After losing numerous sponsors following his SUV-crash-multiple-affairs-rehab-divorce debacle of late 2009, Tiger Woods was reduced to lugging his clubs (well, his caddy was, anyway) in a bag adorned with his own logo, provided by Nike, which looks after the "TW" clothing and equipment brand. Prior to this, he had a bag deal with AT&T that was reported worth "millions." And before that, Woods bag deal was with General Motors; it brought in a reported $7.5 million per year.
A bag deal for the world's most famous golfer had been rumored since Woods returned to competition toward the end of this year. But Tiger formally rolled it out at his own tournament, the Chevron World Challenge, a limited-field event that he — Gasp! — won this past weekend, ending a two-year victory drought. However, the deal is weird. It's with a company called Double Eagle Holdings and its FUSE Science brand.
At his blog, Bruce Krasting breaks down FUSE's rather piddly financials. The upshot is that, although FUSE is sorta-kinda publicly traded, it trades at meager valuations and has a market cap of less than $40 million.
That's a market cap in the ballpark of Woods' total endorsement deal with GM.
So what's going on here? Krasting thinks it's a business arrangement, with Woods awarded options on the inevitable increase in value that the stock will see as his sponsorship — and one assumes, media appearances for FUSE, like the many minutes he spent on CNBC with the company's CEO prior to winning the Chevron tournament — adds value.
And heck, the company has no place to go but up. According to Krasting, FUSE's assets are $300,000. Against liabilities of $507,000:
My problem with this is that I can’t believe that a guy like Tiger would put FUSE (exclusively) on his bag unless he actually had tried the drink (and he liked it). If it’s later shown that all these guys [endorsing FUSE] are falsely endorsing this product it would them look very bad indeed. These pros are not dumb. They have tons of money and good lawyers. So I’m confused.
I'm a little baffled myself. Tiger has shown that, post-scandal, he can still sign prestigious deals. He just did one with Rolex. But he primary sponsor, Nike, with a market cap of $45 billion, is now losing the bag billboard to an upstart with a fraction of that. It's worth noting that while bag deals aren't uncommon in women's golf, most of men on the PGA Tour roll their bag deal into their equipment deal.
Check out the video below. Tiger seems to be plenty down with FUSE Science. And maybe his people figure that, in the $9 billion sport-drink market that Krasting notes, Woods can turbocharge the brand and transform a stock currently trading for less a $1 into something that will rapidly yield a rather higher valuation than that.
Of course, this could also be the nature of post-scandal Tiger: he has to do scruffy deals that would have been well beneath him when he was the face of corporate American, during better times for that organization, as well.