Tuesday, September 17, 2013

Lehavot’s Leveraging

One of this year’s November Nine, Amir Lehavot (currently second in chips), yesterday announced that he was selling pieces of himself to interested buyers. He tweeted the news, linking to a Two Plus Two thread he’d begun outlining the details of his offer.

In the thread-starter Lehavot makes reference to past results (mostly online) and to the fact that going into the Main Event he had 80% of his action. Of that, he’s now offering up 30% (overall) while keeping 50%.

The price Lehavot is setting on shares he’s deriving from the value of his current stack as determined by the Independent Chip Model (ICM) such as is often used when negotiating final table chops. Subtracting the ninth-place money he and each of the other final tablists have already been given ($733,224) and then comparing his current stack to the remaining prize money still up for grabs, this makes his stack of 29.7 million chips “worth” $2,924,822 according to ICM.

Thus the price for 1% of Lehavot for potential buyers is $29,248, nearly three times the Main Event buy-in.

Lehavot will need to finish third or better in order for investors to make any profit at all. To finish third would mean earning a $3,727,023 payday for Lehavot. Take away the $733,224 he’s already gotten, that adds up to $2,993,799; thus, every 1% purchased for $29,248 would get back $29,938, or just a little less than $700.

If Lehavot finishes fourth, that will only yield $20,588 per 1% (a loss of more than $8K), and so on down to a ninth-place finish which would mean investors get zero return. If he finishes second, 1% would be worth $44,399 (about $15K profit), and if he wins, 1% would be worth $76,263 (about $47K).

From Lehavot’s perspective, if he were to sell all 30% he’s offering, that puts another $877,440 in his pocket before he plays a hand in November, which added to the ninth-place money is a little better than the total prize for finishing sixth.

While most responding in the thread are critical of the deal, a few are not. Meanwhile, responses to Lehavot’s original tweet are mostly characterizing it a less than attractive offer for buyers (“it’s only a good deal if your name is Amir Lehavot,” says one).

I think I belong to that latter, skeptical group when it comes to assessing the merits of Lehavot’s offer. But setting the actual deal aside, it seems to me that the whole idea of a November Niner selling pieces of himself at the delayed Main Event final table must be creating a headache for the WSOP.

The issue of deal making at the WSOP has always been complicated. Unlike on the European Poker Tour where everything is done out in the open -- such as was exemplified with a little bit of extra drama at the recent EPT Barcelona Main Event final table -- the WSOP doesn’t acknowledge or help broker deals. There have even been suggestions here and there that the WSOP doesn’t allow deals at all, although that isn’t really the case.

Back in 2010 in a $1,500 limit hold’em shootout event there was a notable instance of a player -- Yueqi Zhu -- being disqualified at the start of the tourney’s second round after having made a deal heads-up with his short-stacked opponent in the previous round to ensure he would advance. At the start of the next day Zhu was disqualified, with WSOP Tournament Director Jack Effel at the time announcing “there is no deal making at the World Series of Poker.”

In truth, Zhu’s case wasn’t simply “deal making” but an instance of a player essentially giving up his chips to Zhu at the end of their match, an action considered as having violated the WSOP’s rule about “Ethical Play” which states “Poker is an individual game. Soft play will result in penalties that may include forfeiture of chips and/or disqualification. Chip dumping will result in disqualification.”

The WSOP has no specific rules (that I know of) forbidding final table deal making in the traditional sense, although like I say they don’t help players make the deals nor do they recognize them when it comes to payouts and tax documents. (Thus does Lehavot also add a note to his offer about needing SSNs from investors to handle potential tax issues later on.)

I have to guess the WSOP isn’t crazy about Lehavot selling shares of himself this way -- i.e., so publicly -- and thus foregrounding the whole idea of final table deal making. What would happen if all nine of the players were to make similar offers? What if they started buying pieces of each other? Or what if all nine arrived at a more traditional arrangement to flatten out the payouts prior to the start of play in November?

Four-plus months of down time obviously gives us lots of time to imagine such scenarios. Gives the players a lot of time to ponder them, too.

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Blogger timpramas said...

The problems could be even mroe serious then the legitimate ones you raised? For instance, what if eight of the nine players agreed to a flatter payout structure but the ninth was a holdout? Wouldn't there be a financial incentive for the eight players to see the ninth player/sole holdout eliminated?

9/18/2013 12:48 PM  

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