Angels’ Andrew Heaney has no regrets about unusual financial deal
Eighteen months ago, Angels left-hander Andrew Heaney agreed to commit 10% of his future earnings to investors in exchange for $3.34 million up front. It was an unprecedented transaction for a major league player.
At first, he was skeptical of the company, Fantex, suggested to him by his agent. But over time he came to see it as an easy decision considering his priorities, he said Saturday at Tempe Diablo Stadium, in his first public comments on the transaction. U.S. Securities and Exchange Commission regulations prohibited him from speaking on the matter until the units of his stock closed.
The day Heaney’s arrangement was announced, Angels reliever and active investor Huston Street called it “the dumbest deal I’ve ever heard.” That night, the two discussed it, and Street’s tone softened. Five major leaguers have since signed similar deals with Fantex. Heaney, 25 and recovering from elbow ligament-replacement surgery, received his money last year.
“To me, there’s multiple ways of looking at it,” Heaney said. “You can look it at as marketing your brand. You can look at it as an insurance policy. Obviously, money to one person is totally different than money to another person. I live in Oklahoma. It’s not expensive to live there. I don’t live an extremely lavish lifestyle.
“I just viewed it as, I want to be comfortable, and I want my family to be taken care of, and I’m OK with that.”
Heaney estimated he could accrue 8% to 9% in compounding interest each year on the cash, roughly doubling that $3.34 million over time. Given the 10% of his earnings he must funnel to Fantex, he calculated his break-even point at somewhere between $60 million and $70 million for his career.
“My thought process is, “OK, If I make that much, and I lose out on money, who the [expletive] cares? Because I don’t care,” he said. “If the downside is that I never earn that much, then thank God I took this money now and was able to afford the things that I need and want in my life and am able to provide for my family.”
The ninth pick in the 2012 draft, Heaney has earned more than $6 million playing baseball. He could be eligible for salary arbitration next season. If he pitches as he did before the surgery, he could pocket another $100 million.
That’s what Street was thinking when he told reporters there was “no chance” he’d agree to Heaney’s deal.
“But, then, of course, I had to go crunch the math.”
So, Street ran a net present value model, including depreciation factors. He generally approached the calculation like Heaney was a company, not his teammate. And his break-even estimate ended up higher than Heaney’s.
“I told him, ‘If you make more than $80 million, then you made a bad deal,’” Street said. “But if you make less than $80 million, you made a pretty good deal.”
Street told Heaney he recognized he was wrong to react so quickly.
“Street thinks he knows everything,” Heaney said, laughing, “so he of course wanted to tell me how he would’ve done it if it was him.”
Perhaps most surprisingly, Street now believes more pre-arbitration players should examine the possibility of a Fantex agreement, rather than commit to a team-friendly contract extension. And, he said, “the whole business model actually has become somewhat attractive to me from both sides of the equation.”
“At the end of the day, Heaney solved for three things, which I really respect,” Street said. “He solved for what he wanted most out of life, he understood that fulcrum where the money swings the other way, and he was OK with that risk. He understood the opportunity cost, so to speak. Lastly, he did something that very few players had done, or even thought about doing, and opened himself up to scrutiny courageously.”
Heaney will throw off a mound Monday for the first time since his surgery. He’ll make 10 throws at 45 feet. The next Monday, opening day, he’s scheduled to throw off a mound at full distance. He harbors hope of pitching this season. … Heaney’s spring project to collect recycling in the Angels’ clubhouse has netted more than 260 cubic feet of plastic water bottles, which he deposits in a dumpster at Tempe Diablo Stadium.
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