Company plans to sell stock in players, starting with Arian Foster

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Fans who bought shares of ultimately worthless stock in the Green Bay Packers can soon devote their discretionary income to something that actually could carry a return on their investment.

According to the Associated Press, a new company plans to sell stock for a future stake in the earnings of pro athletes.

The first major player to strike a deal with Fantex is Texans running back Arian Foster, who will get $10 million in exchange for 20 percent of his future football earnings and all other income generated by his football career, including broadcasting jobs.   (I wonder what Dick Vitale would call that arrangement?)

Fantex hopes to sell one million shares of Arian Foster at $10 apiece in order to raise the money necessary to pay Foster.  The shares then will be bought and sold on a trading platform created by Fantex.

Fantex presumably will make money on the transactions, as well as any shares it decides to hold in certain players if Fantex believes that they bought a stake in the player’s rights at a favorable rate.

For the player, it’s basically a loan that could, in theory, be repaid multiple times over, based on the quality and longevity of the player’s career.  For those who play in the NFL for a decade and then spend 25 years in broadcasting or coaching, 20 percent of all earnings will be evaporating years after the money received up front has been spent.

But it’s also an insurance policy of sorts, paid in advance, for players who could see their careers evaporate quickly due to injury, scandal, or ineffectiveness.

The reality is that, for each transaction, chances are someone will be getting screwed.  Either the player will end up paying back way too much money over time, or the investors will bank on someone who ends up being a bust — or who decides to retire sooner than everyone anticipated.  (And Foster seems like a player who could be inclined to follow in the footsteps of men like Jim Brown, Barry Sanders, and Robert Smith, each of whom walked away with gas in the tank.)

Making the situation even more odd is that Broncos executive V.P. of football operations is a member of Fantex’s parent company, Fantex Holdings.  Which opens a potential can of worms for the league office, given that Fantex will be acquiring a financial stake in the careers of men who play for other teams.

So while we’ve given Fantex a little free advertising by writing about this unusual proposition, there’s something about it that makes me very uncomfortable.

Enhancing the potential for discomfort is the question of whether the approach can or should apply to college athletes.  If they can buy insurance against career-ending or career-limiting injuries while in school, why shouldn’t they be able to sell a chunk of their perceived future value now in order to bank some of the money they’ll eventually make?

Whether or not it’s permitted in college, look for plenty of players to sell their rights at a young age in exchange for an accelerated payday — and then to spend the next 15 to 20 years (or more) regretting an impulsive decision made in order to get rich more quickly.

80 responses to “Company plans to sell stock in players, starting with Arian Foster

  1. So now packer shareholders can go around saying the own 9 players? Haha, they’re lining up waiting to give away their meager money!

  2. If they want insurance, they should buy actual insurance. Much cheaper.

    This smells like tax shelter schemes that used to be popular but were always too slick for the really smart people, but sucked in the gullible and undisciplined fools who are quick to think there’s a fast and easy way to make money.

  3. Could this be construed as a player “betting” on themselves?

    I think there are some pretty well defined rules around players engaging in betting on NFL games. Granted this is two steps removed from directly betting on games, but I would be surprised if this angle hasn’t been raised as an objection to this business model.

  4. Is it before or after tax earnings on the 20% they owe?

    If it’s before, that’s brutal. It means they’ll likely (depending on what state they live/work in) be taking home less than 50% of what they earn.

    Although if you generously assume Foster will make $500k/year (and he quit today) it would take 100 years for Fantex to break even.

    In the case of Foster, Fantex is thinking he’ll get one more big contract plus sponsorships.

    If Foster is smart he puts all $10mm away in conservative tools and lives off the interest. Don’t even bother being a broadcaster.

  5. This is a mess. It’s like selling yourself 20% into slavery. It reduces the incentive for a player to continue playing by 20%, so if you buy stock in Peyton Manning as a Broncos fan, you are effectively encouraging Manning to retire by participating. I have no idea how taxes will be handled on this, and if the player has to pay out before or after tax. If Adrian Peterson signs a broadcasting contract mostly for NFL football but also participates in a general sports talk show, some college football coverage, and guest hosts on the Olympics coverage, the Today Show, and some combine draft special all under the same general contract, how much of that is exactly football related? If an ad say “Hi, I am Drew Brees, and I shop at this Toyota Dealer, drive like a champion!” is that football related? What if a player becomes a coach, part owner, opens a company that is sports related and uses his broadcasting career to promote the company, etc. 20% is a big cut so lawyers could get involved in what counts how. And then inside information becomes a factor, as doctors, team officials, friends, etc might have inside knowledge of a retirement, career intentions, injury, etc. Corporations can’t tear their ACL or have concussions and lose most of their value in an hour. Corporations have an obligation to shareholders to maximize value, but athletes may choose personal matters over money, or pursue non-football interests (like Strahan).

  6. Lawyers are circling this just waiting for someone to get butthurt as an investor or a player….I don’t think it’ll ever get off the ground anyways…the point about this being “betting”is very interesting.

