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Fantex Provides Platform to Invest in Athletes Like Stocks

Saturday, November 2nd, 2013 Leave a comment Go to comments

I guess nothing is out of the question when it comes to creative finance, like investing in shares of your favorite athletes. That’s right — you can buy and trade shares of professional athletes!

Fantex Holdings is launching a new platform that seeks to offer up shares in pro athletes as equities for trading. According to Fantex, the idea of investing in athletes is a natural progression from fantasy football, an industry that had more than $1 billion in revenue in 2012. (And experts say there’s nothing illegal about the idea.)

Here’s how the system would work:

Under Fantex’s plans — detailed in an S-1 prospectus filed with the SEC on October 17, the company would issue “tracking stocks” for each athlete in its stable; each stock would launch via its own initial public offering. Investors buy shares on a closed exchange only at fantex.com with each worth a stake in the athlete’s gross “brand income” in perpetuity — that includes team contracts, money from endorsements during and after the pro career, coaching revenue — anything related to his or her brand as an athlete.

 

So can Fantex actually get star athletes to get on board? Apparently, the answer is “yes.”

Fantex announced . . . that its debut “stock” would be Arian Foster, the Houston Texans running back. Much of the initial press doubted any other athlete would be convinced to follow. But today came news that a second football player has signed on: Vernon Davis, the San Francisco 49ers tight end. The Foster IPO will offer 1.06 million shares at $10 per share. If it is successful, Foster will get $10 million from Fantex, which in turn will get 20% of his future earnings. (The shares that investors get will “track” the fortunes of Foster and fluctuate along with the value of his brand; Fantex says shareholders will get dividends but cautions in its risk summary that shareholders do not actually own any part of his brand.) Davis, meanwhile, took a smaller deal: He’ll get $4 million from Fantex in exchange for 10% of his future earnings. Foster goes public first; Fantex will begin taking reservations for his IPO next week.

 

While investing in star athletes’ future earnings may sound enticing, there are undoubtedly high risks involved with such investments. The biggest risk factor relates to whether a star athlete can remain healthy and perform at a high level. For example, three days after Fantex announced its launch, Arian Foster left an Oct. 20 game against the Kansas City Chiefs with a hamstring injury. Interestingly, Fantex’s S-1 notes that if a player is injured, Fantex can convert your stock to another player’s, but there is no guarantee it will be worth anything.

As of now, securities tracking players’ earnings can only be bought and traded on fantex.com, not through other well-known brokerage firms like E*Trade or TD Ameritrade.

 

Source:

What happens if athletes become stocks? (Fortune)

See also:

Will You Soon Be Able To Buy Stock In Arian Foster? (Forbes)

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