Sports fans can now buy stock in athletes with Fantex

Watch report from Action News
March 24, 2014 11:21:04 AM PDT
With March Madness underway it can feel like nearly everyone is a sports fan with something at stake. But one company is hoping fans truly turn that emotional investment into a financial one.

The company is called Fantex. The concept? Fans can now profit from an athlete's profit by buying stock in a particular athlete's brand...or so Fantex would like to make you think.

Fantex is gambling on the concept that these investors will help build the athlete's fan base through social media because they have a financial interest in how well the athlete performs on and off the field.

But the largest beneficiary of this concept may not be the athlete or the fans.

"I have to be at my best each and every day in order to take the Vernon Davis brand to the next level," said San Francisco 49er Vernon Davis.

In one Fantex video, even 49er Vernon Davis, the person, refers to himself as "the brand" which Fantex believes will extend the 29-year-old's career off the field.

"So we thought if we could actually help them define their broader brand, who they are and what they represent, and then sell a security that was linked to the value of the brand, we could create a bunch of advocates out in the market place that could ultimately spread the word," said Fantex CEO Buck French.

Think Michael Strahan or John Ellway. Both harnessed talents off the field, built a second career, a bigger fan base and made a lot of money post NFL.

Ellway is on the board of Fantex.

The brokerage firm wants to help other athletes achieve that success by super-charging their brand.

Davis got $4 million from Fantex, in return Fantex and theoretically investors, get 10 percent of his future earnings.

"In order to fund the purchase, we are selling a security Fantex Vernon Davis at Fantex.com for $10 a share," said French.

Fantex claims the value of the stock is linked to the cash flow an athlete's brand generates.

But if you are looking at this like fantasy football, Wall Street version, financial expert Kevin McDermott of the Philadelphia Group says investor beware.

"You are a secondary investor; you are in a sense investing in that person. But really you're investing in the prosperity of Fantex," said Kevin McDermott, Philadelphia Group.

McDermott says that is because you can only invest in a specific athlete as long as Fantex allows you to.

He says Fantex maintains a conversion privilege which means Fantex can convert your ownership of an athlete's brand into general company stock if at any point that would financially benefit Fantex.

And then there are the ethical issues.

"I think there's a lot of issues that go into the whole concept of the public owning an interest in someone's income and all the connections that go with it," said McDermott.

Former Eagles Defense Tackle and radio personality Hollis Thomas is skeptical the company has the investors or the athletes in its best interest.

"I think it's kind of a shame," said Thomas. "I still don't relish giving 10 percent of my money to anybody."

Fantex said it started with the NFL because of the popularity of fantasy football. But that it is seeking other athletes in other sports and is even looking into breaking into the entertainment industry.

Most experts agree it is important to approach this as a recreational investment; a novelty, so to speak, as opposed to an investment in which you will see a big return.


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