Arian Foster goes public (1 Viewer)

[bombjack]

Fantex Offering Stake in Texans’ Arian Foster Starting at $10

2013-10-17 14:11:02.438 GMT

By Leslie Picker

Oct. 17 (Bloomberg) -- Beyond Las Vegas sportsbooks and fantasy football leagues, Fantex Inc. is offering a new way to bet on professional athletes -- starting with the National Football League’s Arian Foster.

The company filed to raise $10.6 million in an initial public offering priced at $10 a share, according to a regulatory filing today. Fantex’s main source of income is Foster, a running back for the Houston Texans who has pledged 20 percent of the money he earns both inside and outside the NFL to the company in exchange for most of the proceeds of the IPO.

San Francisco-based Fantex, led by Chief Executive Officer Cornell “Buck” French, plans to make similar agreements with other professional athletes. Foster, 27, is in the second year of a five-year contract with the Texans, where he’s eligible to receive a salary of as much as $23.5 million through the 2016 season, the filing shows.

Foster currently has endorsement contracts with companies such as Under Armour Inc. and Kroger Co. The Pro Bowl running back also recently acquired an undisclosed stake in Health Warrior Inc., the closely held nutrition company known for its chia bars.

In his fifth NFL season, Foster has 531 yards on 117 carries, with another 183 yards on 22 catches, and has scored two touchdowns. Foster has rushed for a career total of 5,052 yards for the Texans, who are 2-4 this season.

Fantex Brokerage Services LLC is managing the offering along with Stifel Financial Corp. No investor will be allowed to purchase or hold more than 1 percent of any series of common stock issued by the company, the filing shows. Orders for the stock will be posted and executed by Fantex’s brokerage’s alternative trading system, and the shares won’t be listed on the New York Stock Exchange nor the Nasdaq Stock Market.

 

[Bankerguy]

I am getting old.

 

[Ray]

Would the NCAA allow Clowney to do something like this?

 

[danielmclark]

So a guy gives a bunch of money to a company that exists solely to take that guy's money and hold it. They don't produce anything, don't provide any services. The company goes public, and people are expected to buy stock in the company. In return, the stockholders get... what, exactly? I assume Foster will keep putting money into the company, but if he's getting "most" of the money from the stock purchases back - I'm assuming at quite a profit - then where's the gain for the stockholders?

Can someone explain this? Because I'm sure I'm missing something.

 

[Area51Inhabitant]

This makes Bitcoins look like a solid investment.

 

[Concept Coop]

In return, the stockholders get... what, exactly?

I'd assume, like any stock, the money they put in will be more or less valuable as Arian Foster becomes more or less valuable. He signs a bigger contract with Under Armor, and his net worth increases 10% - your $10 share is now worth $11.

 

[Banger]

I'd short as many shares as I could possibly get my hands on. It'll be zero within 3 years.

 

[Concept Coop]

It's actually kind of a cool idea. Imagine investing in Michael Jordan 25 years ago.

 

[Area51Inhabitant]

An NFL player is just one bad tackle away from being completely worthless. I could maybe see this being less risky in other sports like baseball or basketball but still this looks like an extremely risky proposition.

 

[Man of Zen]

So a guy gives a bunch of money to a company that exists solely to take that guy's money and hold it. They don't produce anything, don't provide any services. The company goes public, and people are expected to buy stock in the company. In return, the stockholders get... what, exactly? I assume Foster will keep putting money into the company, but if he's getting "most" of the money from the stock purchases back - I'm assuming at quite a profit - then where's the gain for the stockholders?

Can someone explain this? Because I'm sure I'm missing something.

Compare it with modern banking, and the concept seems a lot less insane.

 

[Concept Coop]

An NFL player is just one bad tackle away from being completely worthless. I could maybe see this being less risky in other sports like baseball or basketball but still this looks like an extremely risky proposition.

Foster is a really funny, really smart guy. If this extends to his career after the NFL...buy low!

 

[Ted Mullins]

I would have loved to get in on this before the 2010 season.

 

[Banger]

so basically what you need to do is tie this in with the player insurance concept to limit your downside risk in the event of an injury.

 

[TheLurkerBelow]

Soon everyone here will quite our jobs to become day traders in NFL player stocks!

