A POTENTIAL MODEL FOR RECRUITING HORSE OWNERS

A start-up called Fantex has established an online platform at which adult residents of the United States can trade shares in professional athletes. Fantex received approval from the Securities and Exchange Commission to offer common stock in Arian Foster, who has a five-year $20.7 million contract to play for the Houston Texans of the National Football League and endorsement deals with Under Armour and Fuse Science.

Foster is receiving $10 million from Fantex for a 20% stake in his lifetime income from football activities, including player contracts, endorsements, and appearance fees. Were Foster to derive football-related income after his playing days are over–as a coach, a product endorser, or as a broadcaster–his wages would continue to be split with investors.

Fantex, Inc. is currently doing an initial public offering, and the funds raised will be used to sign up more athletes. Fantex will act as the umbrella company in all transactions, and set up a separate “tracking stock” for each athlete that is linked to his or her “economic performance and value.” Fantex, Inc. will take a 5% cut of the earnings due the tracking stock and also allocate to the stock a portion of corporate expenses.

The Fantex public/corporate form of ownership differs legally from the prevalent private partnership structure in horse racing. Nonetheless, both propositions are fraught with risk, particularly because of career-ending injuries and off-the-field misbehavior in the case of human athletes.

Whether the Fantex business model is viable or not remains to be seen. If the innovative and speculative concept proves to be successful, the modus operandi might work to create a more robust marketplace for trading racehorses and expanding the ownership base. Individuals without the wherewithal or desire to join a partnership would be able to participate in a highly unpredictable equine sporting venture without having to commit to a regular cash outlay.

Copyright © 2013 The Blood-Horse. Used with permission.

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