Feb. 13--Fantasy football has been the closest fans have come to making money off a team athlete's individual performance. But a new company, whose initial public offering road show for one athlete came to Philadelphia on Wednesday, is making it even more of a reality.
Fantex, a San Francisco company, offers an opportunity to invest in an athlete's future earnings. An investor would ride the same roller coaster that the athlete experiences, with a lucrative contract and broad marketability as a potential boon, and injury or image problems presenting risk.
The first athlete for shareholders to invest in is San Francisco 49ers tight end Vernon Davis. The company will pay Davis $4 million in exchange for 10 percent of his future earnings, whether it's from his current NFL contract, future NFL contracts, endorsements, appearance fees, or post-football employment.
"It's an investment, so if you believe that Vernon Davis' brand has the potential we do, then it could be a lucrative investment," CEO Buck French said Wednesday in a University City coffee shop when asked why a Philadelphian without a vested interest in Davis would be interested.
"The second reason is they very likely may have him on their fantasy team, even though he's not an Eagle. That game has changed. And the third component is they actually think this is an interesting concept out there. And our goal is to not just have one [athlete]."
French, who was born in Chester County, is on a 12-city tour via a former Madden cruiser. His schedule Wednesday included speaking at the Wharton School of the University of Pennsylvania and meeting with potential investors at Xfinity Live.
The company is trying to raise roughly $4.2 million for the Davis IPO, with 421,100 shares available to the public at $10 each. That means Davis would need to earn $42 million for the investors to make money on his earnings. Fantex estimated Davis' gross potential income at $61 million before applying any discount rate, and without Fantex's help marketing.
Davis, 30, has two years remaining on his contract and just finished his eighth season. Fantex is expecting him to play at least 14 total seasons and sign another deal that would pay him at least $33 million. That figure is based on contracts received by tight ends such as Tony Gonzalez and Antonio Gates.
"If you believe in our forecast . . . I think it's totally feasible," said French, who said he consulted with the NFL players union.
There is also a dividend yield, which could enhance the investment. Fantex is especially bullish on Davis' post-career earnings, believing Davis is a "multidimensional" brand. Fantex receives 5 percent of each dollar it collects from brand income, with the other 95 percent going to investors.
The risks are injury, decline in production, or fizzling in post-career aspirations, which makes the money paid by Fantex attractive to the athlete. Fantex had a deal with Houston Texans running back Arian Foster, but Foster suffered an injury, and the offering was delayed.
"There's always short-term pain, long-term gain in any start-up," French said. "The short-term pain was unfortunately [that] it happened right after we announced. The long-term gain is it helped people understand the security better and the risk."
The securities are sold on Fantex's website with the general public targeted instead of institutional investors. The goal is to sign other athletes from the NFL and elsewhere. Philadelphia is one of the markets Fantex has identified.
"I hope so. This is a great sports town," French said. "You have some very interesting players here."
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