SAN FRANCISCO — Here is a new twist on fantasy sports: a San Francisco startup is offering a chance to bet on the moneymaking potential of star athletes.
The unusual investment opportunity kicked off Thursday with an IPO filing proposing to sell stock for a stake in the future income of the Houston Texans’ Arian Foster, a top running back in the National Football League.
The initial public offering hinges on a deal requiring Fantex Holdings Inc. to pay Foster $10 million in return for a 20 percent share of his remaining contract with the Texans, his endorsement income and any other future money tied to his football career. Those earnings could include potential broadcasting jobs that Foster gets after his playing career is over. It doesn’t include money Foster would make if he pursues a career unrelated to football.
Fantex plans to sell about 1 million shares at $10 apiece to pay Foster and cover other expenses. The tracking stock will be bought and sold on a trading platform set up by Fantex, co-founded last year by Silicon Valley entrepreneur Buck French.
Foster, who is in his fifth season with the Texans, is the first player in what Fantex hopes will become a diversified line-up of star athletes. The company is aiming to do IPOs featuring players in professional baseball, basketball, hockey and golf, as well.
“Our philosophy is to work with people who we believe have interesting brand attributes that we can work with and they can work with us,” said French. “You don’t have to be a superstar. I could see us working with big names and no names. The question is do they have attributes to build a brand for the long haul.”
Just like any securities investment there are risks. The marketability of professional athletes can go through wild swings if they become embroiled in scandals, as bicyclist Lance Armstrong and golfer Tiger Woods have proven. There’s also no guarantee that athletes will have long playing careers.
Fantex is betting it can help Foster line up a lot of lucrative endorsements. And if Foster collects the maximum from his Texans contract and current endorsements, Fantex would receive about $5 million.