Fantasy football fans might have a new obsession that allows them to invest money in trading an athlete's "brand," but with risks more real than in fantasy sports.
Fantex Holdings, a new company based in San Francisco, announced that it has registered with the Securities and Exchange Commission its first tracking stock linked to the "value and performance of the brand" of Houston Texas Pro Bowl running back Arian Foster.
The company's first initial public offering for Foster, 27, is priced at $10 per share.
Buck French, co-founder and CEO of Fantex Holdings, doesn't hide the fact that it's a risky investment and that potential investors should read the prospectus. The company admits the offering is "highly speculative and the securities involve a high degree of risk," and "should only be considered" by people "who can afford the loss of their entire investment."
"The whole business of Fantex is to help his brand," French said of Foster. "I can't help Arian Foster be a better football player, but we believe he has attributes to create a more powerful brand with greater longevity. That's our goal."
The company is taking reservations for the IPO in the next several weeks. Investors have to be at least 18 to invest, but minimum suitability requirements might vary by state, French said. If you have a registered account that's funded, however, you could buy just one share.
Fantex Holdings is the parent company to Fantex Inc., the brand-building arm of the business. One of the things the company has done to build the undrafted player's brand is create a two and a half minute "brand video" featuring Foster talking and working out to dramatic music.
Fantex Brokerage Services is the broker-dealer and exclusive trading platform for Fantex Inc.
Foster is "unable to speak about Fantex" because the company is in registration with the SEC, a spokesman for Fantex said.
When asked why Foster is Fantex's first athlete to have a tracking stock, French said the company viewed him as a "trailblazer, someone who does what he believes in, not afraid to take risks and be first in things."
"Those attributes we found to be enticing with him from a brand-building perspective and he was interested in working with Fantex Inc. He saw it as a platform to help him build his brand for the long term," French said.
French said Fantex Inc. hopes to work with other athletes and brands in the entertainment sector in the future, but he said the company has not signed any other athlete contracts.
Fantex Brokerage Services calls itself "the world's first trading platform that lets consumers invest real money in stock linked to the value and performance of the brand of a professional athlete."
"It's much like fantasy sports, except fans will be trading on Foster's business value," ESPN's Darren Rovell writes. "If he does well on the field and companies become more interested in Foster as an endorser, his stock might go up. Fans can then buy and sell shares, with Fantex taking a commission."
Ted Schwartz, president of Capstone Investment Financial Group in Colorado Springs, Colo., and personal finance columnist for ABCNews.com, is skeptical of the risks involved.
"This seems to me to be more of a gamble and less of an investment," he said, questioning how an investor will analyze an expected return.
All investments are based on your expected return on investment, he notes.
"It is possible to do, but seems like a very difficult task and that most 'investors' won't be doing their homework but rather rely on the luck of the draw here," Schwartz said.
Sterne Agee's chief economist Lindsey Piegza said that like for any investments, the best analysis takes a longer term view rather than a static snapshot.
"What's tricky is picking the investments or players that do have a longer cash flow potential," she said. "If a player is 'hot' at the moment, that might not be a good buy-and-hold investment, similarly if the brand is likely to be short-lived or a temporary fan/market infatuation. You want to make sure the player has staying power."
Byron Studdard of Studdard Financial in Sarasota, Fla., said it was an interesting idea, "but definitely has its share of risk."
Studdard said he is unsure he could be convinced to invest in the unknown future earnings of an athlete when he could buy global stocks that have paid consistent dividends for years.
"If I had a choice between that unknown and a corporation that has been around for 50 years, I would choose the established company, especially if they paid a consistent dividend," Studdard said.