NBA Blocks Spencer Dinwiddie From Turning Contract Into Investment

[kamaze]

The NBA has prohibited Spencer Dinwiddie from using his contract as a digital investment vehicle.

Dinwiddie had planned to convert part of his three-year, $34.4 million contract into an investment and potentially realize profits in 2021 when he is expected to become a free agent again.

“According to recent reports, Spencer Dinwiddie intends to sell investors a ‘tokenized security’ that will be backed by his player contract. The described arrangement is prohibited by the C.B.A., which provides that ‘no player shall assign or otherwise transfer to any third party his right to receive compensation from the team under his uniform player contract.’ ”

Dinwiddie hoped to raise between $4.95 million to $13.5 million. The minimum investment was to have been $150,000.

[kamaze]

Spencer Dinwiddie still plans to convert his $34.4 million contract into a digital investment vehicle.

The NBA attempted to block Dinwiddie from moving forward with his plans and the two sides met on Thursday to discuss the legal issues surrounding it.

Dinwiddie still plans to move forward with bringing the investment vehicle to market, sources tell Shams Charania. The NBA will reconvene over next steps on the issue.

Dinwiddie signed a three-year, $34.4 million extension last December with the Brooklyn Nets.

[ecuhus1981]

This will be an interesting saga, from a sports business perspective. From a Nets perspective, I hope that it does not become a distraction for the team or Spencer.

[Paradise]

This will be an interesting saga, from a sports business perspective. From a Nets perspective, I hope that it does not become a distraction for the team or Spencer.

I hope not but in light of this China situation that has become a league wide distraction and could impact the cap in 2020. What does he have to lose? He’s definitely not in the wrong here.

Read on Twitter

[MrDollarBills]

This will be an interesting saga, from a sports business perspective. From a Nets perspective, I hope that it does not become a distraction for the team or Spencer.

I hope not but in light of this China situation that has become a league wide distraction and could impact the cap in 2020. What does he have to lose? He’s definitely not in the wrong here.

Read on Twitter

Read on Twitter

I really don't understand how this works as an investment vehicle so I can't comment on it, but it seems like this might end being being a clash between the player's association on spencer's behalf and the league. the league can't technically tell Spencer what to do with his money, so I agree with him. I think from the NBA's standpoint, it's the whole "selling shares of his contract" or what not is where the hang up is.

I just don't get how buying shares of his contract can yield a ROI. I'm dumb as the day is long when it comes to crypto.

[ecuhus1981]

I just don't get how buying shares of his contract can yield a ROI. I'm dumb as the day is long when it comes to crypto.

No, you're not, at least not in my estimation.

I too initially thought that the RoI of a 3-year guaranteed contract would be mostly sentimental, rather actually monetary profit. I figured it would be a novelty for rich millienials, or an ostentatious way of showing player support.

Then I read the tweets from today, and I see where the interest (pun intended) lies for investors, as well as the NBA's beef. I didn't read the entire initial article from Shams, but I figured that the 3rd year of Spencer's deal (2021-22) was going to pay out at his current contract's value, whether or not he opted out. So then, the risk of how to pay his investors for that season would be on him if he opted out and could only find a vet's min deal or something like that.

NOW, I see he's doing something different. He's selling his 21-22 salary no matter what it is. If he balls out and somehow lands a 4-year max FA deal from a team, his investors will have received 200% profit or more over face value for that particular year, and they might be willing to pay richly now to get in in the ground floor of such an investment. At least, I can see it likely that Dinwiddie garners a Rubio-type 3-year, $54mil deal from a team. That alone would represent 50% profit over invest for that 3rd year, which beats a 3-year CD by a country mile.

The risk is entirely off of Spencer in that scenario, too. If he makes a false assumption about free agency, and can only find a minimum deal after opting out, his investors suffer, but they cannot recoup anything from him. That's the gambit they made.

The problem on a larger scale that I could see for the NBA is, what does this type of financial agency among players do to the overall product? Does it become even more of a mercenary league than it already is, with players stat-stuffing in hopes of securing large payouts for their investors on opt-out years? What if advertisers or sponsors start investing, is there a conflict of interest?

The rabbit hole is deep. But SD is correct, this business venture does not violate the CBA in any way. I hope that Michele and the NBPA are prepared to have Spencer's back on this. With any luck, Adam will take a laissez faire stance on the issue and steps in only in abusive situations. I would hate to see it distract from our season, but some things are bigger than Brooklyn 19-20.

[MrDollarBills]

I just don't get how buying shares of his contract can yield a ROI. I'm dumb as the day is long when it comes to crypto.

No, you're not, at least not in my estimation.

I too initially thought that the RoI of a 3-year guaranteed contract would be mostly sentimental, rather actually monetary profit. I figured it would be a novelty for rich millienials, or an ostentatious way of showing player support.

Then I read the tweets from today, and I see where the interest (pun intended) lies for investors, as well as the NBA's beef. I didn't read the entire initial article from Shams, but I figured that the 3rd year of Spencer's deal (2021-22) was going to pay out at his current contract's value, whether or not he opted out. So then, the risk of how to pay his investors for that season would be on him if he opted out and could only find a vet's min deal or something like that.

NOW, I see he's doing something different. He's selling his 21-22 salary no matter what it is. If he balls out and somehow lands a 4-year max FA deal from a team, his investors will have received 200% profit or more over face value for that particular year, and they might be willing to pay richly now to get in in the ground floor of such an investment. At least, I can see it likely that Dinwiddie garners a Rubio-type 3-year, $54mil deal from a team. That alone would represent 50% profit over invest for that 3rd year, which beats a 3-year CD by a country mile.

The risk is entirely off of Spencer in that scenario, too. If he makes a false assumption about free agency, and can only find a minimum deal after opting out, his investors suffer, but they cannot recoup anything from him. That's the gambit they made.

The problem on a larger scale that I could see for the NBA is, what does this type of financial agency among players do to the overall product? Does it become even more of a mercenary league than it already is, with players stat-stuffing in hopes of securing large payouts for their investors on opt-out years? What if advertisers or sponsors start investing, is there a conflict of interest?

The rabbit hole is deep. But SD is correct, this business venture does not violate the CBA in any way. I hope that Michele and the NBPA are prepared to have Spencer's back on this. With any luck, Adam will take a laissez faire stance on the issue and steps in only in abusive situations. I would hate to see it distract from our season, but some things are bigger than Brooklyn 19-20.

So this basically hinges on Spencer getting a bigger deal if I'm reading you correctly. Barring injury I'm pretty sure Spencer will out play the value of his current extension and get a larger deal.

Either way, this clearly is not the NBA's business. I think they can iron this out with the NBAPA and it won't become a distraction.

Spencer's ambition is pretty admirable, tbh. But the possible negatives to the on court product is a concern. In an pre opt out year he would be under a tremendous amount of pressure. Investing in something like this also seems really volatile.

[ecuhus1981]

So this basically hinges on Spencer getting a bigger deal if I'm reading you correctly.

Exactamundo.

For a contract valued at 34.3mil (10.6 + 11.4 + 12.3), and a payout in that 3rd year of anywhere between $2mil and $35mil (likely between 12 and 20), I could see shares providing Spencer with $40mil in upfront money. Even if he gets that $35mil in 2021-22, and investors get the $23mil in profit that he could have gotten for himself, he hasn't really "lost". Having $40mil right now to invest right now could have its own benefits, rather than $10mil by the end of the year. Dinwiddie is plugged in to Silicon Valley, and I'll bet he has an investment lined up there that would earn as much if not more than first year of the next contract he'll see.