While it is not often publicly vocalized, one motivation to take a company public through an IPO is to cash in during strong IPO “market environments” while transferring risk on an unknown future. Such might be the case with the recent announcement that an IPO is being planned on San Francisco 49ers’ star tight end Vernon Davis, bestowing on the athlete turned risk manager $4 million from the sale of securities while providing investors 10% of his future earnings.
“Upside call on post career earnings”
Running the math through his head, Buck French, CEO and founder brokerage firm Fantex Inc (OTCMKTS:ANFRL) that is bringing the offering public, said dividends will be paid based on current earnings. This includes his football team salary as well as his “brand” income from things such as endorsements. “The call option is in his post-career,” French noted in a CNBC interview, noting that downside risk exists in that he could sustain injury, shortening his career.
The ExodusPoint Partners International Fund returned 0.36% for May, bringing its year-to-date return to 3.31% in a year that's been particularly challenging for most hedge funds, pushing many into the red. Macroeconomic factors continued to weigh on the market, resulting in significant intra-month volatility for May, although risk assets generally ended the month flat. Macro Read More
Other professional on docket, one not so lucky
Also on the docket is Houston Texans running back Arian Foster, who signed with Fantex and had an IPO scheduled for last year. Unfortunately for Foster’s risk management plan, the IPO was a curse as he experienced season-ending back surgery that postponed the offering. French also noted that Buffalo Bills quarterback EJ Manuel also agreed to sell shares of his future earnings on Fantex’s exchange.
The vast majority of investors were individuals, according to a New York Times report.
Fantex Inc (OTCMKTS:ANFRL) was founded by technologists in the sports marketing business and like most exchanges takes a skim of the buying and selling transactions, in this case a healthy 5% of the transaction which sounds more like a brokerage commission than an exchange fee.
In keeping with the California lifestyle, the exchange will keep unconventional hours, opening at noon Eastern Standard Time (9 AM on the left coast) and close trading at 8 PM Eastern.
A “Hollywood Stock Exchange” based on derivatives contracts for movies was previously scuttled by the Commodity Futures Trading Commission. It is unclear if the Securities and Exchange Commission will have issues in the future.