Update: Jocks and Bonds

November 18, 2013

Arian Foster for NVSEOn the first of this month we wrote about the planned “IPO” of shares in Arian Foster, running back for the Houston Texans.  Fantex, Inc. is applying the concept of celebrity bonds to professional athletes and securitizing their potential future earnings.

At that time we expressed concerns about the business model and the ability to quantify risks or conduct due diligence:  (a) it’d be analogous to a musician securitizing songs he planned to compose rather than his library of existing proven songs, (b) a professional athlete’s fortunes can turn on a dime, and (c) their “brand” is easily tarnished by revelations about past or current activities.

Last Tuesday brought unfortunate news for Mr. Foster.  (Unfortunate but impeccably timed as follow-up to the original story…)  He must have season-ending surgery and as a result, Fantex has postponed the IPO.

San Francisco-based Fantex last month filed with the U.S. Securities and Exchange Commission to raise $10.6 million in an initial public offering priced at $10 a share for Foster, who pledged 20 percent of his on- and off-field earnings to the company in exchange for most of the proceeds of the IPO. It was to be the first public offering for a professional athlete.

“After consideration, we have made the decision to postpone the offering for Fantex Arian Foster,” Fantex Chief Executive Buck French said yesterday in a statement. “We feel this is a prudent course of action under the current circumstances…  We continue to support Arian and his brand, and we wish him well in his recovery.  We will continue to work with him through his recovery and intend to continue with this offering at an appropriate time in the future based on an assessment of these events.”

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