
I think World Cup will be significant here. It's the first iteration of the 48 team event. And I think it's going to be a great success across the US, Canada and Mexico. Whether it has a long term impact on the success of the professional leagues here, or even at the grassroots is really going to be something that FIFA, US soccer and other constituents are going to have to work through. It'll certainly raise the profile of
the national team players who play in leagues around the world. And that may make investing into those teams more interesting. I don't necessarily see investments all that soon into national federations. But then again, there's a lot of talk about private equity buying into the big 12 and other college football leagues and associations conferences. So never say never.
That will definitely happen. So we're like, well beyond time, we could keep on talking about this. Again, my favorite topics sports and investing rolled into one. Amit is in the q &a calling coming in from Kenya saying he has support issues. Andrew already gave you his email, just follow up with him. Andrew, what's your email again? Andrew at republic .com. All right. And one more thing, we never touched on women's sports on this. And
There's a massive run on valuation of women's sports and particularly women's soccer leagues, soccer clubs in the US. And that is something that everyone should keep a very, very close eye on, especially if you're thinking about World Cup and the effect that it has on US teams. Sorry, just had to put a caveat on there. I would - WNBA has - My corollary to that is do your due diligence on those leagues. Do a lot of financial due diligence on those leagues because
As Andrew and Slava have both mentioned, sports is an emotional investment and there's a lot of FOMO out there too. So, firm believer in women's sports, I believe they'll be successful. Just anyone who's looking to buy into a women's sports asset, do your due diligence, as you should with every investment. In the Watford deal, you get both the men's team and their women's team as a note. Amazing. Thank you for joining. Honestly, this is like the...
Perfect people to having this conversation bringing innovation and all the experience So I appreciate everybody for joining again If somebody wanted to contact Andrew, it's andrew@republic.com check out Republic check out Watford If somebody wants to be in touch with Stuart it's SKI partners. He's crushing it Is there an email or any contact information you'd like to share with anybody? Sure, it's just first initial last name sgoldfarb@SKIpartners.io Perfect
And I'm Slava with Vincent. You can just email me, slava@withvincent.com. Check out our newsletter, check out our podcast. And thank you everybody for joining. Thanks everybody. Thank you.
