Club Necaxa: Selling A 1% Stake For $1.3 Million

Every morning I write an email discussing the business and money behind sports. If you would like to receive it directly in your inbox, subscribe now.

Friends,

Here’s a stat that surprises a lot of people: “In the U.S. alone, more people watch [Mexican soccer league] Liga MX than Major League Soccer and the Premier League combined.”

That revelation led real estate titan Al Tylis to expand his investment in professional sports, despite already owning large stakes in Major League Soccer team D.C. United, Welsh soccer team Swansea City A.F.C., and the National Basketball League’s New Zealand Breakers.

Earlier this year, Tylis teamed up with a strategic list of celebrity investors to purchase a 50% stake in Mexico’s Club Necaxa, one of the 18 teams that comprise the Liga MX.

Investors include:

• Mesut Özil

• Kate Upton

• Justin Verlander

• Eva Longoria

• Victor Oladipo

• Richard Hamilton

• Shawn Marion

• Bode Miller

Tylis has repeatedly declined to comment on how much his group paid, except to say that “there was a news report valuing the [team] in the low nine-figure range, which I’m not going to disavow.”

Even more interesting: Al Tylis and his investor group are now allowing fans to purchase a 1% stake in the club through an auction tied to a nonfungible token (NFT).

Whether your core interest lies in sports, business, crypto, or traditional finance, it’s been impossible to go multiple consecutive days over the last few months without hearing about nonfungible tokens — or NFTs.

In the simplest form, NFTs are a digital asset that lives on the blockchain. They are unique and therefore not interchangeable, which allows us to tokenize things like art, music, in-game items, videos, and more.

Essentially, they are digital collectibles. Some people believe they are junk, a pyramid scheme, or “a grift by rich people to become richer.” While others believe they are “the next big thing.”

In my mind, most of the NFTs we have seen so far follow the same playbook. A company or individual with a large audience creates a digital token with the hopes of selling it to their fans. The only problem? Most NFTs are just photos or videos on a blockchain.

The real value of NFTs lies at the intersection of a highly engaged audience, great creative, special access, and desirable utility. If NFT issuers can put those four criteria together, they have the chance to create an incredibly valuable product.

Here are two good examples:

• LaMelo Ball is releasing 500 NFTs that track the performance of his NBA career through awards, highlights, and statistical milestones. For example, if LaMelo wins Rookie of the Year, the 500 NFTs will automatically update to include the award — potentially increasing the value of the collectible.

• The Premier Lacrosse League (PLL) is releasing 1 “Owner’s Pass” for each of the 8 teams in the league. With perks like season tickets, mid-season call with the head coach, tickets to an awards ceremony, call with Co-Founders (Mike & Paul Rabil), and a championship ring if your team wins, this isn’t just a digital collectible. It essentially makes the biggest superfan a team owner.

There are more examples — these are just two of the most recent ones — but I like them for one simple reason. They offer leagues, teams, and players a new and unique way to engage with their most passionate fans. The secret isn’t in the technology but rather the unique experiences, special access, and ultimate utility.

As for the Club Necaxa NFT, it offers some of the same features. Sure, a certain amount of social currency goes along with it, but you’re really buying a 1% equity ownership in the club. If the team valuation increases, so will your NFT. If it decreases, the value of your NFT will also.

Other benefits include:

• The 1% ownership stake is permanent

• It can be transferred to anyone at any time (as long as they meet KYC standards)

• Unlike other investors, if the club wanted to build a new stadium or training facility, the NFT owner is not required to make capital calls.

The downside? In addition to the NFT owner having no voting rights, the opening bid for the auction starts at about $1.3 million.

Traditionally, the value of NFTs has been the ability to authenticate an item through a digital signature. So the real question becomes: if this 1% equity ownership stake can be certifiably authentic without being an NFT, what is the value in launching it as an NFT?

In my opinion, marketing plays an important role. It’s in the news, I’m writing about it, and more people know about the Mexican club today than last week. But more importantly, Club Necaxa is setting itself up for a lucrative, long-term income stream.

How? Similar to the royalty structure built into other NFTs, Club Necaxa and its existing investors will receive 10% of the sale each time the NFT changes hands. For example, if the NFT owner eventually resells it for $2 million, Club Necaxa’s investors will receive $200,000.

It’s not a small number, so maybe the NFT doesn’t trade very often, but you get the point — the combination of publicity and monetization is unique. So don’t be surprised if other professional sports organizations try it.

Have a great day, and I’ll talk to everyone tomorrow.

If you enjoyed today’s email, subscribe now to receive future emails directly in your inbox.

Want To Improve Your Fitness Through Sleep?

I want to introduce a new partner I’ve been working with — Eight Sleep, the premier sleep fitness company that powers human performance through optimal sleep.

Eight Sleep uses an advanced temperature-controlled system that adjusts throughout the night. It analyzes your personalized sleep stages, biometrics, and bedroom temperature, reacting intelligently to create the optimal sleeping environment.

The result?

Since getting my Eight Sleep Pod Pro Cover a month ago, not only do I fall asleep faster, I actually get high-quality sleep, so I wake up feeling well-rested and energized.

Simply put, it’s been a gamechanger.

If you want to join me and thousands of pro athletes, CEOs, and other high performers that are dedicated to improving their sleep fitness, you should get an Eight Sleep Pod Pro Cover too.

Trust me; you won’t regret it :)