 

[tdhartis]

It's really not as crazy as it sounds. When you're investing in stocks, particularly in adolescent companies, you're invested in their long-term potential in most cases. Just as an injury can wreck the career of an NFL running back and leave him worthless in this scenario, you have your Enrons of the world. Also, think about the fiasco with the BP oil spill a few years ago. A lot of people bailed on the stock because they thought the company would never regain the ground it had lost. Others decided to stay in or "buy-low" once others had bailed, and they were rewarded when it rebounded. I imagine the same type of mechanics apply here. Let's look at a hypothetical:

Imagine Adrian Peterson signed a contract with this company in training camp prior to his first season. Coming into the league, some people were very high on him, and others were skeptical because of injury history, running style, whatever. Let's say these circumstances set a "share" of AP at $30. Fast-forward four years, and his perceived value has been confirmed, he is widely considered the best RB in the league, and has signed multiple lucrative endorsement contracts. His share price has skyrocketed to $90 at this point, and those that got in at the ground floor have realized a good deal of profit. Then comes 2011. He's riding high until he is placed on injured reserve for tearing his ACL and MCL, and a great deal of investors decide to jump ship before his stock falls too low. Will he ever come back the same player? Will he lose his endorsements? As a result of these fears, his share price plummets to $60 a share. Those that have stuck with him since the beginning and those that buy in at this level believe he will rebound, even if it is a risky venture. The next year their faith is rewarded, as AP bursts back onto the scene as good as ever, and his stock price jumps up to a new high of $95 by the end of the 2012 season.

I imagine that's how it would work. You're basically using knowledge you'd normally apply to some aspects of FF to make financial decisions. You think that nobody WR on the Giants whose stock is $5 a share has potential? You invest on the ground floor, and when said Victor Cruz goes off and signs a huge contract down the road you make off like a bandit. It's a pretty interesting concept, and I'll be following it closely.

 

[GroveDiesel]

So a guy gives a bunch of money to a company that exists solely to take that guy's money and hold it. They don't produce anything, don't provide any services. The company goes public, and people are expected to buy stock in the company. In return, the stockholders get... what, exactly? I assume Foster will keep putting money into the company, but if he's getting "most" of the money from the stock purchases back - I'm assuming at quite a profit - then where's the gain for the stockholders?

Can someone explain this? Because I'm sure I'm missing something.

My guess is this is how it works:Company sells "stock" in an athlete. Public buys that stock in an IPO. The majority of that money goes to the athlete. In return, a percentage of that athlete's earnings go to the company. That money will then be paid out in dividends to the shareholders of that stock.

So basically you're buying an interest in Foster's future earnings.

The company will probably make money off of a percentage of the IPO and a percentage of the athlete's earnings before paying out the dividends.

 

[lod01]

Yeah, this will work.

 

[hines]

so how does Foster gain from this? where is money being created? say he gives $1 million to the company and they sell $800,000 worth of Foster stock how does he not get screwed in this?

 

[lod01]

so how does Foster gain from this? where is money being created? say he gives $1 million to the company and they sell $800,000 worth of Foster stock how does he not get screwed in this?

Ponzi? He gets other players to do the same and a % of what they pay in, goes to Foster? That would be awesome.

 

[FantasyTrader]

Not the right player to start with. Where's Andre Ellington's or Keenan Allen's IPO?

 

[Hang 10]

Huh, I thought he was going to confess that he was a gay.

 

[Vision6]

This makes Bitcoins look like a solid investment.

Actually bitcoin has been steadily rising. Not bad considering corporate media scared off many people with its propaganda.

 

[The Duff Man]

They are looking to raise $10.6M

He will give 20% of his earnings to the company. If you think he will earn more than $53M you buy and hold, and reap the benefits later.

Seems like a very poor investment to get a decent return, but I suspect they are pitching it more for fun, what is $10?

For Foster, he hedges against his future earnings and takes the $10M now. Smart move on his part I think.

 

[Shutout]

How has this concept not been applied to a fantasy game already?

There should be leagues that are doing nothing more than buying and selling player stock.