    Inflation rates, international contracts/exchange rates/tax rates….wow this could go bad in so many ways…

    Shareholder lawsuit against the Raps because they drafted Wiggins and their tax rate damps down the 20%? Or against Jeffrey Loria for trading Reyes to the Jays and pumping up his taxes? Or against Cano for taking a deal with the Rangers and decreasing his endorsement opportunities….it’s just endless….

  7. I won’t buy anything with the word ‘tex’ in it.

    Well… except Texas Pete sauce (made in North Carolina).

  8. It’s a good thing there is no historical precedent for owning human beings or I’d think this was a horrible idea. 😀

  9. trevor123698 says:

    a lot of money is going to be lost in this
    ________________________________

    You have a better chance of getting a return on your investment with this than if you paid for Packers *stock*…

    You’ll never get a dime back from the Packers, you might actually get some money back from Fantex.

  10. So John Elway is the GM* of the Broncos, so wouldnt this be some type of collusion, given the fact that his team will eventually be playing against some of the “Stock Players”? And it says their stock depends on performance… could he influence their performance against his team? Sounds like a hot mess to me.

  11. This seems kind of stupid and will be something the CBA needs to take care of.

    Who’s to say a player won’t take the $10-15M from this company, sign their big deal and then absolutely shut it down? This company won’t last doing this if they are fronting players that much money.

  12. It’s no more stupid than going to a casino.

    Going to a casino is about the stupidest thing a person can do. In an earlier and much regretted life of mine I had occasion to have a long dinner with two CEO’s of two major casinos. During the entire time these guys referred to the people who come into their casinos as “the suckers.” Not the customers, not the patrons, not even the gamblers, just “the suckers.”

    Just remembering that evening makes me want to take a hot shower and again try to scrub myself clean of any residue of scum they might have left on me.

  13. Florio,

    Everybody understands that Packers stock is worthless. People buy it as memorabilia. You’re not original or witty by constantly referring to it as worthless. Everyone already knows. But my all means, keep reminding us if it makes you feel like you’re breaking a major story or something.

  14. A better investment would be the aluminum rights to all the beer cans buried under my crazy uncle Cooter’s double-wide.

  15. how on earth would this be a bad move by Foster? He’s 27 years old, in the decline phase of his career. He would have to make more than 100 Million in the rest of his career. This is extremely unlikely to be the case even if he succeeds as a broadcaster.

    I ask myself why on earth would this company make such a ludicrous deal with Foster? The answer – it thinks it will be able to sell shares to a sports obsessed fan base. It gives fans a chance to gamble on the players they think have a big upside or are undervalued in some way. It’s a way for the fans to gamble on individual players.

    Personally I think the idea is brilliant. Whether it works or not I have no idea. But trying to get a few bucks from millions of dumb dumbs has always been a good business model. As H. L. Mencken said, “nobody ever went broke underestimating the intelligence of the American public.”

  16. I can just imagine a scenario – off the top of my head……..

    Gronkowski, you ain’t playing this week – or the rest of the season. Big Tony just put down 500 large on you. If you get hurt, he’s gonna hurt you…permantly!

  17. Too much chance for “insider trading”. What’s to keep an unmotivated but promising player, say, Jamarcus Russell, from bilking shareholders of their cash based on future promise then tanking?

  18. That’s a securitization. Structured finance. I wonder if they set it up with a bankruptcy remote SPV to protect Arian Foster.

    You are basically buying equity in future contracts. Same as a Ford bond backed by future auto loan payments, But without credit enhancement.

    What could go wrong?

  19. It is getting old to hear that Packer stock is worthless. It is not. In exchange for our investment, we have a great facility in Green Bay, the financial ability to retain our quality players, and enough left over to improve our product. I would say based on the quality operation that we have, the return is substantial and ongoing. Worthless? Hardly.

  20. Goodell and his greedy horde of employers will somehow put a stop to this, unless of course they get a percentage. They should call these “investments” the Vince Young wonderlic 6 funds….

  21. This is by far the stupidest idea I have ever heard. It has scam written all over it. I’m sure there are a bunch of people (on both ends dumb enough) to do it. There are so many ways things could go wrong. Is this scheme even legal and what are the potential corruption issues that can arise?

  22. International soccer has a similar system where corporations can buy stock in players…but the investors receive payment for that stock when a player is sold, and there’s no risk to the player (who’s barely part of the transaction). It’s a good way for poor clubs to raise money (clubs in Brazil and Portugal use this device to get an advance on a future transfer fee).

    That’s a system that makes some sense. This is like a perpetual payroll advance, and a terrible idea.

  23. After getting their up front money, what is a player’s motivation to work hard anymore?
    As you say, Foster seems like more of a Ricky Williams than a Brett Favre or Emmitt Smith (this coming from a guy who likes Ricky, for many reasons).
    Take the money, retire, go live in South America.
    Sorry investors, I’m injured.

