Arian Foster, Vernon Davis Both Out With Injuries
The greatly maligned plan from Fantex to offer "tracking stocks" in athletes took a big hit this past weekend as both Arian Foster (Houston Texans) and Vernon White (San Francisco 49ers) went down with serious injuries.
Fantex is a company that wants to offer IPOs for athletes. Here is how it would work - an athlete agrees to sell Fantex a percentage of their earnings (salary, endorsements, etc) for the remainder of their career for a flat fee. Through a complicated process, Fantex would then create a tracking stock that would be correlated to the performance of the player and their future earnings.
For instance, Arian Foster signed a deal with Fantex to sign over 20% of all of his future earnings for a payment of $10 million. Fantex is planning on selling $10 million in stock in order to finance this payment. If things worked correctly, the tracking stock would follow Foster's on-field performance and its impact on his future earnings. For instance, if Foster had a great couple of years, he might be eligible for a very large deal, and owners of the tracking stock would presumably benefit (we won't get into the fact that Foster is a 27 year-old running back, which is a position with a short shelf life).
A few weeks after signing the deal with Arian Foster, Fantex signed a similar deal with San Francisco 49ers tight end Vernon Davis. Fantex announced that Davis, if the offering proved to be successful, would receive a payment of $4 million for 10% of all of his future earnings.
Both deals were contingent on the stock offerings going well.
This past weekend, disaster struck for the two planned Fantex offerings, as both Foster AND Davis suffered injuries.
Arian Foster needs season-ending back surgery, while Vernon Davis suffered a concussion during the first half of San Francisco's loss to the Panthers and did not return.
The two planned offerings from Fantex have been largely panned by investors and the media over the past couple of weeks.
One of the biggest points of contention? The possibility of a serious injury wiping out most or all of the investment.
The injuries to Foster and Davis this past weekend illustrate this point, and fans/investors should be very careful about spending money on any future Fantex offering.
Filed under: General Market News