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IPO to give investors a stake in NFL back

October 17. 2013 11:39PM

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SAN FRANCISCO — Here’s a new twist on fantasy sports: a San Francisco startup is offering fans a chance to bet on the moneymaking potential of star athletes.

The unorthodox and risky investment opportunity kicked off Thursday with an IPO filing proposing to sell stock for a stake in the future income of the Houston Texans’ Arian Foster, one of the best running backs in the National Football League.

The initial public offering hinges on a deal requiring Fantex Holdings Inc. to pay Foster $10 million in return for a 20 percent share of his remaining contract with the Texans, his endorsement income and any other future money tied to his football career. Those future earnings could include potential broadcasting jobs that Foster might get after his playing career is over, an option many former athletes pursue. It doesn’t include any money might make if Foster decides to pursue a career in construction or another field unrelated to football.

Fantex plans to sell 1.06 million shares at $10 apiece to pay Foster and cover other expenses. The tracking stock won’t trade on a major stock exchange; instead, they will be bought and sold on a trading platform set up by Fantex, which was co-founded last year by Silicon Valley entrepreneur Buck French.

Foster, who is in his fifth season with the Texans, is just the first player in what Fantex hopes will become a diversified line-up of star athletes.

The company is aiming to do IPOs featuring players in professional baseball, basketball, hockey and golf, as well.

“Our philosophy is to work with people who we believe have interesting brand attributes that we can work with and they can work with us,” French said. “You don’t have to be a superstar. I could see us working with big names and no names. The question is do they have attributes to build a brand for the long haul.”

French, who says he doesn’t play in fantasy sports leagues, knows something about making money. He got rich during the dot-com boom when he sold a software maker called OnLink Technologies to Siebel Systems.

Other successful figures involved in Fantex Holdings include: its chairman, David Beirne, a venture capitalist who was an early investor in online commerce giant eBay Inc.; and one of its directors, former Denver Broncos quarterback John Elway, who is executive vice president of football operations for his former team. That means Elway might be in a position to sign Foster to a contract someday.

The pedigree of Fantex’s early backers can’t conceal the highly speculative nature what the company is trying to do.

The marketability of professional athletes can go through wild swings if they become embroiled in scandals, as fallen superstars such as bicyclist Lance Armstrong and golfer Tiger Woods have proven in recent years.

There is also no guarantee that athletes, particularly in football, will have long playing careers either.

Foster, 27, already has suffered injuries to his knees and hamstring that have sidelined him in previous seasons and limited his ability to play in other games. He also has been plagued by an irregular heartbeat since he was 12, according to the IPO filing.

As a financial safeguard, Fantex is setting limits on how much money prospective investors can put into the Foster IPO. Those with an annual income or net worth below $50,000 will be restricted to a maximum investment of $2,500 while those with annual incomes or net worths ranging from $50,000 to $100,00 will be limited to a maximum investment of $7,500.

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