 

[danielmclark]

It's really not as crazy as it sounds. When you're investing in stocks, particularly in adolescent companies, you're invested in their long-term potential in most cases. Just as an injury can wreck the career of an NFL running back and leave him worthless in this scenario, you have your Enrons of the world. Also, think about the fiasco with the BP oil spill a few years ago. A lot of people bailed on the stock because they thought the company would never regain the ground it had lost. Others decided to stay in or "buy-low" once others had bailed, and they were rewarded when it rebounded. I imagine the same type of mechanics apply here. Let's look at a hypothetical:

Imagine Adrian Peterson signed a contract with this company in training camp prior to his first season. Coming into the league, some people were very high on him, and others were skeptical because of injury history, running style, whatever. Let's say these circumstances set a "share" of AP at $30. Fast-forward four years, and his perceived value has been confirmed, he is widely considered the best RB in the league, and has signed multiple lucrative endorsement contracts. His share price has skyrocketed to $90 at this point, and those that got in at the ground floor have realized a good deal of profit. Then comes 2011. He's riding high until he is placed on injured reserve for tearing his ACL and MCL, and a great deal of investors decide to jump ship before his stock falls too low. Will he ever come back the same player? Will he lose his endorsements? As a result of these fears, his share price plummets to $60 a share. Those that have stuck with him since the beginning and those that buy in at this level believe he will rebound, even if it is a risky venture. The next year their faith is rewarded, as AP bursts back onto the scene as good as ever, and his stock price jumps up to a new high of $95 by the end of the 2012 season.

I imagine that's how it would work. You're basically using knowledge you'd normally apply to some aspects of FF to make financial decisions. You think that nobody WR on the Giants whose stock is $5 a share has potential? You invest on the ground floor, and when said Victor Cruz goes off and signs a huge contract down the road you make off like a bandit. It's a pretty interesting concept, and I'll be following it closely.

That's a great explanation, thanks. One thing still nags at me though... with companies, you expect them to continue to operate indefinitely. With players, there's a time limit - they will retire after a few years. Unless you're talking about someone on a level of Michael Jordan who continues to get endorsements after his career ends, the people holding "stock" in players will be left with nothing... so they'd have to sell before the player retired. But retirement is usually telegraphed a year or two in advance - how long ago did we know, or at least suspect, that this is probably Tony Gonzales' last year? And once rumors of a retirement date start surfacing, people will look to sell the stock... but who's going to buy?

I get that it's risky, and it actually does seem like an intriguing idea. This part of it is a little concerning. I sure wouldn't want to be holding $1000 worth of Arian Foster on the day he says he'll be retiring.

 

[NJ]

Huh, I thought he was going to confess that he was a gay.

I think he already did that with the way he dresses after games.

 

[tdhartis]

I don't think Foster is the ideal candidate to actually invest in, seeing as how his best days are behind him and he has likely gotten the largest contract of career, but he's obviously just being used as the main marketing mechanism so they can attach their company to a big name. It wouldn't have garnered nearly as much attention in the media if it was a lesser known player.

Like someone said earlier, modern day finance has much more ridiculous ways of investing than this that would make this look simple and straightforward. Finance was my major and I don't even pretend to understand a good deal of the mechanisms they use nowadays. I personally think this is a rather ingenious idea, and if they can tap into the flourishing fantasy football fan market and begin to sign more players, then this could be the next big form of gambling. It's really just a combination of gambling, finance, and fantasy football when you look at it, and I think there's potential in that.

 

[The Duff Man]

I agree, I think this is a very smart idea from the company's standpoint.

I would rather invest in them than Foster.

 

[tdhartis]

It's really not as crazy as it sounds. When you're investing in stocks, particularly in adolescent companies, you're invested in their long-term potential in most cases. Just as an injury can wreck the career of an NFL running back and leave him worthless in this scenario, you have your Enrons of the world. Also, think about the fiasco with the BP oil spill a few years ago. A lot of people bailed on the stock because they thought the company would never regain the ground it had lost. Others decided to stay in or "buy-low" once others had bailed, and they were rewarded when it rebounded. I imagine the same type of mechanics apply here. Let's look at a hypothetical:

Imagine Adrian Peterson signed a contract with this company in training camp prior to his first season. Coming into the league, some people were very high on him, and others were skeptical because of injury history, running style, whatever. Let's say these circumstances set a "share" of AP at $30. Fast-forward four years, and his perceived value has been confirmed, he is widely considered the best RB in the league, and has signed multiple lucrative endorsement contracts. His share price has skyrocketed to $90 at this point, and those that got in at the ground floor have realized a good deal of profit. Then comes 2011. He's riding high until he is placed on injured reserve for tearing his ACL and MCL, and a great deal of investors decide to jump ship before his stock falls too low. Will he ever come back the same player? Will he lose his endorsements? As a result of these fears, his share price plummets to $60 a share. Those that have stuck with him since the beginning and those that buy in at this level believe he will rebound, even if it is a risky venture. The next year their faith is rewarded, as AP bursts back onto the scene as good as ever, and his stock price jumps up to a new high of $95 by the end of the 2012 season.

