Wanna Buy A Share Of Houston RB Arian Foster's Future NFL Earnings

[ICanSleepWhenI'mDead]

Turns out you can:

 

http://www.businessweek.com/articles/2013-10-17/houston-texans-running-back-arian-foster-is-going-public?campaign_id=yhoo

 

On Thursday the New York Times reported that Foster would be the first athlete to go public through a new company called Fantex Holdings. Fantex has established a market in which people can purchase and trade shares of athletes’ future earnings, in a sort of stock market for jocks. The company has persuaded regulators that this counts as investing, not gambling.

[NoSaint]

well, he thought fantasy owner were a pain... just wait....

[eSJayDee]

I like the idea of it. It's just speculating at its finest. It also is presumably a way of athletes to defer risk & capitalist on future earnings now. Didn't read the specifics, but my primary concern is how the duration of his career is handled. Do your shares only cover X # of yrs? You obviously have no say in when/if he quits/retires.

[Captain Hindsight]

I dont really understand how something like this works. Anyone that knows want to break it down for us?

[Realist]

Here's their link if you want to learn more.

 

https://fantex.com/

[TPS]

No, not that kind; the financial kind. Betting on his future earnings.

http://www.bloomberg.com/news/2013-11-01/football-player-derivatives-are-the-best-derivatives.html

R

[KD in CA]

Actually he's betting against his future earnings, if you look at a hedge from that standpoint. I read about this a couple weeks ago -- pretty interesting concept. Players get to lock in some cash and fans get to 'buy' their favorite players.

 

I wonder how much Buffalo Barbarian would have lost buying shares of Tim Tebow and other over-hyped college QBs.

[jjamie12]

Actually he's betting against his future earnings, if you look at a hedge from that standpoint. I read about this a couple weeks ago -- pretty interesting concept. Players get to lock in some cash and fans get to 'buy' their favorite players.

 

I wonder how much Buffalo Barbarian would have lost buying shares of Tim Tebow and other over-hyped college QBs.

The concept is really cool. This particular investment is terrible. A buddy of mine tried to do something very similar about 5 years ago in with minor league baseball players, but MLB wouldn't go for it at all. It's too bad, because I would imagine that this would work way better with leagues that have significant 'minor leagues' associated with them. It would be way more fun to buy shares in some minor league baseball player and watch him move through the minors and be able to actively trade on what his future earnings might be based on how well he's doing.

[TPS]

The concept is really cool. This particular investment is terrible. A buddy of mine tried to do something very similar about 5 years ago in with minor league baseball players, but MLB wouldn't go for it at all. It's too bad, because I would imagine that this would work way better with leagues that have significant 'minor leagues' associated with them. It would be way more fun to buy shares in some minor league baseball player and watch him move through the minors and be able to actively trade on what his future earnings might be based on how well he's doing.

It's definitely an interesting way of the player insuring himself against injury. But that's why I'd stay away, despite the actuarial numbers, it's the (un)luck of the draw if you take the option and he does get injured.

[uncle flap]

Smells fishy to me:

 

http://regressing.deadspin.com/arian-fosters-personal-stock-offering-sounds-like-bull-1447360031

 

(There's some strong language, so move along if you're easily offended)

[KD in CA]

Smells fishy to me:

 

http://regressing.de...bull-1447360031

 

(There's some strong language, so move along if you're easily offended)

 

Thanks for that link. The article went off on a bit of a tagent with the ownership of players, but it also asked some important questions and pointed out some things that I agree with. Specifically, the offering's tactic of false scarsity by 'limiting' ownership to 1% is like the old infomercial trick; no high net worth individual is going to make a large investment on a football player's future earnings anyway. They know the only people who are buying this are NFL fans, who, as they correctly point out, will buy any dumb sh-- connected to the NFL. Secondly and more importantly, they point out the unclear nature of how one might realize a return on this investment, and that's what led me to click on the link at the bottom and review the prospectus.

 

What the S-1 says is you are buying shares in the Foster subset of Fantex, but not in the future cash flow that will come into the Foster fund. That money will be used to pay ongoing operational expenses of Fantex. The only cash you get as a shareholder is if Fantex decides to declare a dividend, which it has no obligation to do. There's no end game where you cash in if Foster outperforms the deal, other than selling your share to someone else. So yes, that's just like buying a real stock on the NYSE, but it seems to me the critical difference is when you buy a share of IBM there is a presumption of IBM continuing to earn income in perpetuity. Obviously that isn't the case with a football player. And it's that presumption of perpetuity that creates the market that makes the investment liquid. Who is going to buy a share of Foster 3 years from now, regardless of what he does on the field?

 

I'm not a Wall Street or investment pro like some people on the board, so maybe there's a better explanation out there, but it seems to me you really are just buying a share of something that has little chance of returning your money (and especially in this example given the valuation on the Foster offering -- I assume they are testing the waters to see how high they can push valuations for other future offerings). I'd expect they'll also seek a balance between paying just enough dividends to keep investors from getting turned off to the whole concept but no more than that.