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Playing the Sports Market

Fans of fantasy sports who want to turn their fandom into real life may now have the chance. Sort of. Fantex, an investment company and trading platform, now offers the opportunity to invest in the future earnings of athletes.1 Here’s how it works: an athlete registers with Fantex for an Initial Public Offering (I.P.O.), where Fantex raises money from retail investors in exchange for “stock” in the athletes. The stock is tied to all of the athlete’s future earnings – including salary and endorsements.2 The athlete will receive a lump sum from the money raised in exchange for a percentage of those future earnings.3 The shares of the athlete trade on Fantex’s exchange and are purported to “track,” that is – rise and fall – with the financial horizon of the athlete’s future.4

In its first I.P.O, for San Francisco 49ers Tight End Vernon Davis, Fantex sold 421,000 shares for $10 a piece, raising $4.2 million, $4 million to be paid directly to Davis in exchange for 10% of Davis’ future earnings. (William Alden, I.P.O. Linked To Football Player Open For Trading, New York Times DealBook, Apr. 28, 2014,  The shares in Davis have risen to a high of $12.50, but have since tapered back toward the initial $10 price5 Other athletes who have relationships or impending deals with Fantex are Buffalo Bills Quarterback E.J. Manuel, Alshon Jefferey of the Chicago Bears, and Arian Foster of the Houston Texans.6

While this intersection of sports and business seems exciting, it’s not without its risks. For instance, Arian Foster was the first athlete tapped by Fantex for an I.P.O., but the process was put on hold when Foster was injured and required back surgery.7 Such risk of injury will always be a risk factor that could affect the value of a player’s future earnings. Additionally, the public may not embraced this idea as much as Fantex would like, facing low demand for I.P.O shares. Fantex bought over 50% of the I.P.O. shares of E.J. Manuel in response to low demand.8 There are also corporate law questions that surface with these securities, such the need for athletes to maximize shareholder value, shareholder governance rights, and monitoring issues for what constitutes future “income”.9

Fantex seems like a novel idea that could help people become even more invested in their favorite athletes than they already are. Yet, the idea hasn’t exactly taken off. Players might not too keen to devote a fixed percentage of their future earnings for a lump sum up front. And investors face plenty of risks, as well.  Ultimately, the stock market for athletes doesn’t provide the excitement of an actual sports contest being played out on the field. For me, I’ll just stick to fantasy.

  1. Peter Lattman & Steve Eder, If You Like a Star Athlete, Now You Can Buy a Share, New York Times DealBook, July 21, 2014, 

  2. Lattman, supra

  3. Lattman, supra

  4. Lattman, supra

  5. William Alden, Fantex Completes Second Football Player I.P.O., Though Demand is Slack, New York Times DealBook, July 21, 2014, 

  6. William Alden, Fantex Signs Chicago Bears’ Alshon Jefferey for an I.P.O., New York Times DealBook, Sept. 18, 2014, 

  7. William Alden, Fantex Moves Forward With Football Player I.P.O., New York Times DealBook, Jan. 28, 2014, 

  8. William Alden, Fantex Completes Second Football Player I.P.O., Though Demand is Slack, New York Times DealBook, July 21, 2014, 

  9. Lattman, supra