$CHZ: the Future of Sports Fandom?

Crypto Moonshot Brief

Summary:

1. Socios is allowing fans to convert their fandom into capital that they can then transact with and simultaneously enabling teams to add an extra pile of capital to their balance sheets, at a very low marginal cost.

2. The implications of this shift are enormous and I think $CHZ, the underlying token at socios.com, may have a very bright future ahead of it.

Speculative Terrain, by Definition

A lot of what we see in the crypto space in terms of price action is euphoria. From an investment perspective, I think that it´s hard to assess the fair value of a crypto asset and therefore, it is hard to get your hands on one with a certain sense of buying with a margin of safety, if it is possible at all. However, I think the underlying technologies and its applications bring a lot of promise. Blockchain technology decreases the cost of transacting value, the same way the first version of the internet decreased the cost of sending information around.

In the abstract, the above concept about value transacting sounds vague and potentially uninteresting, but the world we see around us is arguably an emergent feature of our financial system. We can do the things we do because we can get appropriate financing for it or in other words, because our financial system provides us with an adequate incentives scheme to get people and things going. Blockchain is supercharging this scheme in very surprising ways. Below is example I encountered today that I found very interesting.

Socios.com

Chiliz ($CHZ) is the underlying token for socios.com. Socios allows teams to emit and manage fan tokens - tokens that fans can buy and sell. As a fan, to buy a token of PSG for example, you need to first buy $CHZ and then trade it for $PSG. Both $CHZ and the fan tokens are subject to the forces of supply and demand, so ultimately, the more fans worldwide want to buy fan tokens, the more the prices of the respective fan tokens and of the underlying $CHZ token will rise. The inverse is also true.

In socios.com, tokens represent voting power within delimited areas of teams. For example, holding a number of tokens enables fans to participate in decision making processes such as the design of the 3rd uniform for their favorite team and other fun stuff. It looks like it is all fun and games, but what $CHZ is actually doing is something with massive value generation potential. $CHZ is unlocking value by allowing fans to convert their fandom into capital that they can then transact with and simultaneously enabling teams to add an extra pile of capital to their balance sheets, at a very low marginal cost.

The value and applications that can stem for this pool of capital is pretty much endless. Not only does it open limitless ways for teams to monetize fans, but it puts sports betting in a whole new dimension, since it allows fans to perform operations on tokens to express their views of what is going to happen in the future. What would it look like to have billions of sports fans worldwide operating with these tokens whilst teams and players go on about their business? Would get a sort of financial system composed of fans? More importantly, the idea of tokenizing fandom appeals to the sense of belonging that fans worldwide have. Now they can turn that sense of belonging into having a real say.

(Non) Valuation and Upside

I do not think there is a way to fairly value $CHZ. I cannot access any financial information for the legal entity behind socios.com since it is private. In my opinion, the only way to look at this is that $CHZ has a market cap of 1.5bn $, whilst it only has a fraction of the popular teams around the globe onboard. Adoption is still at the early stages, but I find a number of very promising qualitative crumbs:

1. Socios has managed to onboard some of the top teams in the planet very early on, such as Paris Sant-Germain, Barcelona, Manchester City, Atletico de Madrid and others. In fact, Messi´s new salary in PSG is in part denominated in $PSG fan tokens. I would assume PSG did their due diligence before doing this.

2. They have a foot in many of the top leagues worldwide. Not only La Liga and the Premier League, but the NBA, UFC and NPL. They definitely have the capacity to close meaningful partnerships.

This is getting more speculative every line that I write, which as a lot of you may know is not my style at all, but $CHZ has been bottoming for months now at the 0.20-0.30 $ range :

Being at such an early stage of adoption, I can´t imagine $CHZ not going much higher as adoption goes higher. I am not finding any meaningful competition for Socios out there and I am getting the feeling that there´s a solid team behind this - Alexandre Dreyfus (CEO) has a successful entrepreneurial track record. Socios looks positioned to dominate the fan token area if indeed fan tokens do take off. I get the feeling that they will.

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These are opinions only of the individual author. The contents of this piece do not contain investment advice and the information provided is for educational purposes only and no discussions constitute an offer to sell or the solicitation of an offer to buy any securities of any company. All content is purely subjective and you should do your own due diligence.

Antonio Linares makes no representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the information contained in the piece. Any assumptions, opinions and estimates expressed in the piece constitute judgments of the author as of the date thereof and are subject to change without notice. Any projections contained in the Information are based on a number of assumptions as to market conditions and there can be no guarantee that any projected outcomes will be achieved. Antonio Linares does not accept any liability for any direct, consequential or other loss arising from reliance on the contents of this presentation. Antonio Linares is not acting as your financial, legal, accounting, tax or other adviser or in any fiduciary capacity.