When it comes to Silicon Valley, every day seems to bring something wacky. Today is no different, with Fantex Holdings raising the possibility that we’ll see Arian Foster stock reach the public.
That’s right. An IPO … of a professional athlete.
Fantex Holdings has built an online platform to allow investors to purchase equity interests in professional athletes. To bring the idea to fruition, it has filed an S-1 with the Securities and Exchange Commission to create a tracking stock for Arian Foster, the star running back of the NFL’s Houston Titans.
Fantex has entered a contract in which it gains 20% of Foster’s earnings after Feb. 28 in exchange for $10 million. The company then plans to turn around to sell Arian Foster stock. Shares won’t actually be traded on the NYSE or Nasdaq; Fantex will act as the broker for buy and sell orders.
Foster, 27, joined the Texans as an undrafted free agent back in 2009, and has enjoyed a standout career including three Pro Bowl appearances.
Foster’s earnings include the five-year, $43.5 million contract he signed last year that included $20.7 million in guaranteed money. Foster also has endorsement contracts with Under Armour (UA), Kroger Texas LP, Gamebreaker Sports, Health Warrior, Pro Player Merch and ProCamps that could result in up to $687,750.
How much of the rest of Foster’s NFL contract he will receive is in the air, as the Texans can terminate the contract at any time because of unsatisfactory performance or if he engages in immoral conduct.
Like many other NFL players, Foster has had his share of physical injuries, especially with his knees — typical among running backs. From time to time, he also experiences an irregular heartbeat.
And if Foster resigns from the NFL within two years, he may be required to pay back $10.5 million.
If we’re actually handicapping this Arian Foster IPO … well, the timing might be off. Foster’s performance. While Foster’s yards per carry are on par with his career average, the Texans have been mediocre this season, so his accomplishments are being lost among bigger headlines.
Also, in a way, the deal with Fantex seems defeatist — why give away 20% of your income for an upfront fee unless you think things might not go too well?
It’s difficult to tell whether his teammates or should be concerned … or think about IPOs themselves.
Arian Foster stock won’t get much interest from Wall Street, and instead should mostly be a gimmick buy among fans. While it’s a fun idea, serious investors should punt on this one.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.