What a clever idea. Buy a stock tied to the lifetime football earnings of Houston Texans star running back Arian Foster. San Francisco-based Fantex Holdings is issuing a million shares of stock in Fantex Series Arian Foster at the bargain price of $10.00 each.
I feel one of those late night, 30-minute infomercials coming.
Stockholders will have no claim on Foster's income. They cannot manage his career or his brand identity. Shares of the Arian Foster series are basically shares in Fantex Holdings.
They make no promises of growth. Fantex calls the Arian Foster series a tracking stock ‒ indexed to Foster's future football related income that can come from his next NFL contract, or income from endorsements, coaching, broadcasting, anything tied to his personal brand.
Foster plays a risky position in a risky profession. He is hedging the risks to his income by sharing a fifth of it in return for a sure upfront payment. The deal is off if Fantex cannot not sell every share of the offering.
What's wrong with this picture?
If this scheme works, other players may jump on board, but what about small investors like you and me? I would not buy shares of Foster. He's a running back. He's 27 in a field where a back's earnings drop after age 30. And he's already on his second NFL contract. Three strikes.
Sports Illustrated ranks running backs the eighth-best paid position on an NFL squad. (Fathers, tell your sons to be linebackers.) The big money on average is with quarterbacks, defensive ends and offensive linemen. Of skill positions, where fans would recognize players by name, only safeties and tight ends are paid less than running backs.
Top performing running backs are paid the big bucks when they come off their rookie contracts. Think Adrian Peterson and Chris Johnson. Foster is already on his big bucks contract. His income is unlikely to go up on his third NFL deal, if there is one. We don't yet know how Foster levers his personal brand into football related income.
Investors have to be astute about business growth and value, especially when buying speculative stocks. As Fantex invents a new investment, investors should dream up a few rules of thumb. Here are four to get you started.
No. 1. Invest in players with a high Q Score. Avoid players with a low Q Score.
Most of a player's income will be based on his NFL contract. But Fantex will track the player's football-related income after retirement. You are buying into the player's personal brand. The best liked, most trusted, ex-players will have the best shot at endorsement deals. Q Scores are a measure of the likeability of brands.
Forbes Magazine tracks players for their likeability. Here are their top five most and least liked NFL players of 2012.
1 ‒ Troy Polamalu
T2 ‒ Drew Brees
T2 ‒ Charles Woodson
4 ‒ Peyton Manning
T5 ‒ Aaron Rodgers
T5 ‒ Rob Gronkowski
1 ‒ Ndamukong Suh
2 ‒ Jay Cutler
3 ‒ Michael Vick
4 ‒ Randy Moss
5 ‒ Matt Leinart
Troy Polamalu could sell hair products to bald people, but this approach is not foolproof. The NFL's most established stars populate the most-liked lists. It includes players near the end of their career, like Polamalu and Woodson, whose football income will end soon, or go down on their next contract. Players like Peyton Manning don't need to hedge their income and are unlikely to sign a deal with Fantex.
Some of the least liked players are due for big paydays. Jay Cutler appears on the least-liked list. Cutler is in his contract year and he might see his income go up if he leads Chicago to the playoffs when he returns from injury.
Michael Vick is controversial. He will continue his NFL career even if he has no place in Chip Kelly's offense because he is a top tier quarterback, but it's hard to see how he parlays his brand into endorsements.
No. 2. Buy stock in players with high social media influence
Track brand identity by the player's social media influence. Klout and other services track players social media engagement with followers. According to Klout, the five most engaged NFL players are:
1 ‒ Robert Griffin III
2 ‒ Larry Fitzgerald
3 ‒ Tim Tebow
4 ‒ Adrian Peterson
5 ‒ Russell Wilson
This is a better measure than Q Score. Younger, upwardly mobile players who are more engaged with fans are a better bet to derive football income beyond their NFL contracts.
Arian Foster is No. 14 on this list.
No. 3. Buy stock in players due for a free agency bump
Here's your buy low, sell high strategy. Identify players who are vastly out-performing their rookie contracts. They are certain for a huge income bump on their next deal. Redskins RB Alfred Morris and Buccaneers RB Doug Martin are perfect examples. Thank the new rookie play-scale for a rich lode of candidates.
We checked KFFL's NFL free agent tracker to find a few nuggets for 2014 and beyond. There are none in the 2014 group, although Josh Freeman is an interesting play. Among 2015 free agents, Cam Newton and Tom Brady would be a Buy.
Then you hit quarterbacks of the golden class of 2012 who become free agents in 2016. Robert Griffin III, Russell Wilson, Nick Foles, Ryan Tannehill and maybe Brandon Weeden and Kirk Cousins are target buys. Most will sign huge new deals before reaching free agency.
What about veterans Eli Manning and Philip Rivers? Their football income at that point will be tied to their brand more than their active playing.
No. 4. Invest in baseball players
MLB and NBA contracts are guaranteed. Only the elite NFL players get guaranteed deals. Football players suffer the double whammy of uncertain deals and shorter careers.
Baseball and basketball players have investment grade income streams.
Not for the little people
This is a hokey idea, so are hedge funds, derivatives and commodities futures. They are made for high net worth investors. If you can buy Super Bowl tickets with pocket change and fly to the game in your executive jet, Fantex players stock might be for you. The Rest of us should stick to fantasy football.
Unless they come out with a Johnny Manziel stock. I'm all in for Johnny Football.
My lawyer wants me to tell you that I am not a financial planner or a stock analyst. You are an idiot if you rely solely on this advice to buy Fantex stock offerings. Read the Fantex prospectus and decide for yourself.