I imagine that's how it would work. You're basically using knowledge you'd normally apply to some aspects of FF to make financial decisions. You think that nobody WR on the Giants whose stock is $5 a share has potential? You invest on the ground floor, and when said Victor Cruz goes off and signs a huge contract down the road you make off like a bandit. It's a pretty interesting concept, and I'll be following it closely.

That's a great explanation, thanks. One thing still nags at me though... with companies, you expect them to continue to operate indefinitely. With players, there's a time limit - they will retire after a few years. Unless you're talking about someone on a level of Michael Jordan who continues to get endorsements after his career ends, the people holding "stock" in players will be left with nothing... so they'd have to sell before the player retired. But retirement is usually telegraphed a year or two in advance - how long ago did we know, or at least suspect, that this is probably Tony Gonzales' last year? And once rumors of a retirement date start surfacing, people will look to sell the stock... but who's going to buy?

I get that it's risky, and it actually does seem like an intriguing idea. This part of it is a little concerning. I sure wouldn't want to be holding $1000 worth of Arian Foster on the day he says he'll be retiring.

That's a very good question. There would be a fire-sale when a player is obviously going to retire, and I'm not sure how they would deal with that. I would imagine that a players value and share price would slowly decline up to the point of retirement, and those getting out at the very end would be wise to not hold the entirety of their stock up to that point, but rather sell substantial chunks of it at different points in time to mitigate their risk. Knowing that you would likely take some hits when a player is near retirement if you hadn't cashed out at that point, you would try to factor that in during your original purchase. It would definitely be a scenario that would be hard to predict since stock markets don't have that element to them. Again, great question.

 

[Buckna]

If he's contributing a tangible 20% of his earnings to the "company" there will be a floor that the stock would never go below because you could just cash out and terminate the "company."

If you get some rookie or very young player to agree to this there could be some wild speculation though. The stock would rise and fall on the fortunes and health of the player as people speculate what his next contract signing would be worth. Look at say a Russell Wilson who's initial rookie contract was small but his next contract will likely be huge.

Just don't see how this would work though because you would need a lot of transparency around player contracts, merchandise cuts and endorsements. Otherwise it would be just a novelty thing like paying to name an endangered elephant or a star or something.

 

[GroveDiesel]

It will be interesting to see if the contract applies after football retirement. Foster is reportedly a very smart guy. So he may very well have significant income even after football. That would provide stockholder value even after retirement. Of course, Foster could also be smart enough to structure his earnings in a way where he doesn't have to share any of it.

 

[MoveToSkypager]

I'm glad Wall Street learned its lesson on not supporting companies that exist based on zero products, zero services, and pure speculation. This company is nothing but a video game. I hope no pensions invest in this garbage.

Pensions? Ha! Nevermind. They don't exist anymore.

 

[GroveDiesel]

I'm glad Wall Street learned its lesson on not supporting companies that exist based on zero products, zero services, and pure speculation. This company is nothing but a video game. I hope no pensions invest in this garbage.

Pensions? Ha! Nevermind. They don't exist anymore.

Arian Foster's future earnings seem like a very real thing to me.

I'm not saying that this is a good investment, but a share of an athlete's earnings is a very real asset.

This isn't like that pyramid scheme where a company issued "stock" in athletes and the only return you could get was in selling it to someone else for more money. That was a total scam. There is an actual asset that you're buying into in this case.

 

[tdhartis]

I'm glad Wall Street learned its lesson on not supporting companies that exist based on zero products, zero services, and pure speculation. This company is nothing but a video game. I hope no pensions invest in this garbage.

Pensions? Ha! Nevermind. They don't exist anymore.

