The Athlete Stock Exchange: Can Big Time Players Make Stocks That Pay?

By Nima Tahmassebi

If you’ve ever played fantasy sports, you understand the risk that comes with picking a player with a high round draft pick. Whether they succumb to injury, enter early retirement, or find themselves entangled in off-the-field issues, real threats can plague an athlete’s career at any given moment. Last Thursday, Fantex Brokerage Services announced a plan that could transform professional athletes into real life investment opportunities; a move that could turn potential threats to your fantasy football team into a serious risk to your investment portfolio.

Fantex is set to pay Houston Texans Pro Bowl running back Arian Foster $10 million for a 20% stake in his future income. This equity share includes Foster’s current and future contracts, endorsements, and other related business revenue. With this move, Fantex is now the first registered trading platform to let its investors buy and sell stock linked to the value and performance of a professional athlete. If Fantex and other brokerage services are able to generate a similar interest from other athletes, this move may be the first step in what could be a new investment medium centered on investing stock in professional athletes.

For a majority of professional athletes, the only thing certain in sports is guaranteed money. As a result, the idea of getting paid upfront may be too good of an offer for some players to pass up. Firms will not only pay these athletes for their current performance and future potential, but will also protect their investment by building and marketing their athlete’s brand image. Players who choose to take part in this deal may not realize how much money they’re potentially parting ways with if they’re successful both on and off the field. However, this agreement also provides them with an opportunity to hedge the risk on their playing careers, as the fifth-year running back Foster has done here.  Moreover, this unique opportunity presents a serious risk to an athlete’s privacy. Now that Foster is a publicly traded entity, his medical history, criminal history, and personal life are available on public record in a lengthy prospectus.

Potential investors also face unique risks and strategies with this new concept. The idea of investing in an NFL player, let alone a majority of professional athletes, is extremely high-risk. With a variety of factors contributing to expectedly short career spans, an investment linked to the career of a professional athlete could be highly volatile and should only be considered by those who can afford the loss of their entire investment. Those who can afford the risk, however, have multiple investment strategies to choose from. One could choose to make an investment early in a player’s career with the goal of eventually getting a percentage of a big contract. Another strategy may be to purchase stock in players who will continue to capitalize on their brand image long after their playing days. Creative investors may even look to short sell the stock of certain players with the hopes of turning a profit from the predicted decline in value.

Whether or not Fantex’s deal with Foster leads to a new world of investment opportunities, this is an exciting new twist in the world of securities. Professional athletes are a high risk, highly volatile investment; however, for to those willing to take the gamble, this could be the kind of endeavor that someday makes fantasy football look like child’s play.

For further information about this blog topic, please click here