Thanks to the JOBS Act, fantasy football is becoming somewhat of a reality, as a San Francisco-based company, Fantex, has filed a registration statement with the SEC to offer equities that track the brand of Houston Texans running back Arian Foster.
In its registration statement, Fantex said that it intends to take advantage of the fact that it qualifies as an “emerging growth company” under the JOBS Act, which defines such companies as those with less than $1 billion in revenue in the previous fiscal year. As a result, Fantex has an easier time getting the sock off the ground, as there are less reporting and accounting requirements.
The stock works by way of Fantex paying Foster an upfront fee of $10 million in return for Foster agreeing to pay the company 20% of gross future earnings related to his football career, such as NFL contracts, endorsements and performance fees, even after retirement. Through Fantex’s own stock exchange, the company has proposed offering 1 million shares priced at $10 each, which gives investors a slice of Fantex’s Arian Foster Brand, which bases its value on the underlying fees coming from Foster, creating an index fund of sorts. Fantex has the option to distribute dividends based on Foster’s income, but the company is not obligated to do so.
The stock is available to all investors, and no one can own more than 1% of the total shares. Plus, those with lower incomes have further restrictions on how much they can invest.
While the offering may be enticing to fans, Fantex noted the following in its registration statement and on its website: “This offering is highly speculative and the securities involve a high degree of risk. Investing in our Fantex Series Arian Foster should be considered only by persons who can afford the loss of their entire investment.” To date, the brand has not generated any revenue and expects to occur more losses “for the foreseeable future” as they try to build the business and sign deals with more athletes.