In a twist on stock market, company to offer shares of an NFL player
The stock of San Francisco 49ers tight end Vernon Davis has risen considerably on and off the field since he was pulled from a 2008 game and his attitude criticized.
Now Davis could become the first known professional athlete to actually be a stock. Fantex Inc., a West Coast brand-building company, is planning an initial public offering of Vernon Davis stock available for $10 a share on its website (www.fantex.com). Under Fantex's plan, Davis and other sports stars would be treated like public companies that are traded on stock exchanges. Trading would take place on the Fantex platform and is awaiting approval from the Securities and Exchange Commission.
The Fantex IPO is part of “a land rush to see who can come up with the next clever concept to bring fans closer to the game,” veteran sports agent Leigh Steinberg, who has represented hundreds of NFL players during his career, told The Associated Press. “It's a manifestation of the different ancillary revenue flows that players, speculators and investors can engage in, all of which is created by the love of sports.”
“While there have been some security offerings that had returns linked to royalty payments received by celebrities (David Bowie for one), it is very unusual and a new concept to offer a stock whose returns are linked to an athlete's future earning stream,” said Ted Schwartz, president of Capstone, an investment group in Colorado Springs, Colo.
In October, Fantex bought 10 percent of Davis' future earnings directly and indirectly related to football.
The company estimates that Davis, 30, an eight-year NFL veteran, will play six more seasons, have a successful post-playing career and ultimately earn about $61 million.
Because of risk factors, the “present value” of Davis' brand income was discounted to $40 million, and he will get $4 million up front. The company will assist Davis in raising his profile off the field.
Davis is scheduled to make more than $10 million in nonguaranteed salary and bonuses in the two remaining years of his contract. Fantex is counting on another lucrative deal to follow.
Fantex CEO Buck French said investors will receive dividends, though he did not elaborate. The future value of the stock will be directly tied to Davis' earnings, which are not a given. If the earnings are lower than expected, investors' expected returns also will decline.
French, who recently visited Pittsburgh and about a dozen other cities to meet potential investors, said Davis' many talents should help make him a marketable commodity after he retires. Davis is an entrepreneur, philanthropist and artist, and a natural for broadcasting, French said.
“He's a multi-dimensional individual,” French said. “He has a long-term view for his brand.”
Last season, Davis caught 52 passes for 850 yards and a career-best 13 touchdowns. But “he realizes he is more than just a Pro Bowl tight end,” French said. “He wants to be great on the field, and he wants to be great off the field.”
The risks, especially injuries, are obvious. The IPO for Houston running back Arian Foster, the first player Fantex signed, in October, was postponed after he got hurt. Foster played in just eight games last season and had back surgery in November. Davis himself suffered a concussion and missed part of a game. It was not his first.
“I can't reduce the risk on the field, and I can't make them a better football player,” French said. “But I can help them become a better brand. And ultimately that's our business' goal.”
“There are a ton of risks and question marks,” Schwartz said. “The No. 1 risk factor would be that this is, by definition, a ‘speculative investment.' What Mr. Davis' future earnings will be is a large unknown, with his next contract a couple of years away.”
He added, “You are actually buying stock that can be converted to Fantex common stock at their discretion. You have no direct investment in the Vernon Davis brand per the prospectus. This stock can only be bought and sold on their platform, so that adds another layer of uncertainty.”
Fantex recently landed another NFL player, Buffalo quarterback EJ Manuel, buying 10 percent of his brand value for $4.97 million. Another IPO is expected, although French said he could not comment.
Investment analyst Jake Mann is more bullish on Manuel than Davis because Manuel is only 24. His career is just starting.
“The younger the better,” Mann wrote on the Motley Fool website. “There's more upside because he has more time to improve his brand value, whether that's through a richer contract or more endorsements.”
Shawn Evans, 43, of Ross was among the few attending the “Vernon Davis IPO Tour” at Jerome Bettis Grille 36. He said he probably will buy shares.
“When you look at the combination of the potential and the risk, it makes for a really interesting proposition,” said Evans, an IT specialist for a Downtown law firm and holder of an MBA. “I absolutely like the idea.”