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Offering Stock on Athletes: A Critical Perspective

Texans RB Arian Foster will be the test case for publicly-traded athletes, funded by a San Francisco-based brokerage firm, Fantex.

It’s not a fantasy: Texans RB Arian Foster will be the test case for publicly-traded athletes, funded by a San Francisco-based brokerage firm, Fantex.

It seems that the long-running phenomenon of Fantasy Sports has given way to something much more real, that could potentially affect the financial and business worlds in a significant way.

According to this report on October 18 by ESPN Sports Business Reporter Darren Rovell, San Francisco-based brokerage firm Fantex is offering the public a chance to literally own a stake in a professional athlete. More specifically, individuals will be able to invest not only in the athlete’s on-field performance, but also the performance of the athete’s brand.  Said CEO of Fantex, Buck French:

Fantex is bringing sports and business together in a way never previously thought possible … By building a marketplace that allows customers to buy shares in a tracking stock linked to the value and performance of an athlete’s brand, Fantex is enabling a new level of brand advocacy through ownership.

It will begin this financial experiment with Pro Bowl Houston Texans RB Arian Foster. His marketability, along with the $20.7-million contract he signed in 2012, went into the decision to start with Foster. Both sides agreed to a deal that paid Foster $10 million for a 20 percent stake in all of Foster’s future earnings, in player salary and in endorsement deals, which currently include Under Armour and Fuse Science. Currently, individual investors can buy Arian Foster stock for $10 per share.

There are many interesting angles about this story, as it may speak to the nature of sports business, and a shift in how individual athletes manage their current, and potential, income. After all, the combination of earning millions of dollars at a young age and making bad financial decisions puts many professional athletes in a precarious situation – one that could easily leave them broke or in financial crisis as early as their 30s.

While it may be a ridiculous thought, ESPN did a documentary on the trend of professional athletes filing for bankruptcy so soon after retirement. A number of pro athletes made the mistake of not investing and saving their money, thinking that there was no way they could deplete the millions of dollars they have earned in their playing careers, only to be slapped in the face by reality (and lack of financial sense).

Which brings me back to this idea – on the one hand, going into this deal brings to light the individual athlete’s recognition that seeing money up-front, rather than gambling on the fact that it will be there in the future in the form of potential income, may be a more sound investment. With that $10 million, at least Foster will have it to spend or save (most likely the latter, if he is good with his money) at his leisure.

Nothing is promised for a professional athlete – you need only look at this past week’s devastating injuries to Colts WR Reggie Wayne, Packers TE Jermichael Finley, Bears LB Lance Briggs, and Rams QB Sam Bradford to understand that. Even Foster, himself, suffered a hamstring injury that could have easily been something worse. After all, the only way this deal turns out terrible for Foster is if he doesn’t turn the $10 million up front into an investment in and of itself, and he ends up earning considerably more than the $50 million it would take for Fantex to even out its own investment in Foster.

On the other hand, this could be a dangerous option for professional athletes facing precarious positions illustrated in documentaries like “Broke” – without sufficient funds, athletes could sell themselves off, and sell themselves out, for a quick cash payment. If left unchecked, financial deals like the one Foster made could turn out to be a cautionary tale for future professional athletes – whether it is taking the idea of “owning an athlete” to a horrifying level, or providing another form of possible corruption within both the financial and sports worlds. With that in mind, the Pandora’s Box that could be opened with the advent of “Athletes for Sale” may not be so attractive.

In any case, it would be an interesting proposition if, say, I could invest in Colin Kaepernick’s financial future – with his current marketability, it could be a can’t-miss opportunity. Think of the possibilities of investing in athletes like Tom Brady, Buster Posey, Peyton Manning, LeBron James, or Derrick Rose.

Only some will be fleshed out with a personality like Arian Foster, and, injuries aside, he will provide a better picture of the feasibility, and potential, of “athletes for sale” in the stock market.

And, for the public-at-large, fantasy sports may now have a whole new context.

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