WSOP BACKER DEAL

[jdoe]

Say I was going to play in a $1500 event at the WSOP and I wanted to sell some of my action to my poker buddies. If I were to sell 15 shares at $100 each and give them 5% per share after taxes is this a good is this deal for me?

Anything I am missing here?

jdoe

[Moovyz]

It all depends on if YOU think this is a good deal. If you honestly think you are a top notch player and stand a much greater than average chance to win, then no, it's not a good deal. Many, who are backed, get 35-50% or more of the winnings. Go to www.fossilmanpoker.com (http://www.fossilmanpoker.com) to see what deal Greg Raymer made last year. (it's in the frequently asked questions area)

I'm playing in 2 events, the $1500 NL and the $2,500 NL and I'm backed 100%. I get 50% plus expenses. I'm probably an above average player with numerous tournament wins and 25 years of profitablity.

But it's strictly up to you. In my deal, all taxes are paid out of the win before the split (contrary to Greg's deal). I'd recommend spelling all this out in any agrangement. If you feel comforatable with the deal, go for it.

[Phill S]

out of interest, are you the blogger who won on sunday?

[Greg (FossilMan)]

Anytime you're playing in 1 event, be it 1 tournament or 1 session of a cash game, you're putting up none of the money, and you can keep more than 10% of any win, it's a good deal for you.

In this case, if you sell those shares, you'll be playing for free and keeping 25% of the win. It's a great deal for you.

And the deal that Moovyz got is fantastic and so good for him, it's amazing. And that has nothing to do with him, it would be a great deal for Negreanu, Greenstein, Brunson, you, me, anybody. Playing for half the win with no financial risk in only 1 event is a huge -EV deal for the backer.

It would be different if I were backing a player for a long series of poker games and/or tournaments, with the player keeping half of the net profit from the series. But, when it's one event only, you can't be making a good deal when you give the player that much. In my deal, I got 35%, but that was for the net win over a half-year period of cash games and tourneys, which is COMPLETELY different than a 1-event deal.

Later, Greg Raymer (FossilMan)

[BISCO]

are there any sample backing agreements (read: contract) available to the public that could be modified for purposes of easily selling a piece of yourself in a tournament?

[BISCO]

[ QUOTE ]
are there any sample backing agreements (read: contract) available to the public that could be modified for purposes of easily selling a piece of yourself in a tournament?

[/ QUOTE ]

bump

[TomCollins]

Greg (and others),

What would you consider a fair deal for backing an above average (but not world class) player in a smaller buy-in preliminary event ($200-300)?

What cut is "reasonable" or "fair"?

[Moovyz]

Hey Greg,

It is a sweet deal huh? I was just about to email you to let you know I'll be there from 6/21-6/26. Maybe I can buy you breakfast one day?

I'm gonna have to argue on behalf of my backer that this is a -EV for the TWO events...lol. Personally I plan on winning both, then seeing you at the final table of the Main Event. Seriously, I'm sure it is a negative EV, but this person blows this much weekly in slot losses. So it has to be a +EV for her vs. that. She also owns a "pre-paid" piece of me for the remainder of 2005 if I cash for more than a pre-determined amount (I should have mentioned that I guess).

In retrospect, I guess I didn't calculate the fact that the original poster was only playing the 1 event. You're right, any % of money won without risk is a great deal. But he should make sure he has the deal set about taxes. If he only gets a small amount but owes ALL the taxes, he may come out bad in the end.

On that subject, was that portion of your deal set up ahead? I know you paid the taxes on the entire win. But had you calculated and agreed with your backers on that part prior? If you had or hadn't, now knowing the outcome from last year, would you set it up differently now?

Best regards, Glen

[Beerfund]

[ QUOTE ]
Maybe I can buy you breakfast one day?