You should go to Vegas and preach to the masses. I'd say this is no more questionable than the derivatives trading that led to the '08 collapse, and at least by being tied to professional football it doesn't given the impression that it should be what you're basing your retirement on, at least to a reasonable person.

Also, the point is mute since the company won't be listed on the NYSE or NASDAQ.

 

[Long Ball Larry]

It will be interesting to see if the contract applies after football retirement. Foster is reportedly a very smart guy. So he may very well have significant income even after football. That would provide stockholder value even after retirement. Of course, Foster could also be smart enough to structure his earnings in a way where he doesn't have to share any of it.

I assumed that it would, thus the above speculations about selling before he retires would be moot. There are so many media outlets today, I'm sure he will do well after football. That makes the investment much more intriguing,

 

[Gvindy]

Reminds me of that guy that sold his forehead space on eBay for advertisers

 

[Hang 10]

Reminds me of that guy that sold his forehead space on eBay for advertisers

I'm surprised Manning hasn't thought of this yet.

With Peyton's marketability and gargantuan 5-head he could make a mint. :money:

 

[Gvindy]

Yeah his 5head is the Times Square of foreheads high profile and big

 

[Ministry of Pain]

Huh, I thought he was going to confess that he was a gay.

He already came out of the closet and announced he was a Vegan

 

[Rove!]

in a few years, will this company have any noteworthy revenue?

 

[porkchopxpress]

As a financial advisor and fantasy player of 20 years this is crazy. And awesome. At the same time. Crawsome!!!!!! (trademarking that btw - you guys keep off)

 

[doyler]

As a financial advisor and fantasy player of 20 years this is crazy. And awesome. At the same time. Crawsome!!!!!! (trademarking that btw - you guys keep off)

That's ok, I prefer Jawesome anyway.

That being said, is this a lifetime 20% for him (including when he's an "analyst"/commentator)? If so, it's not the best hedge for him, but it's still nice.

 

[thriftyrocker]

This makes Bitcoins look like a solid investment.

Actually bitcoin has been steadily rising. Not bad considering corporate media scared off many people with its propaganda.

I was shocked there wasn't a panic after the Silk Road closing.

 

[Long Ball Larry]

How has this concept not been applied to a fantasy game already?

There should be leagues that are doing nothing more than buying and selling player stock.

There are many.

 

[MoveToSkypager]

I'm glad Wall Street learned its lesson on not supporting companies that exist based on zero products, zero services, and pure speculation. This company is nothing but a video game. I hope no pensions invest in this garbage.

Pensions? Ha! Nevermind. They don't exist anymore.

Arian Foster's future earnings seem like a very real thing to me.

I'm not saying that this is a good investment, but a share of an athlete's earnings is a very real asset.

This isn't like that pyramid scheme where a company issued "stock" in athletes and the only return you could get was in selling it to someone else for more money. That was a total scam. There is an actual asset that you're buying into in this case.

Sorry, I was late in admitting I don't know what I am talking about.

 

[doyler]

This makes Bitcoins look like a solid investment.

Actually bitcoin has been steadily rising. Not bad considering corporate media scared off many people with its propaganda.

I was shocked there wasn't a panic after the Silk Road closing.

There was, but then all of the news about it actually helped it rise even more than it had (http://www.newstatesman.com/sites/default/files/images/btcgox.jpg)

As far as Foster is concerned, he'll now get like 40% of his contract right now and then 80% of his guaranteed money no matter what happens. If he doesn't get hurt or cut during this contract, it should be like...$5mil extra? (Quick mental math, might be off) That extra will also be offset by the 20% decrease in any off-field money he gets, but I have no idea what that is at this time.

 

[Long Ball Larry]

It's really not as crazy as it sounds. When you're investing in stocks, particularly in adolescent companies, you're invested in their long-term potential in most cases. Just as an injury can wreck the career of an NFL running back and leave him worthless in this scenario, you have your Enrons of the world. Also, think about the fiasco with the BP oil spill a few years ago. A lot of people bailed on the stock because they thought the company would never regain the ground it had lost. Others decided to stay in or "buy-low" once others had bailed, and they were rewarded when it rebounded. I imagine the same type of mechanics apply here. Let's look at a hypothetical:

