Imagine having acquired a financial interest in LeBron James, Peyton Manning, or Roger Federer early in their careers.
A new company wants to make this fantasy a reality for the next generation of superstars.
On Thursday, Fantex Holdings announced the opening of a marketplace for investors to buy and sell interests in professional athletes. The start-up, backed by prominent executives from Silicon Valley, Wall Street, and the sports world, plans to create stocks tied to the value and performance of an athlete’s brand.
It will have its debut with an initial public offering for a minority stake in Arian Foster, the Pro Bowl running back of the Houston Texans. Buying shares in the deal will give investors an interest in a stock linked to Foster’s future economic success, which includes the value of his playing contracts, endorsements, and appearance fees.
Buck French, the company’s cofounder and chief executive, said Fantex hoped to sign additional players in football and other sports, as well as expand into other talent areas like pop singers and Hollywood actors.
The brokerage Cantor Fitzgerald runs the Hollywood Stock Exchange, a marketplace for bets on the fortunes of movies and their stars. But a real Hollywood exchange has never gotten off the ground, and bettors only use play money.
Nothing about Fantex is make believe. Investors can register with the company, finance their accounts with cash, and place orders for shares in the Foster IPO. The offering plans to sell about $10.5 million worth of stock, representing a 20 percent interest in Foster’s future brand income. Foster will pocket $10 million; the balance will cover the costs of the deal.
Unlike many esoteric Wall Street investments that are available only to high-net-worth individuals, the Fantex offering is available to US residents 18 and older, with a minimum investment of $10. There are some restrictions. For instance, investors with annual incomes of $50,000 to $100,000 may invest only up to $7,500 in the offering.
Fantex will market the Foster IPO in the coming weeks, offering 1.06 million shares at $10 a share. No one can own more than 1 percent of the offering, ensuring that it is available to a wide number of investors. If demand is less than the number of shares being offered, Fantex may cancel the deal.
But if it proves successful, Foster’s tracking stock will then trade exclusively on an exchange operated by Fantex. Presumably, the tracking stock will increase in value if Foster raises his earnings potential with standout on-the-field performance or increased corporate sponsorships. Then, the investor can try to sell his shares at a higher price. Fantex will make a 1 percent commission from both the buyer and seller on the trades.
French demurred when asked to predict how the stock might behave in a secondary market.
“We don’t know how it will trade,” French said.