Wednesday, November 20, 2013

The Arian Foster IPO: sports betting almost took on a new dimension

A month or so ago, I read with interest about Fantex, a new company that’s in the business of taking pro athlete’s public.

This story probably got a bit lost in all the Twitter about Twitter, but it’s a good story in its own right:

Fantex has established a market in which people can purchase and trade shares of athletes’ future earnings, in a sort of stock market for jocks. The company has persuaded regulators that this counts as investing, not gambling.

As of today, anyone over the age of 18 can buy stock in Foster, claiming a stake of his future earnings in increments as low as $50. Fantex is selling $10.5 million worth of stock, which represents 20 percent of Foster’s future earnings. The company takes $500,000 in fees and gives $10 million to Foster. To oversimplify a bit, Foster ends up ahead on the deal if he makes less than $50 million from this point on. (Source: Business Week)

As Fantex will be the first to tell you, if you happen to take a look at their website, the company is:


In fact, it’s not a brokerage service selling any old shares. What it’s selling can only be traded on Fantex. Thus,

…There is no assurance as to the development or liquidity of any trading market.

But, hey, no brokerage service can guarantee you that there’ll be a buyer on the day you decide to become a seller.

The real differentiator may be that:


Fantex, Inc. creates a unique brand building platform for athletes to increase the reach and engagement of their brand. Fantex, Inc. signs a contract with an athlete to acquire a minority interest in their brand and builds a plan with a goal to increase its value, leveraging its marketing expertise.

The notion of the “personal brand” is one that completely and utterly makes me want to gag. Brand Me, Brand You, Brand He, She or It. Brand We, Brand You, Brand They.

Personally, maybe I’m just not a “people person”, but I like my brands to represent stuff.  Coca-Cola: now there’s a brand. Ford. L.L. Bean. Stuff!

Or brands tied to real people – think Martha Stewart – that are actually about stuff. Which, as we see from Ford and L.L. Bean, become people-free brands after a couple of generations.

Even intangible stuff, like Google and Twitter and Facebook, are brands that are about stuff – even if the stuff’s entirely digital.

But a brand that represents the future earnings of an athlete, where the “brand promise” is tied to exploits on the field which have not much by way of longevity, especially in a game like football? That sounds more like a big, fat old gamble to me.

As in, Fantex makes its vig. And the athlete gets to guarantee his money now, just in case he breaks his leg and/or gets caught up in some off-field scandal (think Aaron Hernandez, who should have had an IPO last spring, before he landed in the hoosegow on what may turn into multiple murder charges), and/or doesn’t make any endorsements after voluntary or injury-forced retirement and/or doesn’t get to be one of the myriad jocks raucously and/or quasi-intelligently commenting on games after they’ve hung up their spikes. 

So the athletes really betting that he may be worth more to his fans than he is in real life, i.e., he’s overvalued at present and unlikely to truly cash in big time.

While you, my fannish friend, are the gambler gambling that the athlete of your dreams is going to keep playing, keep making fat money, and keep his nose clean.

Which all seem like pretty bad bets,especially in football, where career-ending or –limiting injuries are frequent, and where, from what I understand, guaranteed contracts (i.e., contracts guaranteed against injury or just getting cut mid-season) are not all that common. And especially in football, where the dumb jock/super-thug/bad behavior quotient seems especially high.

And where, let’s face it, you’re more apt to end up post-retirement with your multi-concussed brain floating around in a jar of formaldehyde than you are to have a lucrative post-player-career life.*

Sounds like a pretty bad bet to me, and one that only a fan who really, really, really liked an athlete would make.

(It also sounds a bit to close to the slavery block, but that may just be my inner PC coming out.)

Anyway, it may be a while before we find out what’s going to happen with the human IPO.

The first Fantex athlete who was to go public was Arian Foster, certainly as appealing an athlete as they were going to find out there. Alas:

Fantex, the start-up promoting I.P.O.’s of National Football League stars, said that it was putting off its stock offering of Arian Foster, the running back for the Houston Texans. Mr. Foster was placed on injured reserve and is expected to have surgery to repair a ruptured disc.

“After consideration, we have made the decision to postpone the offering,” Buck French, the chief executive and co-founder of Fantex, said in a statement. “We feel this is a prudent course of action under the current circumstances.” (Source: NY Times.)

And the only other athlete that Fantex had lined up for an IPO was Vernon Davis, also an NFL player. Davis recently left a game with a concussion, putting him in line to be yet another one of those ex-NFL-ers who gets their brain in a jar.*

If I were Fantex, I might go after a few baseball players…

----------------------------------------------------------------------------*These brains go to Boston University’s Center for the Study of Traumatic Encephalopathy, which studies the impact of multiple hits on the health of ex-athletes, many of whom suffer terrible, often catastrophic, ill health in early to late middle age. BU’s research has been getting a lot of press the last few years, and is causing many parents to rethink letting their little guys play football.

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