Player Stock from Fantex

A couple years ago, a company called Fantex announced that it would be having an IPO (initial public offering) of stock on Houston Texan’s running back Arian Foster. The goal was to offer about a million shares of stock in the earnings of Foster, the 28 year old star running back. Foster would receive $10 million up front, and the value of these shares purchased is linked to essentially 20% of the earnings associated with his professional brand (including endorsements and other business ventures). This would count any earnings from contracts for playing in the NFL, or any jobs later in his career that Foster received due to his NFL career, such as broadcaster/analyst for a company like ESPN or the NFL Network.

Well, if I did my math correctly…. it would look appear that in order for investors to make a return on their investment, Foster would have to make about $50 million in football related earnings over the rest of his career. Let’s take a look at whether that is going to happen and who is likely to be on the losing end of this transaction.

In 2012, Foster signed a 5 year contract, worth a total of $43 million over the 5 year span. Of this total amount, only about $20 million is guaranteed, the rest of the contract’s worth can be earned as bonuses for various accolades and accomplishments. The IPO for Foster occurred in 2013, so subtracting his initial year of the his contract gives us around a minimum $16 million of guaranteed earnings from NFL contracts. It is also mentioned on that a part of is $12 million signing bonus was paid to him in 2013, so we can add that on to his earnings. That is $22 million of the necessary $50 million that is needed to pay off the investment. Foster also made close to $2 million in endorsements last year, so if he is able to stay close to that mark for the rest of his football playing career, I would put that number at close to another $10 million in earnings. This brings our total up to $34 million. Now we have to guess at the size of his next contract after this current one expires. The age of 30 is known as the general age where running backs in the NFL start to see a steep decline in performance, and subsequently, salary. When Foster comes out of his current contract he will have just passed this age benchmark. Frank Gore (San Francisco 49ers), who is just hit this age, is set to earn about $3 this year, and Fred Jackson (Buffalo Bills) is 33, and just signed a contract this summer that guarantees him $2.5 million for the next two years. I would call both of these running backs outliers of sorts, due to the fact that they have remained successful so late in their career. If Foster remains healthy and signs a similar contract, this would bring his earnings towards $40. This would be a fantastic career for a running back as the average running back in the NFL only lasts 2.5 years. This would leave about $10 million for Foster to earn after his NFL career to fulfill our $50 million target.

I am not saying that this is process was anywhere near exact, and the outcome could be much different, but I wanted to show the process investors had to go through to decide whether to invest in this stock or not (though less exact). But whatever my prediction was, I hope it showed how extremely difficult it is to predict a players future earnings because of the uncertainty about injuries, value of the league, inflation, etc. Judging this deal at this moment from my standpoint, I would say I would much rather be in Arian Foster’s position because of the security he received from this deal. One devastating injury could knock out almost all future earnings, and having that $10 million in the bank is great insurance.

However this ends up, it is an extremely interesting way to involve fans of the sport in a way that has never been done before. This website has already offered IPO’s for other players, and hopefully more in the future. This innovation could allow players to have financial security, while allowing fans to be more and more involved in the game.

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