The PGA Tour’s Player Equity Program has been in the works for a while, with players finding out their allotted shares and corresponding vesting schedule this week. Fried Egg Golf reached out to sports law attorney and Conduct Detrimental golf contributor John Nucci, who was kind enough to answer our questions on why the Tour went this route and what it means going forward. 

What is the PGA Tour likely trying to achieve with the Player Equity Program?

Granting equity awards that vest over an eight-year period gives players an incentive to remain on the PGA Tour for that time period so that they earn their full award. The hope of the PGA Tour is that these awards deter players from jumping ship to LIV. 

At a high level, “vesting” means that players will receive awards, but the players will forfeit all or a portion of the award if they leave the Tour in a specified timeframe.

Awards that are subject to vesting will usually include a clause that says the awards “accelerate” when a specified event occurs. That event is commonly a sale of a business, but can also include a “qualified financing,” such as an investment by the PIF. 

If the awards do include such a clause, they could fully vest at the closing of a PIF investment. For the Tour, this would accomplish their goal of rewarding players who stayed loyal. 

Given that aim, is this structure a good way to accomplish that goal, or could they have gone about it differently?

I’m going to double-preface everything I say here. First, the PGA Tour is dealing with a competitor with unlimited pockets that seemingly does not care about losing money. There is no playbook for this, so they are trying to figure it out as they go. Second, I have yet to see the award agreements or the full details of the program.

However, based on what has been reported, it seems like the formula used to determine awards weighed past experience more heavily than future potential, which surprises me.

For instance, players like Scottie Scheffler, Viktor Hovland, Ludvig Åberg, and Collin Morikawa are apparently not among the highest award recipients. Nobody can argue that Tiger and Rory haven’t made the game what it is today, but there is a minimal risk of those guys jumping ship. 

In my view, spreading the wealth to ensure that young stars have a meaningful incentive to stay on Tour is more critical. Are Scottie or Collin or Ludvig going to care about forfeiting their (hypothetical) $10 million equity award if LIV offers them $100 million? 

On the flip side of this, how do you call Tiger, Rory, or Spieth and say we’re giving Collin and Ludvig more than you? It is a lose-lose. 

Other than focusing more heavily on young stars, I think this program accomplishes the PGA Tour’s goals as best as it can. 

As mentioned, there is no playbook when your competitor truly does not care if they lose a few billion dollars. If LIV wants to offer a Tour member a $100 million contract and that player is motivated by money, no amount of award or forfeiture of that award is going to make a difference.

How will players actually convert equity to cash? 

At this point, all we know is that players will not be able to sell their interest until they become fully vested, which is at least eight years away.

I would be shocked if the awards didn’t include a “right of first offer” in favor of PGA Tour Enterprises. In short, this would mean that the players will have to offer to sell their interests back to PGA Tour Enterprises before they can sell it to anybody else. 

I would also be surprised if PGA Tour Enterprises did not exercise each of those rights, and if the awards didn’t contain some transfer restrictions. For instance, the Tour is not going to allow a member to sell their interests to a current LIV player.

However, the idea is that the value of these awards increases over time as the sport and the company grow. In eight years, a $10 million award may be worth much more, just like $10 million of stock that you buy today may be worth much more in eight years. 

How does this move impact the ongoing negotiation/standoff between the PGA Tour and LIV/PIF? 

I am not sure this will have much of an impact on negotiations, if at all. Each side has taken steps in recent months to improve their bargaining position. 

LIV went out and got Jon Rahm to show that they don’t plan to go anywhere and to try and weaken the PGA Tour’s resolve. The PGA Tour went and partnered with private equity to show LIV that it doesn’t need its money to survive. 

I am hopeful that the parties understand that golf is too much of a niche sport to have two fractured tours. At the end of the day, a partnership is beneficial to fans because we’ll see the best players in the world playing against each other, maybe while bringing some new innovations to the game as well.

John Nucci is a sports law attorney, adjunct professor of sports and entertainment law, and frequent golf law contributor to Conduct Detrimental. He can be found on Twitter at @JNucci23.

This piece originally appeared in the Fried Egg Golf newsletter. Subscribe for free and receive golf news and insight every Monday, Wednesday, and Friday.