Being Arian Foster....well at least 20%

Have heard about the novel security being offered in the US concerning the NFL star Arian Foster. He has decided to sell the rights 20% of future earning for the upfront price of $10,000,000. The company that has bought the rights, fantex has in turn decided to issue 1,000,555 shares at $10 a pop to people who want to invest. Interesting stuff. The question I have is if it is a good investment. So I checked out the IPO docs. Couple of red flags

1. Firstly, this is not a growth stock. Arian Foster is 4 years into a NFL career and is currently at the peak of his powers. His previous contract (in the 2nd year of a 5 year one) is probably his best (as he is 27 and when he comes off the current one, he will be 30-31....and definitely on the decline. Post career earnings are unlikely to be as good as his NFL earnings (especially as the deal with FanTex deliberately excludes investment income)

2. As shareholders, you actually are shareholders of a company FanTex Limited rather than Arian Foster. So the Financial Asset could be sold leaving the shareholders with nothing

3. There is no secondary market for the shares. You are basically stuck with them after you have bought them.

4. The company is under no obligation to pay dividends.

5. The company has entered into an agreement with a holding company Fantex Holdings and will pay 5% of earning to them for "Management Services"

6. The stock can be diluted at any time with the addition of new "star's". Also with this initial IPO, there is a dilution that will take around $2 off the share price as current stock is converted to the new share structure.

7. The holding company will control 99% of the voting stock, meaning the shareholders will have no power at all after this offer.

So is it a good deal? Well I will let the fans decide.

Disclaimer: Not a recommendation to invest/not invest with FanTex. See your financial advisor