More on buying Randy Newsom

From the NYT comes the followup to my post about selling shares in Randy Newsom:

Through Thursday, Newsom had sold about 1,800 shares of himself at $20 apiece. . . . . Dozens of minor leaguers had expressed interest in also going public through Newsom’s new company, Real Sports Investments. . . .

Unfortunately for Newsom, however, his plan did not exactly thrill M.L.B., the players union or the Securities and Exchange Commission.Offerings shopped over the Internet must be registered with the S.E.C., and Newsom’s was not. After speaking with a lawyer for M.L.B. on Thursday afternoon, Newsom decided to table his idea to work with authorities on a venture they would approve and perhaps even support.* * *

So was this a security regulated under the federal securities laws?  Note, in addition to the facts in my previous post, Newsom's comment that “if you’re looking at this solely as an investment opportunity, then we’re probably not the place for you. We want to add to the spectating experience for fans, and at the same time do something good for the players.”

As for MLB, the NYT says "a minor league player’s selling a piece of future earnings probably runs afoul of major league guidelines designed to insulate players from gamblers, as well as union rules regarding payments to and from agents."

Was this a good investment? The article notes that “under Newsom’s structure, a $100 investment in Mike Piazza when he was a lowly Dodgers farmhand in 1990 would have ultimately been worth about $6,000.”

Of course there's a big risk, and the securities laws care more about preventing fraud than permitting risk-taking. Jon Searles, a pitcher on Padres farm team, notes the financial hardships of minor league players for whom a trip to Quiznos is “living large.” Searles says that even sub-marginal prospects would be tempted to try to cash in.  But he says that “rational investors will assess those percentages.” What does Searles know?  He has an economics degree from Wharton.

Meanwhile, Newsom is studying for his LSAT on Saturday. He'll have a good hypothetical for his securities class in law school.