If you’d like to buy stock in an NFL player but you realize that Texans running back Arian Foster is getting much closer to the end of his career than the beginning and may have taken $10 million in exchange for 20 percent of his future earnings as some sort of an exit strategy, how about buying stock in an even older player?
Darren Rovell of ESPN.com reports that 49ers tight end Vernon Davis has become the second NFL player to sell a chunk of his future earnings to Fantex in exchange for cash now.
Davis will get $4 million up front in exchange for 10 percent of his future earnings — as long as Fantex can find enough
suckers people to finance the $4 million investment, with Fantex making its money from the buying and selling of Vernon Davis shares.
As one NFL insider opined to PFT, Foster would be a bad investment. He’s 27, he’s wearing down, and he could be cut after the 2013 season. Davis isn’t much better; he’ll be 30 in January, which means he has had plenty of wear and tear.
It makes more sense to invest in a young, ascending player, but some league insiders believe that few young athletes with real promise would agree to a transaction that essentially amounts to betting against themselves.
“That’s not in the nature of pro athletes,” one agent who requested anonymity observed. “I certainly would not advise it. This concept was brought to one of our guys and both [the agents] and his financial advisors did not think it was beneficial for him.”
So why would Foster and Davis essentially bet against themselves? Either they really need the money in the short term, or they’re starting to realize that they’ll soon be out of the game.
Regardless, they’ll carry around for the rest of their lives the obligation to surrender a piece of their football-related earnings. That could result in all sorts of strange outcomes, including but not limited to cash-only autograph signings that, if/when the poop hits the propeller via a shareholder lawsuit, could get the player prosecuted for tax evasion.
As a different agent told us in the wake of the news that Foster was giving up 20 percent of his future income for $10 million, any transaction of this nature would be preceded by a 20-page, single-spaced letter from the agent explaining every conceivable risk. In the end, the agent said the recommendation would always be to not take the money.
I agree with that assessment, and I’d also recommend against buying stock in any pro athletes.
Then again, my investment strategy consists of burying cash in jars in my backyard.
Great, now I have to go dig them up and move them.