Fantasy football just went helmet-to-helmet with Wall Street, and now fans can become “investors” in one of the best players in football.
San Francisco-based Fantex Holdings, whose board of directors includes John Elway, announced Thursday that it has agreed to a deal with Houston Texans All-Pro running back Arian Foster in which Foster will give the company 20 percent of all football-related income for the rest of his life in exchange for a one-time payment of $10 million to Foster and submitted a filing with the Securities and Exchange Commission.
According to the Registration Statement the company filed with the SEC on Thursday, Fantex wants to stage an initial offering of 1,055,000 shares of Foster stock at $10 apiece. There is of yet no date given for the date of the IPO.
The venture is unique, both in sports and business terms, because, as the filing states, “there is no current trading market” in which such stock can be traded. If successful, Fantex plans to expand this venture to other athletes and create a “stock market” built on the foundation of the financial viability of athletes.
“We think that we can obviously raise the money from the public markets because there will be the interest (after the initial offering) that, ‘Hey, this an interesting thing because I’m interested in the sport, I understand finance … and I want to own a tracking stock that’s linked to the value and performance of Arian Foster’s brand,” Fantex CEO Buck French told USA Today. “I do think people will find that interesting.”
In the short-term, it appears the risk sits with Fantex, and in turn its investors. According to USA Today, if Foster played out his entire deal (which may be unlikely given the running back is 27 and the contract would run through age 31), the company would collect just $4.7 million on Foster’s contract — or $5.3 million less than what the company is paying him up front. And with the dangers inherent in football, Fantex even included in its filing a lengthy footnote on the former University of Tennessee star’s injury history.
Foster also made headlines in 2011 when he tweeted out the MRI results of his injured hamstring, angering the Texans.
So the rest of the money would need to be made up from Forster’s non-playing income. Fantex admits in the filing that 75 percent of the total “Arian Foster brand income” is expected to come from contracts outside of football that do not yet even exist.
Among Foster’s non-playing ventures (also listed in the SEC filing) are an appearance in an episode of the TV show “Hawaii Five-O” and a role as a running back in an upcoming Kevin Costner film, “Draft Day,” as well as endorsement deals with Under Armour, grocery chain Kroger and sports memorabilia company Gamebreaker Sports.
And with all of the information disclosed in filings for publicly traded companies, Forbes points out one more risk — this one for any athlete who signs on.
“Athletes beware: allow stock to be traded in your name and open the door to public scrutiny.”
But according to some other current players, that risk may be worth taking on.
When ESPN asked injured Detroit Lions receiver Nate Burleson whether he would be open to a deal like Foster’s, he said, “Yeah, I think so. But there’s only so many athletes that, one, are going to have the money-making ability as a megastar as the Calvins [teammate Calvin Johnson] and Fosters, players like that. Then there’s other athletes that might achieve success financially through business and different ventures they have going.
“It’s appropriate for those two type of athletes, the megastars and those who are really business-minded. Using the NFL to further themselves as a platform for something much bigger for the rest of their lives. So yeah, I think it’s good.”