Categorized | Alternative Investments, IPO

Fantex IPO Debuts Well Amid Skepticism

Fantex Holdings which debuted the stock of Vernon Davis yesterday saw a 20 percent increase in value for its initial public offering. A few investors came out an purchased the widely debated personal stock of the San Francisco 49er tight end, allowing many to see that the eight year veteran NFL star may have a more profitable career in years to come. The stock traded at $12 dollars per share when it closed Monday but only sold 496 shares of the 421,000 shares offered leaving many questioning the long term profits that could be made.

How Fantex Profits

Fantex is poised to earn between $1.2 million dollars and $1.4 million dollars from Davis’ this deal via his salary and other professional income. Much of the IPO shares were purchased by individual investors which has given Fantex Holdings some ground to work on, since their parent company promised to buy up some 200,000 shares if need be. While that wasn’t the case needed, it did also bring on some concern that the IPO might not do well. Fantex analyzed the longevity of tight ends who have played in the NFL over the last decade and came to the conclusion that Davis would be able to play in the NFL for a total of 14 years. With roughly 6 years left to play, pending there aren’t any major injuries or contract signing issues, the company says there are plenty of venues in which investors can profit. Similar stocks are planned to be offered for Houston Texans running back Arian Foster and Buffalo Bills quarterback EJ Manuel. The current deals are only for NFL players, but Fantex is quickly trying to expand its reach and ability to sell shares of other athletes in a various degree of sports.

How to Buy

The stocks is only being traded privately via Fantex online. And there are other restrictions as well. Only investors living within the 16 approved states are allowed to buy into these stocks, inclusive of New York, Pennsylvania, California, and Illinois. Davis isn’t allowed to publicly sell his stock until late May.

The Historic Shift in Tradingfantex

The concept of trading stock, purchasing and selling stock based on a branded image of an athlete has brought much skepticism on itself. The idea was introduced over a year ago by Fantex Holdings and became a reality yesterday. Fantex CEO Buck French thinks the move is a historic one that will change the financial way in which sports investing will work from now on. However there is much debate over the legitimacy of buying stock on one’s personal and professional brand image. The biggest issue comes from skeptics wondering if this concept in application is nothing more than a ploy to gain on avid sports fans.

Many wonder how serious investors can place money into an idea like this. Not just for the lack of an established historical trading line, or the idea that one can put a profitable price on athletes or perceived performance over a career but how to gain a profit? Specifically towards investing in Vernon Davis who has become one of the top tight ends in the NFL is still nearing the age that most players retire at. Many question whether or not investing in Davis personally is safe or even worthwhile. Since age is a prevailing factor in his long term ability to make money both from endorsement deals or the ability to physically elongate his career. Can Davis increase his current stats or will the team be able to win a Super Bowl before the end of Davis’ current contract also have come into question, as many wonder if he’ll be able to resign at all. All of these questions and doubts are leading skeptics to question the legitimacy of trading Davis’ stock.

It is currently estimated that Davis will need to acquire anywhere from $33 million dollars or better of a contract in order for the first wave of investors buying shares up at even $12 dollars per share to be able to turn any kind of profit on the investment. Since Fantex Holdings is poised to gain over $1 million dollars just on Davis’ current contract, many are left wondering if this is a worthwhile investment for many or any for that matter, outside of the company. Amid all of this skepticism, it is noteworthy to mention that while the shares undersold in numbers, they did in fact gain $2 dollars in value just on their initial offering leading many to see potential in this new kind of investing. Any kind of investing is a risky business because of both a volatile market or the risk that comes from the uncertainty of success. What everyone can agree on when it comes to more traditional forms of investing or more modern newer ideas and concepts is that without adopting some sort of risk, there can be no great rewards.

Let us know how you feel about investing in individual athletes, worthwhile or too risky?



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