  24. I think this could work really well for soccer players. Guys like Cristiano Ronaldo and Lionel Messi have huge marketing potential. All evident from their big endorsement deals around the world. NFL players are like investing in penny stocks.

  25. Fans who bought shares of ultimately worthless stock in the Green Bay Packers can soon devote their discretionary income to something that actually could carry a return on their investment.

    ————————————————————

    Depends on your definition of worth. I value my stock in the Packers. Maybe it is only something you can understand when you are a true fan of a team and something that could never be understood by a fan that will never have the same opportunity.

  26. united9198 says:
    Oct 17, 2013 8:24 PM
    It is getting old to hear that Packer stock is worthless. It is not. In exchange for our investment, we have a great facility in Green Bay, the financial ability to retain our quality players, and enough left over to improve our product. I would say based on the quality operation that we have, the return is substantial and ongoing. Worthless? Hardly.
    —————————–
    Hilarious. “we”? “our”? You seem to think you really bought something.

  27. That is correct “we” being those who invested in Packers stock do benefit by having one of the best football operations in the NFL. Our investment pays a great return in entertainment and pride in our operation. There are investors who get nothing in return for the money they put into something, so I totally disagree with the idea that stock in the Green Bay Packers is worthless.

  28. Those old enough to remember the internet about a decade ago, may have played Wall Street Sports online. Similar concept, though of course, no money changed hands.

  29. Can’t work in college. Would be considered a “pre-contract agreement” which is illegal, unless it specifically excludes the sport that player is good at, which is worthless.

  30. “Fans who bought shares of ultimately worthless stock in the Green Bay Packers can soon devote their discretionary income to something that actually could carry a return on their investment.”
    —————————–

    Yep – real useless, not taking into account that it’s the reason why a small town like Green Bay has managed to keep an NFL team…. totally useless.

  31. united9198 says:
    Oct 17, 2013 8:24 PM
    It is getting old to hear that Packer stock is worthless. It is not. In exchange for our investment, we have a great facility in Green Bay, the financial ability to retain our quality players, and enough left over to improve our product. I would say based on the quality operation that we have, the return is substantial and ongoing. Worthless? Hardly.

    ——-

    Well said. You take pride as you should – as any football fan should. Bravo!

  32. Just another step towards The National Touch-Football League. But Goodell will allow it, provided all prospective investors first pass the current Concussion Protocols, including correctly answering that always tricky “What planet are you from?” question.

  33. Nope, thanks anyway.
    I’ll take my 10 bucks a share and lay it on black or red, even or odd at a roulette table and double my money instantly
    and then, MAYBE let it ride.

  34. Are the player’s endorsement deals included in this? It seems like they would have to be for this investment to have any real value.

    The concept of Celebrity Bonds isn’t new, but doing it with an athlete is new. In 1997 an investor paid David Bowie $55M for all the royalties generated by Bowie’s catalog for the next 10 years. The investor then sold “Bowie Bonds”, which didn’t do especially well after the Internet changed the model for selling music.

  35. Gosh to even sniff the idea of calling this “insurance” is just what this outfit would love everybody to think of this as! Oh wow. Well if any players want to buy real insurance without an additional profit calculated by these actuaries for the same effect, then I’ll be there. But I can see the appeal of gambling with these guys, sounds like a fun way to plan for retirement.

    Likely more fun though for the guys running this game when they are planning THEIR retirement. Ten years from now every owner of every team will probably have their own currency too. At that point in time you would be a fool to not get into the currency creation game.

  36. Hey it’s a neat idea really. Although I would not bet my retirement on it, but for your children or grand kids into sports who knows $100 on 10 shares could bring in a few unexpected bucks at college time. I see this as more of a novelty then anything but look at other weird ideas that went on to make huge money….ie google, facebook, paypal(send money with an email address? LOL). At this point all I can say is interesting.

  37. Anyone who knows anything about the market would cackle at this “investment” and dismiss it as pure gambling.

    If you want to call this stock, as if you’re claiming residuals on players income, you’re out of your head. The risk is so huge you’d be better off investing in diamonds in Greenland. Ever heard of Beta?

    I pity the fool who takes the bait here, and suggest you find a CFA who can steer you away from this faster than Moby Dick.

  38. fground says:

    how on earth would this be a bad move by Foster? He’s 27 years old, in the decline phase of his career. He would have to make more than 100 Million in the rest of his career. This is extremely unlikely to be the case even if he succeeds as a broadcaster.
    _________________________

    Better check your math calculations.

    20% of all his future NFL related earnings is what he is giving up. 20% of 100 mil (your example) = 20 mil – double what he’s getting up front.

    At 27 – Foster could have another 5 or more years in the league as a RB.

    Will he have any endorsement contracts during that time? He’d give up 20% of that for life.

    Could he get involved in coaching or scouting for the NFL? He’d give up 20% of that for life.

    Broadcasting? 20% of that for life….

  39. This sounds REALLY sketchy. Not sure I want to buy stock in Arian Foster when I can buy index funds of the S&P 500.

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