Imagine Adrian Peterson signed a contract with this company in training camp prior to his first season. Coming into the league, some people were very high on him, and others were skeptical because of injury history, running style, whatever. Let's say these circumstances set a "share" of AP at $30. Fast-forward four years, and his perceived value has been confirmed, he is widely considered the best RB in the league, and has signed multiple lucrative endorsement contracts. His share price has skyrocketed to $90 at this point, and those that got in at the ground floor have realized a good deal of profit. Then comes 2011. He's riding high until he is placed on injured reserve for tearing his ACL and MCL, and a great deal of investors decide to jump ship before his stock falls too low. Will he ever come back the same player? Will he lose his endorsements? As a result of these fears, his share price plummets to $60 a share. Those that have stuck with him since the beginning and those that buy in at this level believe he will rebound, even if it is a risky venture. The next year their faith is rewarded, as AP bursts back onto the scene as good as ever, and his stock price jumps up to a new high of $95 by the end of the 2012 season.

I imagine that's how it would work. You're basically using knowledge you'd normally apply to some aspects of FF to make financial decisions. You think that nobody WR on the Giants whose stock is $5 a share has potential? You invest on the ground floor, and when said Victor Cruz goes off and signs a huge contract down the road you make off like a bandit. It's a pretty interesting concept, and I'll be following it closely.

That's a great explanation, thanks. One thing still nags at me though... with companies, you expect them to continue to operate indefinitely. With players, there's a time limit - they will retire after a few years. Unless you're talking about someone on a level of Michael Jordan who continues to get endorsements after his career ends, the people holding "stock" in players will be left with nothing... so they'd have to sell before the player retired. But retirement is usually telegraphed a year or two in advance - how long ago did we know, or at least suspect, that this is probably Tony Gonzales' last year? And once rumors of a retirement date start surfacing, people will look to sell the stock... but who's going to buy?

I get that it's risky, and it actually does seem like an intriguing idea. This part of it is a little concerning. I sure wouldn't want to be holding $1000 worth of Arian Foster on the day he says he'll be retiring.

That's a very good question. There would be a fire-sale when a player is obviously going to retire, and I'm not sure how they would deal with that. I would imagine that a players value and share price would slowly decline up to the point of retirement, and those getting out at the very end would be wise to not hold the entirety of their stock up to that point, but rather sell substantial chunks of it at different points in time to mitigate their risk. Knowing that you would likely take some hits when a player is near retirement if you hadn't cashed out at that point, you would try to factor that in during your original purchase. It would definitely be a scenario that would be hard to predict since stock markets don't have that element to them. Again, great question.

You know that all companies are going to remain active indefinitely?

It really isn't all that different in principle than many other investments.

 

[Fever in the Funkhouse]

How has this concept not been applied to a fantasy game already?

There should be leagues that are doing nothing more than buying and selling player stock.

 

[Fever in the Funkhouse]

Yahoo sports did something like this, wow, maybe it was ten years ago. It was for college hoops. You'd be in a league with ten to twelve other owners and you'd get 100 "dollars" to start with. Thy would have dollar values for each team (ie duke would be $22), and you would build your team of teams (with minimum and maximum size requirements). You would take flyers on good no name teams from the patriot league and whatnot for $2. After each week, yahoo would recalibrate the value of each team, but you would have the team at the value you bought it. You could buy and sell teams, adjusting your roster as you like, trying to increase your overall value along the way.

 

[Vector]

So a guy gives a bunch of money to a company that exists solely to take that guy's money and hold it. They don't produce anything, don't provide any services. The company goes public, and people are expected to buy stock in the company. In return, the stockholders get... what, exactly? I assume Foster will keep putting money into the company, but if he's getting "most" of the money from the stock purchases back - I'm assuming at quite a profit - then where's the gain for the stockholders?

Can someone explain this? Because I'm sure I'm missing something.

Think of it as the 21st century equivalent to baseball card collecting. You buy shares as a collectible and as that player becomes more popular the value of his stock increases. It mentions that "No investor will be allowed to purchase or hold more than 1 percent of any series of common stock issued by the company, the filing shows."

They also have their own trading platform so they have, as of yet, undefined regulations.

This sounds like each player, when entering into an agreement with the company gets his own series of stock. This is what makes it similar to trading cards in the past.

Obviously I do not know all the specifics, but at first blush this is what I took from it.