Houston Texans running back Arian Foster and Fantex Holdings agree to a deal that allows people to invest in Foster's future performance.
Fantasy football owners “invest’’ in talent every year, hoping players’ performances will lead to financial gain in their fantasy leagues. But now it is possible to actually invest in a football player the same way one can invest in stocks and bonds.
The player in question is Houston Texans running back Arian Foster, the company sponsoring the investment is Fantex Holdings and the expectation for a big payoff for investors is very low.
Foster and Fantex Holdings agreed to a deal in which Fantex would pay Foster $10 million for a 20 percent stake in all future earnings by Foster from all football-related business deals. That includes contracts, endorsements, appearance fees and other possible revenue-generating efforts.
Fantex is offering 1,055,000 shares at $10 per share with a minimum investment of $50. No investor can own more than 1 percent of the offered shares.
For Foster, the deal amounts to an insurance policy against future injury. He is in his fifth season in the NFL, and running backs in the league average only 3.5 years of service.
“Arian still owns 80 percent (of future earnings) so he’s very much incentivized to continue to build his brand,’’ said Fantex co-founder and chief executive Buck French. “And, by the way, we’re incentivized to help him, because we have 20 percent. That was our whole idea of starting this company, aligning everyone’s incentives properly.”
Fantex can cancel the deal if they do not have the demand they need to make the offering financially viable.
Foster is currently under contract with the Texans and is scheduled to make $5.25 million this season, $5.75 million next season, $6 million in 2015 and $6.5 million in 2016. NFL contracts are not guaranteed. Fantex would gain $4.7 million if Foster plays out the rest of his current contract.
For investors, the only way they make money is if a dividend is paid or if the stock’s popularity creates a demand for stock that investors can sell at a profit.
“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 is an interesting thing because I’m interested in the sport, I understand finance and I want to own a tracking stock that is linked to the value of performance of Arian Foster’s Brand,’’ French said. “I do think people will find that interesting.”
All of the risks associated with the investment are included in Fantex’s prospectus filed with the Securities and Exchange Commission. Some of the more likely ones include a career-ending injury to Foster, and the possibility that the National Football League or other organizations could discourage such dealing in human performance.
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.