[/ QUOTE ]

What? /images/graemlins/confused.gif Buy him a beer you [censored]. /images/graemlins/ooo.gif

[Moovyz]

He can have beer... it's just that in all the times I've played with Greg I've never seen him drink it. Dinner's out, because he'll be playing late into the night. I'd like to sit down to a nice breakfast with my friend... if it's ok with you?

[Beerfund]

[ QUOTE ]
He can have beer... it's just that in all the times I've played with Greg I've never seen him drink it. Dinner's out, because he'll be playing late into the night. I'd like to sit down to a nice breakfast with my friend... if it's ok with you?

[/ QUOTE ]

Whatever dude, just make sure you atleast get a kiss.

[Greg (FossilMan)]

It will be my pleasure to join you for breakfast, dinner, whatever.

As for taxes, my backers all got their own w-2g from Binions for their share of our win. If we hadn't been able to do it that way, I would have issued each of them 1099-misc forms from me to them for their win. In any event, we all knew the deal was that they had to each pay taxes on their own share of the win, and that I would be reporting anything big to the IRS as having been won by them, not by me for the whole amount.

Later, Greg Raymer (FossilMan)

[drewjustdrew]

I know I have asked a similar question to you this before Greg, on this topic.

What is better in these backed arrangements, to have the names and ssns available upon winning the tournament, or to gather them after the fact (assuming you have complete trust in your backers). I guess my question really is - do the backers need to have the tax form (I forget what the number is) signed before you are hit with the W-2, or can you get it after? Or is just their Tax info necessary without a signature?

[ZeeJustin]

[ QUOTE ]
And the deal that Moovyz got is fantastic and so good for him, it's amazing. And that has nothing to do with him, it would be a great deal for Negreanu, Greenstein, Brunson, you, me, anybody. Playing for half the win with no financial risk in only 1 event is a huge -EV deal for the backer.

[/ QUOTE ]

This implies that not even the best player in the world can expect to have an roi of over 100% in the long run. In an event as big as the WSOP ME, surely there must be several dozen players that are worth 2 to 3 times the buyin, and maybe a few that are worth a lot more. Saying any deal where the backer needs the player to have a 100% roi to break even is -ev seems wrong to me.

[BISCO]

is there any quick and dirty way to sell a piece of yourself in a tournament other than a handshake agreement?

[drewjustdrew]

[ QUOTE ]
This implies that not even the best player in the world can expect to have an roi of over 100% in the long run. In an event as big as the WSOP ME, surely there must be several dozen players that are worth 2 to 3 times the buyin, and maybe a few that are worth a lot more. Saying any deal where the backer needs the player to have a 100% roi to break even is -ev seems wrong to me.

[/ QUOTE ]

To have $0 financial risk implies an infinite ROI which is clearly better than 100%. Now if you are talking net present value, that is a different story.

Edit: I was looking at it from the player standpoint when I read your post the first time. I read somewhere that Lederer puts the EV of a good pro at $30,000 - $40,000 in the ME.

[slickpoppa]

[ QUOTE ]
[ QUOTE ]
And the deal that Moovyz got is fantastic and so good for him, it's amazing. And that has nothing to do with him, it would be a great deal for Negreanu, Greenstein, Brunson, you, me, anybody. Playing for half the win with no financial risk in only 1 event is a huge -EV deal for the backer.

[/ QUOTE ]

This implies that not even the best player in the world can expect to have an roi of over 100% in the long run. In an event as big as the WSOP ME, surely there must be several dozen players that are worth 2 to 3 times the buyin, and maybe a few that are worth a lot more. Saying any deal where the backer needs the player to have a 100% roi to break even is -ev seems wrong to me.

[/ QUOTE ]

I agree, I don't see why the fact that it is only one event makes it -EV for the backer. If the player is worth more than 2X the buyin, which I think is certainly possible in an event like the WSOP, then the deal is +EV. It is a high variance investment, but still +EV.

