Imagine having acquired a financial interest in LeBron James, Peyton Manning or Roger Federer early in their careers.Fantex Holdings will announce the opening of a marketplace for investors to buy and sell interests in professional athletes.
Buying shares in the deal will give investors an interest in a stock linked to Mr. Foster’s future economic success, which includes the value of his playing contracts, endorsements and appearance fees.
Wow. This is ridiculous.
Since professional athletes are known to be among the most financially literate and responsible, it only makes sense to allow them an opportunity to somehow monetize all of their future earnings immediately and eliminate the annuity-like income stream associated with their finite and highly uncertain earning power.
Its a veritable lumpsum payout option on the genetic PowerBall that is being a professional athlete.
I'm a capitalist in every sense of the world and am all for free markets, but this is so fucked up. The player's union needs to do something here. You've already got the Alan Iversons and Mike Tysons of the world with the current state of professional sports... with this you'll literally have hall of famers working at Denny's or truck stop bathrooms trying to make enough money to pay for their Parkinson's meds.
http://dealbook.nytimes.com/2013/10/17/want-a-piece-of-a-star-athlete-n…
This is why I don't take the NFL (or any other league) seriously when they act like they care about the athletes. They wouldn't allow this if they did.
Wonder if there's a way to short it. Foster's on the decline.
Allen* Iverson. gotta practice that spelling..practice
I hope you swallow a highly malignant tumor and get mouth, throat, esophageal, stomach, intestinal and colon cancer.
Practice that.
I like your style
He's just talking about practice. not a game.... practice.
Just short every athelete in their prime. .. and profit when they retire?
It seems like this is similar to what happens in South America where you have athletes basically being owned by companies and various agencies. It causes so many problems for the player - for example, if they want to leave a team they can't because XXXX firm owns 51% of your decision making abilities now. It would be a shame if they let this come in to play.
I've been shorting Alex Rodriguez for 4 months. Invested $1,000. Made a million!
This is nothing new. I actually put up some money when my local soccer team in Europe needed financial backing from their fans. 30 of us ended up pooling up enough cash to buy a decent player and sold him a few years later for a profit. The team only had to pay his wages, but were free to choose whom to buy and when to sell him.
I reinvested everything back into the pool, but the next two players went bust. A fun experience (suddenly more fun going to games), but this just sounds dumb. What incentives does a player have to increase his income when 20% of it belongs to someone else... He either has to kick ass and everybody elses or settle for what he has now. He already profitted from the deal.
sounds like slavery :(
http://www.southparkstudios.com/clips/387407/stu-dent-ath-o-leets
Haha, love the white dudes buying stock in the ability of a black dude to perform in a field. Glorious, glorious stuff.
Haha, wow.
LOL
GS Elevator Gossip @GSElevator 15 Oct
1: What's more offensive, the name 'Redskins', or a sport where a few rich white landowners have a draft to buy players to work the field?
speaking the truth, brotha
Can't wait for the first insider trading scandal when one player shorts the shit out of another and hits them low in the knee after the play.
So in other news if anyone wants to invest in me and my future earnings, I'll also be going public. Make the checks made out to MR. Theodore Bonkers the third.
this isnt bad for the player at all...he is agreeing to sell equity in his career. Its not against his will and in fact it allows him to reduce his own risk and raise immediate capital. my worry would actually be the player eventually selling so much of himself that he is no longer incentivized to work hard or seek endorsements.
So let me get this straight....a black man put himself up for auction?
I'm not even mad. I'm confused.
When my sister jokingly suggested that I help her with her medical school bills, I thought it might be interesting to do something similar to the above. I offered to pay for a portion of her medical school if she paid me a certain portion of her post medical school income for the next couple of decades.
She ungraciously declined and criticized me for always be so concerned with money and profits.
I think some company was also trying to start this kind of stuff. Not sure what happened to it.
https://www.upstart.com/ Something like this? 'Pay off my student loans and I'll give you X% of my income for Y years after graduation if I'm earning over Z/year.'
Which I don't really understand as in the UK you do that anyway and just borrow direct from Student Finance, must be different in the US.
