You know the words… “Are You Ready For Some Football”?
Pro Football fans know these words by heart. And many football fans are, in a way, already investing in football players when they play fantasy football. And while not every fantasy football league has an entry fee, lots of folks put up a chunk of cash to “invest” in the performance of the individual players on their team.
But one new company wants to all the actual investment in the future of pro players- in the form of a tracking stock.
Enter Fantex, Inc…
Fantex has a brokerage subsidiary that runs an exchange of tracking stocks on pro ball players. The largest name in their stable right now is Arian Foster of the Houston Texans…
The tracking stock is like owning a minority stake in each player’s future economic success. Sounds like a cool investment for football fans, doesn’t it?
Well fellow pigskin lovers, not so fast…
I took a moment to review the SEC filing and found a ton of red flags popping up all over the place!
First off, Fantex runs the exchange for the stocks that they create. Sure, they have a cool app that allows you to monitor each player’s tracking stock and see how the price is changing, as well as trade these stocks.
Well that concerns me. Think about it…
If you buy or sell penny stocks, at least you know there are legitimate exchanges handling your orders… and in most cases provide liquidity for you to sell your holdings.
But what happens when a player has a career ending injury and their tracking stock tanks? It just went from $100 down to $1… how can you sell it before or as it tanks?
Even Fantex’s S1 filing exposes tons of risks. Here’s one right from their filing…
“Each Fantex Inc. tracking stock is intended to track and reflect the separate economic performance of a specific brand contract that Fantex has signed with an athlete. However, holders of shares of a Fantex Inc. tracking stock will have no direct investment in that brand contract, associated brand or athlete. Rather, an investment in a tracking stock will represent an ownership interest in Fantex, Inc., as a whole. These tracking stocks are offered only through Fantex Brokerage Services (FBS). FBS cannot assure you as to the development or liquidity of any trading market for these stocks.”
Basically, their telling you up front that you’re not even investing in an individual athlete… but rather shares of Fantex, Inc. itself! So if all the other players except the one you’re really “buying” have bad careers or sustain injuries- you’ll end up holding the bag.
Yep, that’s what they’re saying.
I’m just scratching the surface here. The summary of risks identified by Fantex themselves is miles long.
The bottom line…
While it sounds cool to buy shares in one of these “tracking stocks”, I’d rather keep my money invested in my crappy fantasy football team!
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