[slickpoppa]

[ QUOTE ]
[ QUOTE ]
This implies that not even the best player in the world can expect to have an roi of over 100% in the long run. In an event as big as the WSOP ME, surely there must be several dozen players that are worth 2 to 3 times the buyin, and maybe a few that are worth a lot more. Saying any deal where the backer needs the player to have a 100% roi to break even is -ev seems wrong to me.

[/ QUOTE ]

To have $0 financial risk implies an infinite ROI which is clearly better than 100%. Now if you are talking net present value, that is a different story.

[/ QUOTE ]

Just because it is an infinite ROI for the player does not mean it is a bad deal for the backer, or even a good deal for the player. For example, if you had a chance to fully back Tiger Woods for 50% of the profits in a $1,000,000 golf match against Phil Ivey, would you take it? If anything, that would be a great deal for the backer and a bad deal for Tiger Woods. Even if Tiger only had $1,000,000 to his name, he would be a fool not to put up the money himself because he is such a large favorite to win.

[drewjustdrew]

I misread the initial post that I responded to. I agree it does not have to be bad for either party, but I would think 100% backing for 50% of return is not usually a great or even good deal for the backer in a risk-return sense.

[Greg (FossilMan)]

What you can do varies dramatically from casino to casino. At Foxwoods, they don't recognize deals, so you as the official winner are going to be reported to the IRS as such. Then, after the fact, you are going to have to issue some form 1099-misc to the IRS and to your backers, indicating to the IRS the partial distribution of this win from you to the backers.

If you're at some other casinos, if you hand them a form 5754 (is that the right number?) when you win, then the casino will pay the money out to each of you individually, and send in a form w-2g to the IRS for each of you individually as well. The form 5754 has the names, addresses, and SSN#s for each of you on it.

To be sure what to do, talk to the casino in advance, and to a tax professional (which I am not). Obviously, if you show up to the tournament with a form 5754 ready to go, you've got nothing to lose, as it will be meaningless if you don't win, or if the casino doesn't accept it.

Later, Greg Raymer (FossilMan)

[Greg (FossilMan)]

[ QUOTE ]
[ QUOTE ]
And the deal that Moovyz got is fantastic and so good for him, it's amazing. And that has nothing to do with him, it would be a great deal for Negreanu, Greenstein, Brunson, you, me, anybody. Playing for half the win with no financial risk in only 1 event is a huge -EV deal for the backer.

[/ QUOTE ]

This implies that not even the best player in the world can expect to have an roi of over 100% in the long run. In an event as big as the WSOP ME, surely there must be several dozen players that are worth 2 to 3 times the buyin, and maybe a few that are worth a lot more. Saying any deal where the backer needs the player to have a 100% roi to break even is -ev seems wrong to me.

[/ QUOTE ]

No, it does not. There is a big difference between backing a player who has a 100% ROI over the long run, and backing the same player for 1 event.

Most tourneys pay about 10% of the field. To simplify things, let's discuss a 50 player field, paying 5 spots. Here is the pay schedule for Foxwoods if 50 enter a tourney. 45%, 25%, 15%, 10%, 5%. We'll ignore the vig, again for simplicity, but keep in mind that the deal will be worse for the backer with a vig included.

To get his 100% ROI, let's say this player you're backing will win this event twice every 50 tries, as well as place in each spot, 2nd-5th, twice each. If you enter him 50 times, his average result will be 10 money finishes, and his ROI will be exactly 100%. If you add up these wins and losses, and then split the total win, you'll both be ahead by about 25 entry fees.

But let's say that you and he settle up after each individual event. And let's put a price tag of $200 on each event. At that price, the prize pool is $10K, and if he finishes in the money, he will get paid $4500, $2500, $1500, $1000, or $500.

Twice he wins, getting paid $4500, for a profit of $4300, and you as the backer win $2150 twice, for a net of $4300. Twice he is 2nd, getting paid $2500, for a profit of $2300, and you as the backer win $1150 twice, for a net of $2300. Twice he is 3rd, getting paid $1500, for a profit of $1300, and you as the backer win $650 twice, for a net of $1300. Twice he is 4th, getting paid $1000, for a profit of $800, and you as the backer win $400 twice, for a net of $800. Twice he is 5th, getting paid $500, for a profit of $300, and you as the backer win $150 twice, for a net of $300.

