Risky IPO seeks new way to trade star athletes

By Michael Liedtke

Associated Press

Published: Tuesday, March 25 2014 3:00 p.m. MDT

Fantex is focusing on players in a lower-income bracket. Besides Davis, the company also has lined up IPOs tied to Houston Texans running back Arian Foster and Buffalo Bills quarterback EJ Manuel. None of them have a contract that will pay more than $6.5 million next year. Fantex hopes to eventually sign similar IPO deals with other athletes outside of football.

Athletes who sign deals with Fantex get a guaranteed payment upfront and promises of help managing their personal brands for years to come. Some of the guidance may be provided by NFL Hall of Fame quarterback John Elway, a director on Fantex's holding company, and retired golf star Jack Nicklaus, who is a Fantex adviser.

Davis isn't discussing his reasons for participating in the IPO yet because of securities regulations discouraging public comments that could sway investors considering whether to buy newly issued stock. He is normally outspoken and has a wide range of interests outside football. Besides his art gallery and Jamba Juice franchise, Davis is such a big fan of curling that he served as honorary captain of the USA's team during last month's Winter Olympics.

NFL spokesman Brian McCarthy declined to comment on the IPO.

French, Fantex's CEO, is a long-time entrepreneur who scored his biggest windfall 14 years ago when he sold one of his previous companies, OnLink Technologies, to software maker Siebel Systems for $760 million. He came up with the idea for Fantex two years ago with another former Silicon Valley venture capitalist, David Beirne, and Dave Mullin, who had been a chief financial officer at several other companies and is now filling the same role at Fantex.

The trio funneled their interests in sports, finance and management into Fantex in hopes that the idea will appeal to kindred spirits.

Fantex is piggybacking on the increasing popularity of fantasy sports —a popular pastime that involves people forming leagues that revolve around the statistics of real athletes. Each fantasy participant drafts players to fill different positions. They score points based on how well their players do in real life. At the end of the season, the winner of the fantasy league wins a prize, usually a financial jackpot consisting of the entry fees.

An estimated 33.5 million people in the U.S. participated in at least one fantasy sports league last year, according to the Fantasy Sports Trade Association. The money spent on the fantasy games totaled about $3.7 billion, or an average of $111 per person, the group estimated. Football is, by far, the most popular sport for fantasy leagues.

The performance of the stock tracking Davis' career will likely hinge on whether the tight end lands another big contract after his current deal with the 49ers expires in 2015. He could end up making nearly $10.3 million, including bonuses, during the next two seasons, according to Fantex's IPO documents.

None of that money is guaranteed, highlighting the pitfalls of betting on the ephemeral careers of athletes. Injuries are a hazard in all sports, but they are more severe and frequent amid football's jarring collisions.

The average NFL career lasts just three years, although standouts usually play a lot longer.

The NFL's perils already ruined Fantex's original game plan. The company set out to test its concept last October with an IPO selling a stock Foster, a top running back for the Houston Texans. The IPO was indefinitely postponed in November after Foster got hurt and underwent season-ending surgery on his back.

Davis has never had to sit out an entire season, though he has missed some games because of various injuries, including a strained hamstring and a concussion last year. After analyzing the longevity of 212 other tight ends from 1990 through 2010, Fantex concluded Davis should be able to play for nearly 14 years.

Davis ranks among the NFL's top tight ends, although he isn't widely considered to be the best player at his position. He has never been selected as a starter on the NFL's annual All-Pro team, a distinction meant to highlight the best players at each position.

But Davis has been winning more acclaim as his career progresses. He made the second team in last year's All-Pro voting after catching a career-best 13 touchdown passes last season. Before the 49ers lost their conference championship game, Davis caught his seventh career touchdown in the playoffs to tie an NFL record for tight ends.

Fantex's projections for Davis call for his next NFL contract to be worth at least $33 million. French believes that goal is within reach, based on the deals that two other star tight ends Tony Gonzalez and Antonio Gates — two players who were voted as first-team All-Pros during their careers.

The IPO documents also paint a rosy picture of Davis as a pitchman. Fantex estimates his endorsement income during the remainder of his career could approach $9 million, even though he only has deals totaling $413,000 during the next two seasons, according to the IPO filing.

Davis could be making slightly more if he had not been fired last October as a spokesman for a coconut water called Vita Coco after he tweeted an endorsement of a competing product.

AP Sports Writer Janie McCauley contributed to this story.

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