With shares, 49ers tight end Vernon Davis puts self on the market
February 10, 2014 9:52 PM
Paul Sakuma/Associated Press
Fantex Holdings is offering investors a share of future earnings from San Francisco 49ers tight end Vernon Davis.
By Michael Sanserino / Pittsburgh Post-Gazette
Unless your last name is Rooney, owning a football team might be a little out of your price range. But a new company is offering investors the chance to buy a stake in a star player -- and the company is bringing its pitch to Pittsburgh.
Fantex Holdings, a San Francisco-based brand building company founded late last year, is offering investors a share of future earnings from San Francisco 49ers tight end Vernon Davis. As part of a nationwide publicity tour for the tracking stock's initial public offering, the company is putting on a presentation for interested investors at 7 p.m. today at Jerome Bettis Grille 36 on the North Shore.
Mr. Davis, 30, has played his entire career with the 49ers after the team drafted him with the sixth overall pick in 2006. He has twice been selected to the Pro Bowl and has two years remaining on a five-year, $37 million contract, which when signed was the most lucrative deal in National Football League history for a tight end.
But it is what Mr. Davis does off the field that interested Fantex when the company started recruiting athletes within the past year.
A studio art major at the University of Maryland, Mr. Davis owns an art gallery for emerging artists in San Jose, Calif. He will travel to Sochi, Russia, next week to serve as honorary captain of the U.S. curling team in the Olympics.
"He's just an interesting, multidimensional individual who has the potential for a lucrative post-career," Fantex CEO Buck French said.
By creating a security that is tied to his future revenues, Fantex and its investors have a big interest in helping that brand grow.
Technically, investors won't own shares of Mr. Davis. Instead, they will own shares of Fantex Inc., a subsidiary of Fantex Holdings that owns the rights to his earnings. Investors will not have any voting rights. Trading will take place exclusively on an exchange operated by Fantex, and the company will earn a percentage of all future trades.
Investors will be able to earn dividends, likely paid in the offseason, but they could also see the value of their investment increase if Mr. Davis' brand grows beyond current projections. Mr. French hopes to have a large pool of small investors, rather than a small pool of high-dollar investors, so there are a lot of stakeholders in the value of Mr. Davis' brand.
"Our whole premise is to build the brands of the athlete and the entertainer," he said.
Under the arrangement, the company will pay Mr. Davis $4 million in exchange for 10 percent of all future football-related earnings, which includes player contracts, endorsement deals and broadcast contracts should he decide to turn to TV when his playing days are done.
Fantex is offering 421,100 shares of "Fantex Vernon Davis" at $10 per share. The company, which filed a registration statement with the Securities and Exchanges Commission in November, will pay Mr. Davis upon financing of those shares.
For Mr. Davis, the deal means an infusion of cash. He's playing in a league where a large percentage of the promised income in player contracts is not guaranteed. Injuries can instantaneously derail a player's career. But the deal also means he could gain a lot of advocates who will help his brand grow.
For investors, it is a risky investment that could yield big returns -- Mr. Davis' current contract expires in 2015, and a new deal could earn him and his investors millions more.
Fantex warned in its prospectus the shares are "highly speculative and the securities involve a high degree of risk." The company disclosed that investments should be made only by people "who can afford the loss of their entire investment." It also disclosed injuries he's had during his NFL career.
Though Mr. Davis is due to receive $9.05 million over the final two years of his current contract, none of that money is guaranteed. The 49ers could cut Mr. Davis, who was selected to the Pro Bowl last season, without paying him any of that remaining salary.
Fantex estimates that 77.3 percent of Mr. Davis' lifetime earnings will come from future contracts, whether as a player, an endorser, a coach or a broadcaster.
If he retires from football for reasons other than injury, illness or medical condition within two years, he is required to pay the company $4.2 million to compensate investors. Otherwise, investors are assuming the same financial risk as Mr. Davis every Sunday he suits up.
While the business model is new for athletes, celebrity bonds have some history.
British glam rocker David Bowie sold bonds -- dubbed "Bowie Bonds" -- in 1997, raising $55 million, according to Forbes magazine. More recently, Sesac Inc., a Nashville, Tenn., company that owns broadcast royalties for artists such as Bob Dylan and Neil Diamond, attempted to raise $300 million by selling bonds backed by those artists' music in 2012.
The tracking stocks that Fantex offers are different, Mr. French said, because the Bowie Bonds and others were based on royalties of previous work. The tracking stock is based on future revenues.
Mr. Davis will become the first athlete to sell his brand to investors.
Fantex had a deal with Houston Texans running back Arian Foster, but sales of those shares were postponed after Mr. Foster underwent season-ending back surgery in November. The company still might explore selling shares in "Arian Foster Brand" at a later date.
Fantex is pursuing other athlete deals but does not have any commitments, the company said. Mr. French said he anticipates other athletes will sign on if Mr. Davis' IPO proves successful.
The event tonight, which Mr. Davis will not attend, is open to the general public. More information is available at Fantex.com.
Michael Sanserino: firstname.lastname@example.org, 412-263-1969 or on Twitter @msanserino.
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