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Old 07-14-2017, 08:05 PM   #1
WillYumTX
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Question Buying a percentage of a friend's action in a tournament.

I had posted this in the MTT community thread, but that did not seem to be the correct forum.

I found some other threads about staking, but they do not seem to address selling a percentage of a player for a single/one-time tournament.

If you guys have any feedback for me, that would be most appreciated. Thank you in advance.

==

A friend is planning to play in a tournament (in a few weeks) with a total buy-in cost of $350.

He is suggesting that I pay $175 for 40%. That's paying for half of the cost for less than half of the (possible) return.

Is that a typical agreement for a percentage of his action?

[I presume that he means 40% of the profit. Or perhaps it's 40% of whatever he walks with at the end of the tournament. I shall clarify.]

I originally thought it would be 50% of the fee for 50% of the winnings. But I can see reasons for not having the percentage sold equal the percentage return.

-- The player has to do the work. The player has to pay associated costs with being at the tourney.

-- But the backer has to take a chance of a complete loss. And the backer does not get to play.

Any thoughts about this offer?

Thank you for your feedback.
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Old 07-14-2017, 08:39 PM   #2
westwd
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Re: Buying a percentage of a friend's action in a tournament.

It's just like any market. There is no set price for buying action. For some players it may be 50 for 50, for some it may be 50 for 30, etc. It depends on the player's skill. Is 40% of the profit worth 50% of the buy in? How good of a player is he? If you don't have that much confidence in them then try to negotiate or just don't accept his offer.

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Old 07-14-2017, 11:00 PM   #3
SpewingIsMyMove
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Re: Buying a percentage of a friend's action in a tournament.

It isn't a matter of paying for labor, it is a matter of determining the value of the investment. Is he a winning player over a significant sample size? If so, than each dollar invested is worth less than the face value the investment.

Look at it this way. Let's say you had a chance to back the best player in the world, who averages a cash every third tournament, and has an ROI of 200% (2 dollars profit for every dollar invested). Would it make sense for him if you paid his whole buy in and got 100% of the equity? of course not. His value that he brings is his skill.

That being said, if you don't think your firend is a winning player, or has enough track record to claim that he adds significant value, go ahead and insist on 50/50. Either he will say yes or he will say no
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Old 07-14-2017, 11:54 PM   #4
TreadLightly
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Re: Buying a percentage of a friend's action in a tournament.

This is what you call a 'markup' which people very often charge for tournament they believe they are winning in or atleast believe they can sell at (sometimes people will sell all their tournaments at a markup even though they are break-even and make $$$ that way)

The markup on this investment with you paying $175 for 40% of his action is 1.25 ( 40% of 350 = $140, he wants to charge $175 which is $140 x 1.25). This (I believe , could be wrong) that he needs to be winning at least a 25% ROI for this to be break-even, and higher for it to be a profitable investment. (Making on average $87.5 profit everytime he plays this tournament in the long run = 25% roi)

If he is unproven as a winner and/or you don't have faith in his poker skills for some reason but want to invest to be nice / help a friend out insist on a 50% for $175 (50-50) and tell him you guys can work out a better deal in the future if things go well.

Also for 40% would mean you get back 40% of whatever he cashes meaning if he cashed for $1k you get $400, not $1k minus $350 buy-in then 40%.

Last edited by TreadLightly; 07-14-2017 at 11:59 PM.
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Old 07-15-2017, 12:19 PM   #5
madlex
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Re: Buying a percentage of a friend's action in a tournament.

Quote:
Originally Posted by WillYumTX View Post
[I presume that he means 40% of the profit. Or perhaps it's 40% of whatever he walks with at the end of the tournament. I shall clarify.]
If nothing else is specifically agreed upon, you're supposed to get 40% of his total cash, not his profits. So if he cashes for $1000 you are supposed to get $400. Everything else would be a horrible deal for you that might lead to you losing money even if he cashes. (If he mincashed the WSOP ME this year and you paid $5k for 40% of his profit, you would have ended up losing $3k)

Everything else is about how good you think he is. Among friends, just for fun, 50/50 is pretty standard though.
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Old 07-15-2017, 02:33 PM   #6
Kelvis
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Re: Buying a percentage of a friend's action in a tournament.

Quote:
Originally Posted by SpewingIsMyMove View Post
It isn't a matter of paying for labor
Of course it is. If someone has a 100% ROI why should he give you 100% on your investment when you do absolutely nothing? Sure there is risk and that should be reflected in the price a bit but if you are going to give someone basically the full EV then why would you sell.

Both sides need to make some money. The player gets some for his effort and the investor gets a take for the risk. For profitable players the markup should always be higher than face value but lower than the actual expected value. The ratio of this split reflects the value of labor and risk.
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Old 07-17-2017, 01:36 AM   #7
Ray Zee
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Re: Buying a percentage of a friend's action in a tournament.

if he is a friend asking to give you a piece of the action it should be 50 50 on the money.
if he needs help for the buyin as well.
if he is offering a business prop then whatever the best deal you can make with him.

generally it is a bad deal to give out anything extra for someone in a tournament as there already is alot of juice taken out and you cant afford to give more unless he is really a top player.

almost all players over estimate their own worth.

plus your deal can be very complicated if he makes a saver or gives up a further piece later in the tournament. and arguments result from misunderstandings.
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Old 07-17-2017, 04:26 PM   #8
SetofJacks
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Re: Buying a percentage of a friend's action in a tournament.

Quote:
Originally Posted by madlex View Post
If nothing else is specifically agreed upon, you're supposed to get 40% of his total cash, not his profits. So if he cashes for $1000 you are supposed to get $400. Everything else would be a horrible deal for you that might lead to you losing money even if he cashes. (If he mincashed the WSOP ME this year and you paid $5k for 40% of his profit, you would have ended up losing $3k)

Everything else is about how good you think he is. Among friends, just for fun, 50/50 is pretty standard though.
My assumption that a "cut of profit" deal would consist of original investment + % of profit.
So 5k + 40% of the 5k profit, 7k total.
Vs. 40% of 15k, 6k total.

40% of profit and 0% of original investment would of course be horrible.
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Old 07-18-2017, 03:49 AM   #9
DisRuptive1
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Re: Buying a percentage of a friend's action in a tournament.

What I've seen is if you stake him 100%, you get 80% of the winnings, 20% goes to the player. If you're going to stake him for 50%, you get 50% of the maximum amount you could get which would be 40% of the prize pool. Sounds typical to me.
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