Back to the topic of athletes though, is this similar to 3rd party ownership that we see a lot of in football/soccer in South America, namely when South American stars make the jump across the pond to Europe, more info:
http://www.postmatch.org/5/explaining-the-falcao-move-to-monaco/
Basically an investment group own the bloke, have a strong say in where he can and cannot move, and take the transfer fee for himself. (He sold for 60M euros, they took about 60% of that the rest goes to the former club who own the other 40% of the bloke.)
I think WSO should create a system where you can invest your WSO credits in other users on the site and in return you receive 20% of the user's SB/MS (participation in both upside and downside) over a certain period of time.
Not sure why you're hating so hard, but being a professional athlete doesn't guarantee you're an idiot or that you won a genetic lottery (most of success in most sports is hard work, though there can be physical prerequisites).
Quite frankly, I'd be more worried about the information problems - both moral hazard and adverse selection seem to exist here:
1) Why work hard if you've already been paid and most of the benefits now accrue to investors?
2) You're more incentive to 'IPO' if you have an inkling that your long run potential is more limited than might be expected (e.g. hidden physical, mental, emotional problems)
The freak athleticism that every profession athlete has (i.e., genetic lottery) is the prerequisite.
Thank you. I was going to rip this guy apart but you saved me. Yes, a lot of success does come from hard work but that's not to be better than the average person, they could do that without lifting a finger, it is to be better than the other genetic prize winners that they compete against for jobs.
I have a few friends who work for Fantex, and even though I am an ex professional athlete, I just don't get it. It would have been absurd for someone to try and invest in my future earnings when I was playing. A company has an obligation to its shareholders, these athletes will not... Perhaps I am a skeptic, but the "37 pages of risk factors" make it look a lot more like gambling than investing.
This only makes sense if Foster is going to retire. If he finishes his $40 million something contract and then signs another 3 year contract then he's going to end up loosing money.
This is so idiotic. As soon as any well known player starts thinking about retirement, he should go to Fantex, sign up for a $10mm IPO, and retire from football the next year. No audits and no board of directors to tell him what to do.
They are banking on all the football fans that want to buy a piece of their favorite NFL fans. Its the same thing as buying Green Bay Packer "stock" (no dividends, no earnings, no SEC regulation, and cant be traded).
Its not like Arian Foster needs the $10mm cash inflow, he is making a bet that he's going to make less than $50mm in the remainder of his life. Look for him to retire in 2016
I'm pleased to announce that I own Andrew Wiggins.
Imagine the regulations that will develop. Where will the line be drawn for future investment vehicles?
I think this is an abolsute joke of an asset class if you even for a second try to take it seriously and look at it as an investor, I feel like the risk here is impossible to wrap your head around.
First off you've got counterparty risk. You're at the mercy of the player actually paying the investment vehicle 20% of his income. If you structure around that by stipulating in any contracts he enters into that 20% proceeds are paid to the entity and 80% to the player... again you're at the mercy of the player's integrity. You don't know that he's not taking under the table kick backs (i.e., contract understates compensation by 40% and the player receives 35% under the table) or just side deals all together for cash or in-kind compensation. I guess you can get comfortable with the latter by assuming that 99% of his income his coming through his actual sports contract and major endorsements with companies like Nike and Ford which aren't about to risk their reputation for shady dealing like this.
Second, Plaxico. Michael Vick. Jayson Williams. Aaron Hernandez. Mike Tyson. How do you get comfortable with all the crazy shit these guys get into to completely fuck up their lives/incomes? We're also assuming that child support never becomes an issue, which it frequently does in this world.
Lastly, and perhaps the least predictable is the first risk anyone thinks about with athletes: injury and performance slumps.
I just think that as an asset class professional athletes' CFs are waaaay too risky. If there was a company with this many axes hanging over its head... I'd be shocked if it attracted any real investors.
I personally would require a triple digit return... which means it would have to be an extremely low earning athlete to have that kind of upside... which again is problematic because the only athletes that garner the amount of headline grabbing attention to warrant this type of investment are already earning tens of millions of dollars... there's not much upside from there. Five to ten years from now, they wont be earning 5-10x what they earned at IPO. For a LeBron James his income isn't going to grow much from year 2-3 of his career to year 10. A lesser known player would just be way to speculative to invest in and the PV of their Future CFs standing at today would be too small to IPO.
