XFC Offers Anderson Silva Ownership in the Company

XFC Offers Anderson Silva
MELBOURNE, AUSTRALIA - FEBRUARY 10: Anderson Silva of Brazil walks to the Octagon prior to his middleweight bout against Israel Adesanya of New Zealand during the UFC 234 at Rod Laver Arena on February 10, 2019 in the Melbourne, Australia. (Photo by Jeff Bottari/Zuffa LLC/Zuffa LLC via Getty Images)

XFC Offers Anderson Silva Ownership in the Company

XFC, the world’s only publically traded MMA promotion, has just offered MMA middleweight legend Anderson Silva shares as part of a new initiative. This initiative seeks to offer XFC fighters shares in the organization. This means that they would, in effect, become part-owners of the very promotion that they would fight in. These shares would become more valuable if the company prospered. In the meantime, they would pay out a small income in the form of dividends.

Employee ownership is becoming more and more popular. In an age of political polarisation, letting your employees own shares in your company (Employee Share Ownership Programmes, or ESOPs) is attractive to many sides. Some would see it as empowering workers. Others might see it as letting individuals take more control of their economic destiny. When it comes to MMA promotions, some of whom prefer to designate their fighters as independent contractors, such ideas seem very far away.

But XFC, which has returned after four years of inactivity, is seeking to do many things differently. Its new tripartite system, where fights are divided into Young Guns (entry-level) Tournament Series (a PFL-Esque tournament bracket) and Super Fights (major marquee bouts) are but one example of this. XFC’s resurgence is based much more around talent development; taking fighters who are making pro debuts or who are relatively inexperienced and building them into prospects in-house.

XFC ESOP: The Details

XFC President Myron Molotky went into detail as to what motivated giving fighters a piece of the pie:

Myron XFC

“Let’s face it, our greatest asset is what happens inside the cage. It’s our fighters, and we want to reward them. The difference is Anderson Silva’s retiring. He doesn’t own a piece of the UFC. Kenny Cross, if he does a good job inside the cage, when Kenny retires he’s going to own a piece of the XFC. The better the job he does inside that cage, and in building the brand, the more success he’s going to see on the investment side.”

Take a look across the sport in general. What do the fighters get out of it, other than a purse? They get put on a platform, someone knows their name, maybe many people know their name. But this is something that I believe we’re going to see much more passion out of our athletes, that knowing that they own this property, knowing that they own a piece just like I own a piece.”

Fighters earn a certain amount of shares, just signing with the XFC roster, and from then on it’s going to be incentive-based. It’s going to be based on winning, it’s going to be based on Fight of the Night, which is going to be tied into a financial reward and more shares for the bonus structure. Knockout of the Night, Submission of the Night, that’s all going to be tied in where they can gain so many extra shares from their performances in the hexagon.”

XFC and Talent Development

The XFC president went on to elaborate on how the incentive program tied in directly with XFC’s new, three-tiered development structure. “Basically, Young Guns is a development league, we’re going to match them up properly.  They’re not going to be forced into situations, short notice fights, fighting out of class, maybe taking on an opponent that’s not matched up well…”

Molotky then went on to make clear that this arrangement would be about developing prospects, but not protecting stars: “It’s gonna be on the fighters when they get inside the hexagon. We’re not going to force fighters down anyone’s throat. They’re going to earn it inside the hexagon. The fans will decide who they want to follow, who they’re passionate about.”

“I’ve never understood the mindset [of labeling fighters as independent contractors]. If you go back to our experiences in Brazil, the fighters we’ve had, many fighters fighting on a big stage across the board, finding success in the XFC, you ask them, ‘how were you treated by the XFC?’, they love the XFC… …when you really get to understand and know who they are, they become really special to you, and you want to do the right things for them. I can’t judge anyone else. But I can tell you with XFC, we’re going to treat these fighters like world-class athletes.”

XFC Offers Anderson Silva Shares

Perhaps it’s this thinking about building the next generation of MMA – the promotion’s motto – that led them to offer shares to Anderson Silva, someone so influential to such a huge generation of fighters. “When you talk to the fighters – we’ve had our trials in Michigan already, and we’ve got the next ones coming up in Atlanta tomorrow… when we were rolling through Brazil, when XFC was jumping down there, for everyone the reference point was always Anderson Silva.”

The timing helped as well, says Molotky. But he also happens to be a huge fan of ‘The Spider’: When asked to pick a favorite fight of Silva’s, he refused: “How do you pick one? I think every time he steps in the cage is my favorite. Win or lose. He is such an amazing athlete and fights with as much will as he does skill.”

Perhaps taking courage from Silva’s early success against the highly ranked Uriah Hall, Molotky also mentioned that he’d be interested in possibly having Anderson Silva fight in XFC if he was interested. “We haven’t had communications with Anderson yet, that’s going to be arranged over the next few days… We don’t feel, in his position that he’s done. If you just look at the boxers that are coming back, Mike Tyson, [Evander] Holyfield. When you roll it back this way, Anderson’s still an absolutely amazing athlete. This wouldn’t be a nostalgic signing to put him inside the hexagon. This is one of the greatest who’s ever walked the planet and we’d love the opportunity to have the conversation.”

Economic Underpinnings of the XFC ESOP

The XFC ESOP is not some harebrained scheme to try and lure fighters in on the cheap by offering them stock instead of cash, leaving them high and dry if XFC folded. Instead, fighters will be offered shares as a sign-in bonus on top of their fight purses from their contract. Some fighters who already have signed contracts will be offered shares on top of what they have already agreed to, as Molotky proudly explained.

“We’re going to have some great announcements at the fighter meetings for all the fighters when we get in there and explain – they’ve already signed the contracts, but guess what? They’re going to see shares in XFC as an additional bonus, and hopefully, as an additional incentive, to put on the greatest fights inside the cage, as soon as we open up on November 11.”

When The Economist in 2015 broke down what separates successful ESOPs from failed ones, it highlighted several positive indicators. These are indicators that XFC exemplifies – being a small business (according to Molotky XFC intends to keep its fighter roster “lean and mean”, below 200 fighters) and offering shares on top of pay, instead of trying to replace pay with shares. This would help maximize productivity gains while minimizing the risk to fighters.

Looking After Retired Fighters

But more importantly, for combat sports, in particular, fighters often run into financial difficulties after they retire. Many from tough, working-class backgrounds are first confronted with a surge in income they are not prepared to manage. This is swiftly followed by a sudden lack of income after retirement. Some are even forced into fighting long after retirement simply for the money. The dividends that shares provide may go some way towards providing long-term income to offset that. Fighters will maintain their shareholdings after they retire, or even if they leave XFC and go fight for another promotion.

“It’s almost looking like it’s a form of savings.” mused Molotky. “You watch it grow, make decisions on how you trade over time. One of the things that we’ve put in place with the Lambert Agency is that we’re going to have a financial class for all of our athletes. There’s going to be classes offered to explain what does all this mean, how does it work, how should you manage it, provide the resources for them to understand what’s really going on here. Rather than just “here’s your purse money, show and win money”, it just expands into a whole new area.”

Combined with the developmental structure, XFC will be looking after fighters when they come up through the ranks and after they retire, not just when they are at their most useful to the promotion.

It’s yet to be seen whether the XFC ESOP will bear fruit. Some of their other programs, like the three-tiered development structure, or their partnership with the TiiCKER app to sell shares to fans are also in the early going.  But certainly, it is of massive interest to those embroiled in the ongoing, frantic debate about how pay in MMA should work.

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