If you’re like me (broke, lacking self-confidence) you are definitely looking at new and creative investments to create some
beer money wealth. While I consider myself somewhat knowledgeable about the financial markets, my returns just haven’t reached pre-crisis levels. Fixed income markets (think bonds) have seen abysmal interest rates ever since capital started flowing as a result of Federal Reserve action vis-a-vis quantitative easing. Equity markets are seeing excellent returns but that could turn at any moment according to many pundits.
What kind of cyclical investments are left you ask? What if you could now invest in people, namely professional athletes? The company Fantex recently filed an S-1 with the Securities and Exchange Commission with the intent of selling shares of Houston Texans running back Arian Foster. The company calls it a stock but it is more like a loan. Arian Foster will receive $10 million now for a 20% stake in his future earnings whether they be from a new contract or from endorsement deals. For younger players this idea seems like a great deal considering that their contracts start at a miserly $325,000.
Investor risk stems from injuries, lockouts and possibly even personal issues. While Foster’s name carries weight he is an aging running back who may not be in the league 5-6 years from now. Can he make the $50 million so that the investors can break even? Only time will be able to tell.
Will there be demand for this type of unusual investment? This can be answered with the adage ‘If you build it, they will come’. If fans are willing to spend exorbitant amounts on stadium seats or snuggies with a team logo on it, why wouldn’t they be interested in an equity offering of their favorite player? Hey the extra dollars may even motivate them to do better on the field now that their finances are in order. For further reading on this deal see here or here.
Nonetheless, is this a feasible idea? What sort of athletes would be best to invest in? What are the implications of essentially betting on a professional athlete’s future?