The only hope here is that retail investors emotionally invest in these athletes... which is rife with risk in and of itself. Because of all the risks I listed above, this isn't a very good investment. If retail investors are the predominant investors in this asset class (and will likely be losing their shirts)... its only a matter of time until regulators shut it down.
I'd rather short Fantex Holdings.
Would've made a killing on Freese in 2011...
I haven't read through the comments, but under no circumstance are Arian Foster's future earnings worth $50 million. How do I short?
Hahaha, welcome to an illiquid market. Ain't no clean hedges here. Hope you learn your lesson now and not when there's P&L on the line.
Yeah... You do realize that there's a name for the concept of owning equity in other human beings, right?
It's called fucking slavery. And anyways, as far as taking "equity like" positions - none of this is new. People have been writing insurance on athletes since before I was born. What you're describing is pretty vanilla.
how is it slavery if the athlete is voluntarily selling you a portion of his future earnings? Number 1 he has decided to do it, and number two you dont in any way "own him", you just own the rights to a portion of his future earnings. Its actually a pretty standard arrangement for athletes in individual sports like boxing to have sponsorship agreements where investors give them money up front to pay for training/living in return for a piece of future earnings.
This program is about selling profit participations and future cash flows, sort of like a REIT. Slaves do not have cash flows as they earn no salary.
I guess folks got bored of betting on ponies running in a circle.
Speaking of servitude, any of you folks see 12 Years A Slave yet? Really, really good film.
My guess is that Fantex won't raise the $10 million they need to start this program. Why? Because there is a major risk--a high probability--that the NFL will simply ban the practice. Then the initial investors will be out 100% of their investment. So I highly doubt this ever takes off. It'll be banned immediately once 60 minutes does a 10-minute segment on it.
i dont get why it would be banned...im not even sure the NFL is even allowed to ban someone from doing this anymore then you can ban an athlete from cutting an endorsement deal for himself. I dont think people on this thread realize this is GOOD for the athlete, it has nothing to do with slavery. If anything someone like arian foster will probably be able to sell himself at a ridiculous price ebcause jock sniffer rich guys want to have some connection to him.
Of course they can ban it. Are you serious? They can simply say that salary and bonuses can only be paid to the athlete himself in the contract, and not a 3rd party, which would mean the investor has to trust the athlete to make good on his contract. The NFL can prevent the exchange from using the NFL name at all. They can require insertion into the contract--a contract that is probably 100+ pages--that a player can't engage in such activities. It's called a private contract that would be collectively negotiated. I'm embarrassed that I have to explain this to a certified user.
If you give an athlete a Wall Street brain it might be good for him. However, athletes are already bad enough with their money. I'm sure many athletes would end up getting ruined by such practices. Then you add on to the fact that annual payment of non-guaranteed contracts is actually good for the NFL since it incentivizes athlete, the NFL would have much incentive for adding this ban to all contracts. Where's the incentive for a RB to get his ass kicked for, say, 2 seasons when he can't collect any additional money? It would actually be illogical and irrational for an NFL player to play when he's already been paid guaranteed money and he can't collect any additional money for playing. When you add to the fact that it's economically irrational then you won't find many rational investors who are interested in the investment.
I saw this. Arian Foster will be the first one to do this. However, one important piece of information here. Even though it says you are entitled to 20% of his earnings, you are not actually receiving that cash, its just reflected in the share price. Just like a common share, but difference is that I am sure companies care more about paying their investors with dividends, unlike Arian Foster, who is more willing to pocket the cash.
Yeah I was curious about that myself. Reading some of the SEC filing, it seems like the board of directors has a huge amount of discretion in when to pay dividends and even reallocate some dividends to other stocks if they get more players. My major concern is Fantex receives 20% of the "brand" income even if it does not have to do with the NFL. That leaves a huge amount of grey area that can be considered income from the "brand", where does it stop? Would a steakhouse in Foster's name count? Would his nutrition company count since he endorses it? Seems little sketch to me.
You've got to be kidding me. Has anyone actually read the S-1?
http://www.sec.gov/Archives/edgar/data/1573683/000104746913009713/a2216…
You know what the most valuable thing about this entire offering is? The list of people who actually purchase this offering. The owner of that list has a gold mine full of fools to sell useless shit to.
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