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Can't buy shares in Facebook? Invest in LeBron James

Sports stock market mixes Wall Street with fantasy sports stars

By , Network World
March 07, 2011 09:36 AM ET

Network World - U.S. investors are up in arms because they can't buy shares in Facebook, but the sports-minded among them do have an interesting alternative: A new kind of stock market lets them invest in LeBron James and Tom Brady., founded by a 24-year-old graduate of Syracuse University, lets investors buy shares of any player they want and get paid out at the end of the season when the stock in the player "retires."

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The market is still in its beta period (founder Jeremy Levine calls it "preseason"), but has already offered numerous IPOs (initial player offerings) that have been snapped up by a new kind of investor with more experience in fantasy sports than Wall Street stock trading.

StarStreet works much like NASDAQ or NYSE, but with at least one key difference: While player values can go up and down each day, the total value of the market remains stable. Just like a real stock market, though, prices are determined based on supply and demand, rather than by the player statistics used in fantasy sports leagues.

"You're trading, but it's for the players you know, rather than the companies you don't," says Levine, who's been building his sports stock market since graduating with a degree in entrepreneurship in May 2009. Levine is full-time and has just one employee, but says he's made some money by charging a 4% commission on player sales.

"It's completely real money, and it's a zero-sum comparison market," Levine explained Saturday at the MIT Sloan Sports Analytics Conference in Boston, where he was exhibiting his trading system. (Levine is based in nearby Cambridge). "The total value of the assets is equal to what's been invested in them and every single dollar that comes into them through an IPO is eventually paid off through a retirement. At the end of seasons, we're retiring shares of players and their values get paid out. From a trader's perspective its completely a 50-50 game, minus a small commission."

StarStreet began with a play-money World Cup market, then started trading in real dollars during the NFL season. An NBA market is now trading and an IPO for Major League Baseball players starts in a few days.

"The way an IPO is done, it's a blind Yankee auction," Levine says. "Tomorrow at 7, we're issuing 100 shares of LeBron James, and the top 100 bids get the share for the price they bid." The shares are inserted into the market and can be bought and sold just like shares in players already on StarStreet.

Levine has 265 traders with a total market value of about $2,400. The numbers are small, but Levine says the market is operating efficiently despite the size.

The first NFL market "worked really well," he said. "There was enough liquidity, definitely not a ton, but enough that players' prices were moving right after games."

Cowboys wide receiver Dez Bryant's stock moved up more than 8% after his breakthrough, for example, while Tom Brady's stock jumped 43% over the course of the season and Chad Ochocinco lost 30% of his value.

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