Of the 50 times you entered him, he cashed 10 times, and won you a total of $9000. 40 times he failed to cash, and you lost $200 each time, or $8000 total. Oh wait, I'm wrong, you made a profit of $1000 for backing him 50 times, or $20 per attempt, while he made a profit of $9000, or $180 per attempt. Of course, if there had been a vig, let's say $20 per event, that would have cost an extra $1000. Some of that would have come out of the player's end on the 10 wins, but most of it would be paid by the backer, and now his $1000 profit is down to just about zero.

And this is a player with a 100% ROI if playing for himself. And it highlights the HUGE difference between backing a player for a cumulative total over a long series of events, and backing the same player for 1 event. In the above example, backing the player over 50 events with the total win being cumulative, made for a good investment for the backer, while backing the player for a series of individual events turned the investment into a tiny winner, at best.

And none of the above takes variance into account at all. I am sure that doing so would make this an even worse investment for the backer.

Later, Greg Raymer (FossilMan)

[Moovyz]

Greg,
Thanks for this response. It was well thought out and calculated. To sum it up...in short, you're saying that a "Break-even" player (return of 100%) will just be basically a break-even deal for the backer. Fair enough.

I've never been just a break even player. I cashed in 28% of tournies enterred (granted they were smaller events, but then again, I think my game has improved over the past 2 years) and in those 28% cashes, I won the events 40% (granted this was probably a slight deviation from normal) because I've always played my best when the final table begins.

Now I admit that this is a small sampling < 100 events.
But I've been making money in live games for more than 25 years, tournies for more than 6 years and NL is easily my stongest game (as I feel it is yours as well Greg).

I agree that it would be a better deal for the backer to "put me in" all year. But there isn't enough money and I don't have the time, right now, to play all year. Deviation is the key. If I run bad, it's a bad deal. If I run average or better than average, It could be a very lucrative deal for both. And let's not cancel out the "hungry" factor. I feel I'm at a level of thinking in the game that I've never been at before. I truly "expect" to do well. Time will tell.

[drewjustdrew]

Yes it is Form 5754 (http://search.irs.gov/pub/query.html?col=catfoin&col=catpub&col=catnote&char set=utf-8&ht=0&qp=&qs=&qc=&pw=100%25&ws=0&la=en&qm=0&st=1& nh=10&lk=1&rf=0&oq=&rq=0&si=0&qt=5754&criterias=1b )

[TomCollins]

100% ROI is a phenomenomal player, not break even. You have a +EV of $10,000 for the WSOP with 100% ROI.

[Vincent Lepore]

[ QUOTE ]
you're saying that a "Break-even" player (return of 100%)

[/ QUOTE ]

Am I missing something here. Doesn't a %100 ROI mean that if you invest $100 you recieve $200 thus earning $100% not breaking even.

Vince

[Moovyz]

Sorry, my mistake. Thanks for the clarification.

[M.B.E.]

Suppose a player has 106% ROI in a $1,500 WSOP event. A backer pays the whole entry fee, with any prize being split 50/50. As the tournament starts, the total equity of the two of them is $3,090, of which $1,545 is the backer's share. So the backer has EV on the deal of +$45. The player has EV of +$1,545 on this transaction, but her EV would have been +$1,590 if she had bought in to the tourney herself without the backing arrangement.

If the player is broke then this is a terrific deal for the player; from the backer's perspective it is +EV but he should be able to negotiate much better terms.

If the player has a huge bankroll relative to the buyin, then it isn't a good deal for the player, because why give up even $45 of EV? For the backer it would be a fair deal.

In any event ZeeJustin is correct that if the player has ROI greater than 100%, a deal in those terms is +EV for the backer. But whether that makes the deal "fair" depends on other factors.