SailGP Expansion Team Seeks $35 Million With Tokenized Fan Offering
An expansion franchise in SailGP, the three-season old Larry Ellison-led boat racing league, is seeking to raise $35 million in a tokenized fan offering that launched this month.
The new, to-be-named team will be the 10th in the catamaran circuit, representing the Caribbean and Bermuda. The raise should be enough to both pay a $15 million expansion fee to the league and fund racing operations for its first two seasons. The man leading the effort also believes its structure can serve as a template for established leagues to increase liquidity for limited partners and perhaps lower the threshold for new minority owners to buy in.
More from Sportico.com
“[The offering] is a tokenized LLC that’s wrapped with a decentralized autonomous organization (DAO) for governance purposes. It’s a hybrid of old school and new school structures,” David Palmer, founder of Bernoulli Locke, said in a phone call.
Bernoulli Locke is a specialist in membership organizations and experiences, and it has put together travel events at exclusive resorts featuring artists and investors. The business has moved toward using new technologies for group ventures, including DAO—a member-managed organization with no central governance—and blockchain.
Palmer negotiated with the league to craft the fan-owned team option, snagging the franchise rights covering 38 countries overall. The franchise fee is lower than the valuations of other SailGP teams, in large part because the commercial potential is less than other markets with teams, such as the United States and France. The pricing also makes it realistic to offer slivers of ownership to fans starting at $5,000.
The new SailGP team is offering just under 2,000 ownership interests for sale, the most allowed under the flavor of offering it has registered with the Securities & Exchange Commission. Each buyer will be limited to a maximum of $200,000 in investment (40 tokens at $5,000 a piece) to prevent any one person from buying controlling interest in the team. Owners will be able to vote on team matters, collect any cash payments they and other owners may eventually approve, and have the ability to buy and sell at will after an initial one-year lock up with the current fund-raising. Over time, the data collected from the boat (each league-regulation catamaran has 10 miles of fiber optic cable and 30,000 sensors) could be parsed by a subcommittee of tech-savvy owners who can work toward improving competitiveness and perhaps create revenue-generating products.
“[A true DAO] doesn’t work for putting together any type of high-performance organization,” Palmer said. “So we did a hybrid.”
Owners will have governance over key features of their equity, including budgetary approval, while for day-to-day operations the DAO will install a manager for two-year terms. The first term will be managed by Bernoulli Locke, which is already in discussions with potential team members to race the boat now being built.
To Palmer, the expansion team is a unique opportunity to prove out his concept of “democratizing” team ownership with legal structures that both satisfy U.S. regulators and take advantage of new technologies. He is particularly excited about the potential for the structure to improve liquidity for limited partners.
After the lock-up period, Bermuda-Caribbean team owners will be free to pursue peer-to-peer transactions to sell, trade or buy ownership tokens. The blockchain system is a cheap, transparent way to enable transactions. “It’s a relatively low cost, decentralized way to manage a disparate group of individuals who may not know each other, build trust and allow them to actually view everything that’s happening via certification in the blockchain,” Palmer said.
He believes the model can serve as a template for more established leagues, where soaring team values mean limited partner stakes take many months to sell, a lack of liquidity that becomes self-fulfilling—many potential buyers don’t even consider buying into a pro team given the headaches.
But first, Palmer needs to raise the $35 million. In a perfect world, the new team will sail in the fourth season that starts in June, but the league is willing to wait if needed, he said. The $20 million that will remain after the franchise fee is enough to run the team for two years assuming no revenue at all. But the team will collect money from racing, as well as a portion of media rights.
Palmer also sees SailGP as a spectator- and TV-friendly property that should benefit revenue generation in the long run. Among the league’s innovations are boat designs that allow the catamarans to foil in shallower water, closer to shore where stands can be erected. The races are also short, both time-wise and course-wise, allowing for multiple races a day in an area that broadcasters can effectively cover.
He calls the races “a very, very dynamic environment where you have multiple lead changes and lots of tactics. So you create a good sporting spectacle.”
And presumably a good financial play as well.
Best of Sportico.com
