The unusual investment opportunity kicked off Thursday with an IPO filing proposing to sell stock for a stake in the future income of the Houston Texans' Arian Foster, a top running back in the National Football League.
The initial public offering hinges on a deal requiring Fantex Holdings Inc. to pay Foster $10 million in return for a 20 percent share of his remaining contract with the Texans, his endorsement income and any other future money tied to his football career. Those earnings could include potential broadcasting jobs that Foster gets after his playing career is over. It doesn't include money Foster would make if he pursues a career unrelated to football.
Fantex plans to sell about 1 million shares at $10 apiece to pay Foster and cover other expenses. The tracking stock won't trade on a major stock exchange; instead, it will be bought and sold on a trading platform set up by Fantex, which was co-founded last year by Silicon Valley entrepreneur Buck French.
Foster, who is in his fifth season with the Texans, is just the first player in what Fantex hopes will become a diversified line-up of star athletes. Foster declined to comment citing Securities and Exchange Commission regulations.
The company is aiming to do IPOs featuring players in professional baseball, basketball, hockey and golf, as well.
"Our philosophy is to work with people who we believe have interesting brand attributes that we can work with and they can work with us," said French who got rich during the dot-com boom after selling a software company to Siebel Systems. "You don't have to be a superstar. I could see us working with big names and no names. The question is do they have attributes to build a brand for the long haul."
At least one person associated with Fantex knows something about a long sports career. John Elway, the former Denver Broncos quarterback who is now executive vice president of football operations for his former team, is a member of Fantex's parent company, Fantex Holdings.
This isn't the first time that a public figure has bet on his future moneymaking potential in the securities markets. British rocker David Bowie famously sold shares in his future earnings with the issue of "Bowie Bonds."
Just like any securities investment there are risks. The marketability of professional athletes can go through wild swings if they become embroiled in scandals, as superstars such as bicyclist Lance Armstrong and golfer Tiger Woods have proven. There's also no guarantee that athletes will have long playing careers.
Foster, 27, already has suffered injuries to his knees and hamstring that have sidelined him in previous seasons and limited his ability to play in other games. He also has been plagued by an irregular heartbeat since he was 12, according to the IPO filing.
So far, Foster has remained healthy enough to be one of the main cogs on the Texans, a team that was widely expected to be a Super Bowl contender. It's been a disappointment so far this season with a 2-4 record.
Fantex is betting it can help Foster line up a lot of lucrative endorsements, as well as help him make money after his career is over. The Texans signed Foster to a five-year contract that will pay him $23.5 million during the period covered by the Fantex IPO. He also could earn up to $2 million in bonuses, depending on his performance, according to the IPO filing. He's also lined up endorsement deals that could pay nearly $700,000.
If Foster collects the maximum amounts from his Texans contract and current endorsements, Fantex would receive about $5 million.