Arian Foster's Personal Stock Offering Sounds Like Bullshit

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Arian Foster is partnering with a company called Fantex Holdings to offer you, the grotesque fan, a chance to buy a minority stake in his future earnings. It's a not-all-that-shocking-but-come-on-still-what-the-hell kind of deal. But it's also kind of bullshit.

Here are the specifics: Foster exchanged 20 percent of his future earnings from his personal brand—presumably covering endorsements, brand-focused ventures, and other sources of income—for a $10 million payment as part of a new kind of stock offering. If all goes well, it will start a new sort of stock exchange, with fans trading.

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The first thing to understand is that, more than anything, this seems like a memorabilia grab more than a new paradigm of athlete economics. The Fantex offering is going to rely heavily on fans buying up shares. In fact, it's even putting specific rules in place so that big investors can't buy up all the shares, and they're available for the average fan—endorsement-backed trading cards, essentially. From the New York Times:

Unlike many esoteric Wall Street investments that are available only to so-called high-net-worth individuals, the Fantex offering is available to United States residents 18 years and older, with a minimum investment of $50. There are some restrictions. For instance, investors with annual incomes of $50,000 to $100,000 may only invest up to $7,500 in the offering. Individual state securities laws might also place further limits and who can invest, Mr. French said.

Fantex will market the Foster I.P.O. in the coming weeks, offering 1.06 million shares at $10 a share. No one can own more than 1 percent of the offering, ensuring that it is available to a wide number of investors. If demand is less than the number of shares being offered, Fantex may cancel the deal.
But if it proves successful, Mr. Foster's tracking stock will then trade exclusively on an exchange operated by Fantex. Presumably, the tracking stock will increase in value if Mr. Foster raises his earnings potential with standout on-the-field performance or increased corporate sponsorships. Then, the investor can try to sell his shares at a higher price. Fantex will make a 1 percent commission from both the buyer and seller on the trades.

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Did you catch that? This isn't speculative trading so much as it is an extension of NFL merchandising. It isn't so much about the "brand" that Arian Foster has built up as it as about the broad commodification of athletes in general, and fans' willingness to buy dumb shit even peripherally attached to a team. You're buying a brand with the Arian Foster stock, but it isn't Foster himself—it's the NFL.

But how will it work from there? The details are non-existent, and what we do have sounds like a mouthful of nothing. "Presumably, the tracking stock will increase in value if Mr. Foster raises his earnings potential with standout on-the-field performance or increased corporate sponsorships. Then, the investor can try to sell his shares at a higher price." What the hell does that even mean? And how does that reconcile with the inherently depreciating nature of nearly every professional athlete (compounded here with the idea of buying into the future of a 27-year-old running back)? Good questions.

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Another big thing to note here is that this might not even happen. The initial offering (IPO) is only putting about $1 million up for grabs, and if it turns out that no one wants it, Fantex can (will) bail on the whole thing. Because the way the deal works, Fantex is essentially buying $10 million worth of "stock" from Foster himself, who remains a nominal majority shareholder, and then selling that off to fans. And Fantex appears to want no part of holding onto that stock itself—which should probably tell you something.

If the stock actually gets off the ground and functions as a real tracking stock on a custom-made Fantex exchange (comforting), it will effectively mean Arian Foster has bet against his future "brand" earnings: He loses out if that 20 percent of his earnings ends up being worth more than the $10 million he's being paid for the shares.

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Foster would make up some of that in the value of being the public face of fans owning players' endorsements, but really it's an insurance policy—risk management in the case that his assets and earning potential dry up tomorrow, due to catastrophic injury or him Michael Vicking himself or whatever else. It's not unlike how poker players will sell off a percentage of their final earnings in a tournament before the tournament's over, locking in a profit.

The broader question is, How far can something like this go? It's not like no one's thinking about cashing in on mutagenically talented kids before they're allowed to turn pro—or on the speculation that they might. Just look at the generally fucked up world of international soccer, where, in acquiring Neymar, Barcelona recently had to pay a transfer fee to both his Brazillian club and his "third party owner." It's all shady as hell when it gets down to the real speculative value of "owning" a player, which is getting at them when they're young, before they're established, and locking in a piece of a potential superstar and his total salary, not just "brand" earnings.

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That's unlikely to see a rise in the US, especially not in something as codified as an official stock index. It hasn't come up domestically, but third party ownership has already been outlawed by the English Football Association. And player contracts are subject to whatever CBA is in place—those would have to be drastically reworked to even begin to handle arrangements like this.

So that's where we are. A "stock offering" that's really a workaround to sell what amounts to a portfolio of NFL action figures, and a "new market" that is kneecapped by business in the US not being as slimy as it is elsewhere. So no, this probably isn't a broad paradigm shift so much as the founding of an ambitious new Pokémon card exchange brokerage.

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Update: Here's the SEC filing, which goes over the premissions Fantex is affording itself, though not, obviously, specifics for what you'll see.