Would You Buy Stock in a Pro Athlete? - Real Time Insight

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If you've ever watched a pro ball game and said to yourself, 'I wish I could buy stock of that player, I would be rich', you may soon be in luck. Fantex has created an SEC registered trading platform that looks to allow you to do just that in various athletes.

The company even has one star athlete, Arian Foster (Running Back for the Houston Texans), under contract in this program, having acquired a minority stake in his 'Brand Income'.  

How it Works

Fantex has a contract with Arian Foster for one-fifth of all his income from endorsements and his NFL contracts for the rest of his life. In exchange for this, Foster receives $10 million, not too shabby for someone who is going to average about $8.6 million a year on his current contract, and for someone who made about half a million in 2011 .

It should also be noted that Foster currently has several endorsement deals, including ones with Under Armour ( UA ) , and a unit of Kroger ( KR ) in Texas. Foster also has a couple other deals with various sports related retailers, as well as a few small other miscellaneous businesses, and these look to be included in the program too.

However, the contract does exclude any income that Arian Foster receives from work in motion pictures, television, and music, so long as he isn't playing himself or a football player. This looks to come into play pretty soon as Foster is actually scheduled to appear in a movie due out in 2014 with Kevin Costner as the lead.  

The real money looks to come from the trades though, as Fantex will get a 1% commission on all buys and sells, so maybe the best way to make money on an athlete IPO is to get in on Fantex, thanks to these hefty fees.

Still, if the idea catches on, there could definitely be money to be made by investing in emerging stars, or players who are primed to bounce back from a devastating injury. Also, it does help players to take out some of the risk from their lives, as it gives them a lump sum payment regardless of what happens in the rest of their career.

And for an undrafted player like Foster who has made a splash in recent years, this definitely could have played a role in his becoming the first player 'traded' on Fantex, although there could be some interest from others as well.

"Fantex represents a powerful new opportunity for professional athletes, and I wish it were available during my playing days," said John Elway , a member of Fantex's board, and former star Quarterback for the Denver Broncos.

But what do you think about this Athlete IPO idea, and who would you want to invest in?

I think it is an intriguing idea, but the fees are quite high for trades. If they can build up a nice lineup of athletes, I could definitely see some interest, especially by die-hard fans.

Personally, I'd go for a basketball player instead, careers seem to be a lot longer, and branding potential seems to be greater in that market. However, a player like Peyton Manning with his amazing year so far and those ubiquitous Papa John's ( PZZA ) commercials, could also be an interesting play…

Let us know what you think about an Athlete IPO in the comments section!

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KROGER CO (KR): Free Stock Analysis Report

PAPA JOHNS INTL (PZZA): Free Stock Analysis Report

UNDER ARMOUR-A (UA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: KR , PZZA , UA

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