MoFo Advises Investor Jonathan Soros in Structuring of Athletes Unlimited as Social Enterprise

Morrison & Foerster advised investor Jonathan Soros in connection with the structuring of the latest venture he co-founded, Athletes Unlimited, as a social enterprise.

Athletes Unlimited seeks to explicitly blend profit and purpose through disruptive innovation in professional sports. With the ambition of building a substantial media and entertainment business, this network of professional sports leagues uses a new, innovative model where athletes play a five-week season using a custom-built scoring system that makes every single play count toward the final result and crown individual champions in team sports. The company has already launched leagues in three sports—all for female athletes—with plans to add more over time. Athletes Unlimited is also giving athletes an unprecedented role in the development of the leagues and substantial influence over all key decisions, functionally eliminating team owners.

Under the new social enterprise structure, the financing of the company links profit and purpose at the core of the capital structure. Using a new security called “mission equity,” the unique structuring gives investors the opportunity to achieve a satisfactory financial return while directly supporting the non-financial mission of the company. In the capital structure, the mission equity as a class is still the residual owner of the value of the company, but, unlike the unlimited upside of conventional equity, the financial benefit each investor may receive from this security is limited by the cap they agree to up front. Instead of dividends, all distributions to investors take the form of a share repurchase at a price established at the time of issuance, and the repurchased shares are set aside as a pool to further the mission. The structure also unlocks a relationship between price and impact without requiring a new buyer to pay a seller for the social benefit they created.

The MoFo team advising Jonathan Soros on the structuring was led by San Francisco partner and chair of the firm’s Social Enterprise and Impact Investing practice Suz Mac Cormac, with support from Amanda Hines Gold, Linda Arnsbarger, Jesse Finfrock, John O’Neill, and Michael Santos. Read more about the structuring.

Morrison & Foerster recently released the “Legal Innovation in Impact Investing” report in partnership with Impact Capital Managers (ICM), which details the ways in which private capital fund managers are using legal tools and processes to enhance and protect impact during the lifecycle of an investment.

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