Twitter user @GetQuackedPoker was amazed that some players were selling shares at odds:
I’m all for selling action and reducing liability to your own bankroll and letting friends sweat. But if you have zero proven results… and have an ABI of $20 why are we charging a markup on $500+ entry events lol… baffles my mind. Not throwing shade but let’s be realistic here.
This post was brought to the attention of Twitter's leading poker theorist and GTO Wizard Head Coach, Wizard Tombos21:
Even if they're a strong player with a good track record, should MTT pros markup their action?
In literally any other area of finance, you pay to offload risk or get paid to take on risk.
If I have a raffle ticket with a 50% chance of being worthless, and 50% chance of being worth $1000, how much should you pay for it? The ticket's EV is $500, but you should rightfully demand a discount given that you're taking on all the risk.
So I'd argue that MTT pros should actually discount their action (from it's estimated value), rather than selling it at a premium.
The provocative tweet predictably sparked a heated reaction from the gaming community.
"Your example only parallels to losing/breakeven players," Matt Berkey replied. "However, I think the overarching sentiment may stand true given the high-risk nature of a single event. Perhaps it's less of a question of whether markup is a reasonable model than it is a question of how conservative buyers should be when buying at markup. Conventional wisdom has always been to split the assumed ROI, but given how inaccurate those estimates are, sharp buyers are prob paying as close to face as possible for known winners, while fading the rest."
"Think you can offset some of this by offering people action of a series or a package," Jason Wheeler agreed. "Agree, one-offs are a high-risk event."
"This is one of the dumbest posts I have ever read," David "ODB" Baker protested. "You don’t have to sell at markup, but plenty of people are value at markup and making money. When you invest in a player, you have no expenses for that player. You can use your time to earn in your area of expertise. You don’t pay for gas, parking, hotel, training, etc., if the investor and the player split the EV of the player, the investor gets way the best of it.
Comparing a poker tournament to a raffle is peak idiocy."
"What if we compare it to venture capital, then?" suggested Tombos21. "The founder does the work. The investor absorbs variance / helps fund a risky venture with convex upside. In this situation, the investor gets paid a risk premium.
Ultimately, the surplus split (net EV after expenses) is determined by what the market will pay."
"I don’t pretend to understand or know how venture risk should be divided," David responded. "I’m not an expert on risk/return, and every investment is different. I am an expert in poker tournaments, and I can say with certainty that some players are very good investments. Some tournaments and tournament series are good investments."
"Meanwhile was a serious debate at the tables last week about whether 1.8 was an acceptable markup for the WSOP Main," Ian Simpson of 888poker recalled. "There might be some players with an ROI high enough for that price, but blisteringly fewer than there are players charging that price."
"If a guy has 20% ROI and sell you at 1.05, you are printing really hard," Mustafa Kanit concluded simply. "Obv you gonna lose and don’t realize your equity often, but this is the fucking game we play.
Is not the fault of the horse if he doesn’t cash.
Is a long-run game. Keep trading at positive EV, and at some point, you're gonna get it back.
I personally sell mainly at face to partners that make me money in other fields, so it would be stupid to charge any markup but obv is a particular case.
The fact that many people over estimate there ROI is a different thing, and that is the issue.
Not winning players that are selling at a fair markup."
Galen Hall spoke at length on the topic:
You're confusing face value with expected value. If I think Phil Ivey has a 50% ROI in an MTT, then 1.2 markup is a discount to the EV, even though it's a premium on the face value. Also, in every area of finance, +EV wagers that are uncorrelated with the market are the holy grail, and people will pay heaps for them. The hard part in poker is estimating the EV!
If we knew for a fact that somebody's ROI was 50%, finance people would pay more than 1.49 for that (minus counterparty risks and fees and stuff). Zero correlation to markets, incredibly small lockup period, etc.
“It’s unlikely that a sale with a 1% discount will be snatched up,” Jason Mo doubted, “the volatility is too high.”