Fantex Could Reshape Player Contracts
July 28, 2016 at 4:25 p.m.
By Mark [email protected]
Thanks to a relatively new business named Fantex, you just might get such an opportunity, and the business just might reshape how player contracts are done in the future.
While still a relatively small sample size, Fantex offers stock in a number of professional athletes; mostly NFL players now but with a growing number in baseball. Fantex seeks to offer athletes significant cash up front against a percentage of all their future earnings.
Fantex then sells shares of the athlete to cover the up-front payment; if they can’t sell enough stock, the deal is off. But it isn’t crystal clear whether investors can purchase stock in a specific athlete (but no, this isn’t real life fantasy sports in any way, shape or manner); it’s believed one has to put their money in Fantex instead.
Faxtex’s first client was NFL tight end Vernon Davis. The then-San Francisco 49er and current member of the Denver Broncos got a $4 million payment two years ago. In exchange, Fantex gets 10 percent of his income for the rest of his life, whether its related to football or not.
Fantex then sold stock in Davis for $10 per share in an initial public offering, if I read NASDAQ’s web page correctly, that stock is now worth $7.90.
So, in essence, Fantex is a concept where elite athletes can get the money for the big purchases, like cars and houses, without having to wait on that first big payday.
This offer clearly won’t work with athletes such as Peyton Manning, Tiger Woods or, to a lesser degree, Bryce Harper. They made so much money from the get-go that Fantex can’t offer them enough money to give up that 10 percent.
But imagine if Fantex had been around 15 seasons ago, when Tom Brady entered the league as a sixth-round draft pick out of Michigan. That stock, having started at $10 per share, might be worth a pretty penny at this point.
If Brady had taken the offer, that is.
What effect this will have on professional sports contracts remains to be seen. Fantex CEO “Buck” French said in an interview with Fortune magazine that while they will definitely have the ear of their client, the final decision as to which team to sign a free agent contract with remains strictly with the player.
No pressure, though.
So now a player can have an agent, a lawyer or two, financial advisors, union representatives and Fantex, all pulling him different directions. And a hometown discount on a contract? Granted, those are increasingly rare anyway, but might become a thing of the past.
Of course, Fantex will want that player to invest his money wisely. They’re going to get a cut of all his income for the rest of his life. Whether that income arrives in the form of a paycheck, a dividend check or profits from any number of business ventures, Fantex will typically get 10 percent of it.
I decided a long time ago I couldn’t be an agent, and the job of a general manager has its appeal but dealing with agents would be on the list of dealbreakers for me.
French said in the Fortune article that he and his group thought there had to be a way to tap into the big money professional athletes make. Given the substantial number of those athletes who wind up broke (enough for ESPN to make a movie about them) is it wise to have another set of hands in the cookie jar?
From where I’m sitting, I’d say no. But I’m not the one being pursued, and I don’t come from the same background as a lot of these athletes. But Fantex is making it clear the money isn’t a loan, and there’s no buying it out.
So even if a pro athlete winds up a sports writer, Fantex gets 10 percent.
As the kids today might text: SMH.[[In-content Ad]]
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Thanks to a relatively new business named Fantex, you just might get such an opportunity, and the business just might reshape how player contracts are done in the future.
While still a relatively small sample size, Fantex offers stock in a number of professional athletes; mostly NFL players now but with a growing number in baseball. Fantex seeks to offer athletes significant cash up front against a percentage of all their future earnings.
Fantex then sells shares of the athlete to cover the up-front payment; if they can’t sell enough stock, the deal is off. But it isn’t crystal clear whether investors can purchase stock in a specific athlete (but no, this isn’t real life fantasy sports in any way, shape or manner); it’s believed one has to put their money in Fantex instead.
Faxtex’s first client was NFL tight end Vernon Davis. The then-San Francisco 49er and current member of the Denver Broncos got a $4 million payment two years ago. In exchange, Fantex gets 10 percent of his income for the rest of his life, whether its related to football or not.
Fantex then sold stock in Davis for $10 per share in an initial public offering, if I read NASDAQ’s web page correctly, that stock is now worth $7.90.
So, in essence, Fantex is a concept where elite athletes can get the money for the big purchases, like cars and houses, without having to wait on that first big payday.
This offer clearly won’t work with athletes such as Peyton Manning, Tiger Woods or, to a lesser degree, Bryce Harper. They made so much money from the get-go that Fantex can’t offer them enough money to give up that 10 percent.
But imagine if Fantex had been around 15 seasons ago, when Tom Brady entered the league as a sixth-round draft pick out of Michigan. That stock, having started at $10 per share, might be worth a pretty penny at this point.
If Brady had taken the offer, that is.
What effect this will have on professional sports contracts remains to be seen. Fantex CEO “Buck” French said in an interview with Fortune magazine that while they will definitely have the ear of their client, the final decision as to which team to sign a free agent contract with remains strictly with the player.
No pressure, though.
So now a player can have an agent, a lawyer or two, financial advisors, union representatives and Fantex, all pulling him different directions. And a hometown discount on a contract? Granted, those are increasingly rare anyway, but might become a thing of the past.
Of course, Fantex will want that player to invest his money wisely. They’re going to get a cut of all his income for the rest of his life. Whether that income arrives in the form of a paycheck, a dividend check or profits from any number of business ventures, Fantex will typically get 10 percent of it.
I decided a long time ago I couldn’t be an agent, and the job of a general manager has its appeal but dealing with agents would be on the list of dealbreakers for me.
French said in the Fortune article that he and his group thought there had to be a way to tap into the big money professional athletes make. Given the substantial number of those athletes who wind up broke (enough for ESPN to make a movie about them) is it wise to have another set of hands in the cookie jar?
From where I’m sitting, I’d say no. But I’m not the one being pursued, and I don’t come from the same background as a lot of these athletes. But Fantex is making it clear the money isn’t a loan, and there’s no buying it out.
So even if a pro athlete winds up a sports writer, Fantex gets 10 percent.
As the kids today might text: SMH.[[In-content Ad]]
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