Fantex, a brokerage that allows fans to buy and sell shares in future earnings of athletes it has bought a stake in, filed papers with the Securities and Exchange Commission on Monday with the intention to sell a portfolio of athletes under a single symbol on a national stock exchange for the first time.
The offering would initially be sold exclusively by investment bank UBS and, if approved, will be listed on NASDAQ under the symbol FXSP.
Investors will be betting on the future earnings of 10 athletes: Denver Broncos tight end Vernon Davis, Chicago Bears wide receiver Alshon Jeffery, Cincinnati Bengals wide receiver Mohamed Sanu, Pittsburgh Steelers linebacker Ryan Shazier, Tennessee Titans wide receiver Kendall Wright, Dallas Cowboys wide receiver Terrance Williams, Buffalo Bills backup quarterback EJ Manuel, St. Louis Rams defensive tackle Michael Brockers, Indianapolis Colts guard Jack Mewhort and Los Angeles Angels pitcher Andrew Heaney.
Fantex has purchased a percentage of future earnings in these athletes. Contract and endorsement money will come into the company in the form of revenues. When the athlete retires, appearance fees and broadcasting contracts are included in the deals.
While there are injury and character risks associated -- the company's first deal with an athlete, Arian Foster, was undone by injury -- Fantex co-founder and chief financial officer Dave Mullin said what attracted UBS to the offering is that "the money is not as correlated as others are to broader economic forces."
Like any other security, the portfolio of athletes can be traded at any time and provides occasional payouts to investors.
Since buying 10 percent of Davis' earnings two years ago for $4.2 million, he has returned a dividend of $1.50 per share to his original investors.
Jeffery, who sold a 13 percent stake in his future earnings to Fantex last year for $7.9 million, makes up more of the portfolio than anyone at 19 percent. That's followed by Heaney (14 percent) and Wright, Shazier and Williams (13 percent). Davis is the smallest part of the portfolio at 3 percent.
Mullins said the company, since starting two years ago, is now getting calls from athletes and agents. But company officials aren't jumping at every marketable name.
"We know that the skill positions are the attractive, sexy parts of the business," Mullin said. "But it's understood that investors want cash on cash yields, and we've found that linemen, for example, are reliable, play for a long time once they are established and are paid very well."
Having the portfolio listed on NASDAQ allows the company to file additional athlete investments and offerings just through the SEC. The previous six IPOs had to go through both the SEC and the states in which they were offered.