Fantasy sports have long provided a platform for fans to become more connected to their favorite professional athletes. Monday Morning Quarterbacks obsess over player statistics and weekly matchups all in an effort to win fantasy games against their friends. However, thanks to Fantex Brokerage Sevices, fans will soon be able to get even closer to their favorite athletes.
Arian Foster is set to become the first professional athlete to be publicly traded on a Fantex platform that valuates the its high-profile clients as a ‘brand.’ The bay area company is finalizing its Initial Public Offering (IPO) to raise $10 million for a 20% return on the running back’s future earnings. Fantex is offering 1.06 million shares at $10 a share to the bidding public.
Investors will be able to buy and sell shares of “Fantax Series Arian Foster Convertible Tracking Stock,” exclusively online through the Fantex platform. The company has also reached an agreement with San Francisco 49ers tight end Vernon Davis to receive 10% of his future earnings in exchange for $4 million up–front. If these ventures are successful, Fantex plans to secure athletes in other sports, as well as celebrity entertainers and musicians.
This move leaves many wondering: Why would Arian Foster sell an interest of his future earnings during the prime of his career? Essentially, Foster is securing an insurance policy on his football prowess. Currently in his fifth year in the league, he has already outlived the average 3.5-year shelf life of an NFL player. Foster is hedging his bets as he approaches his 30’s, and presumably, a decline in production.
In the case of Arian Foster, this offering gives all fans, rich and poor, an opportunity to own a piece of their favorite player. The idea seems more of a novelty than an economic opportunity. However, if other players express interest in similar insurance policies, corporations could step forward offering a lump sum in exchange for an interest of their earning potential. And unlike Fantex, they could proceed without selling shares to the general public.
Endorsement deals have served as the mutually beneficial vehicle connecting brands and players in the past. Return on investment is certainly tied closely to on-field performance. Under Armour, for example, is set to increase its revenue-generating abilities with success of its athletes such as Cam Newton and Foster. The results, however, are not as concrete. Under the parameters of the Fantex platform, athletes experience the security of cash up front, while investors enter a high-risk, high-reward scenario with the potential for massive dividends.
A successful Arian Foster stock market could leave traditional sponsorships and endorsement deals in the rear view mirror. Instead, companies could begin to seek investments in athletes, rather than sponsorship of them.
Popular targets would include athletes with high earning potential during the dawn of their careers. Imagine if Company X agreed to invest $3 million in Tom Brady after he was selected in the 6th round of the 2000 NFL Draft in exchange for, say 15% of his future earnings. 13 years and three Super Bowl Championships later, that company would be experiencing stratospheric profits.
However, would it be ethical for that company to capitalize on Mr. Brady’s hard work and good fortune? Should he be penalized for insuring his football career before it took off?
By offering shares of the Arian Foster brand, Fantex raises some unique moral and ethical questions. The success or failure of this Arian Foster stock will have a profound impact on the sponsorship industry. With its groundbreaking Arian Foster IPO, Fantex may have opened the floodgates for forthcoming changes in sponsorship deals.