Sports fans who have long envied the salaries of professional athletes may now get a chance to buy stocks linked to sports stars’ financial performance.
Fantex, a San Francisco-based brand-building platform, is launching a $10.6 million IPO enabling investors to lay claim to 20 percent of the future earnings of Houston Texans’ star running back Arian Foster, according to The New York Times.
If the IPO is successful, Foster will receive $10 million and Fantex will likely approach other star athletes to follow suit. Sources said investors won’t have a direct investment in Foster or income from his brand, such as football jerseys or advertising income. But Fantex told the New York Times it expects to pay stockholders a dividend.
Some observers wondered why Fantex picked a football player, particularly a running back, as the vehicle to launch its marketplace. Running backs such as Foster are notoriously prone to career-ending injuries and often have contracts with very limited guarantees.
For the 27-year-old Foster who is a 5-year-veteran, the IPO could prove to be a good deal, given that many running backs retire before they turn 30. In yesterday’s game against the Kansas City Chiefs, Foster hurt his hamstring in the first quarter and sat out the remainder of the game.
Football careers contrast sharply with those of professional baseball and basketball players, both of whom tend to enjoy much greater career longevity along with guaranteed contracts. Fantex’s filing for Foster discusses many of the “risk factors” associated with the offering.
According to published reports, shares in Foster’s earnings will trade only on an exchange operated by Fantex, which will charge buyers and sellers a 1-percent commission. Fantex’s board includes former Denver Broncos quarterback John Elway and hedge fund Glenview Capital Management President John Rodin.
The idea is not unique. Cantor Fitzgerald operates the Hollywood Stock Exchange, a market that lets people bet on the future performance of movies and film stars. But there is one big difference: People who to go to the Hollywood Stock Exchange only invest play money.