NEW YORK, Oct 17 (IFR) - Arian Foster is looking to go public - well, sort of.
Fantex Inc, an entity formed to track the revenue generation of athletes and entertainers, on Thursday filed documents to undertake a $10m IPO of Foster, the Houston Texans running back who is the company’s first (and so far only) client.
“Fantex Series Arian Foster” would be listed and traded only through a web site of affiliate Fantex Brokerage Services (FBS), and not a major stock exchange.
“The goal of Fantex Inc is to work with athletes and entertainers across the world to help build their brands to have greater value and longevity than it otherwise would have,” CEO Buck French told IFR.
“Fantex Brokerage Services is a registered broker-dealer formed to be the exclusive marketplace for buying and selling tracking stock issued by Fantex Inc that is linked to the value and performance of the brands of athletes and entertainers.”
FBS is looking to sell 1.055m shares at a fixed-price of $10, with $10m of gross proceeds raised going to Foster himself in exchange for a 20% split of his future “brand income”.
Stifel is serving as a qualified independent underwriter.
“The concept is not to take out Arian Foster, but to get a multitude of people on the platform,” one banking source said.
There are obvious risks in investing in a professional athlete, much less an NFL running back.
The 27-year-old Foster has suffered a number of injuries in his career thus far.
In 2010, when he ran for a league-leading 1,616 yards, a torn meniscus required offseason surgery. Foster, who has an irregular heartbeat, missed three games in 2011 due to hamstring issues, and recently underwent an MRI on his right calf that was strained during off-season practice in May 2013.
Even if Foster stays healthy, however, there is no guarantee the investment will pan out.
To earn a return on its investment, Fantex estimates, it will need to derive 75% of Foster’s total brand income from future NFL playing contracts and endorsements - deals, that is, that Foster has not yet signed.
The running back, who is in the second year of a five-year contract that would pay him $23.5m through 2016, would need to enter into at least one additional multi-year player contract at terms that are comparable to a similar NFL player, Fantex said in its prospectus.
Fantex expects to begin taking reservations for indications of interest in a couple of weeks. Bookbuilding would remain open for “two to four” weeks.
Pending SEC approval, investors would receive shares on a pro rata basis, depending upon the level of subscription received.