Investing in athletes: NFL’s Vernon Davis, the next GE?

Turning athletes into stocks
Turning athletes into stocks   

Football fans already are emotionally invested in their favorite team or player, but those who want to become financially invested in certain players can buy stocks offered by Fantex.

The San Francisco- based company, which focuses on brand acquisition, marketing and development, acquires minority interests in the income associated with an athlete's brand.

"You can create a brokerage account and either reserve shares in upcoming IPOs or you can buy shares in the secondary market and place a bid order in the marketplace and buy them from other people who own shares, just like you do on the secondary market on the NASDAQ or the NYSE," Fantex co-founder and CEO Buck French said in an interview with CNBC's "Power Lunch."

So far, investors can buy a tracking stock that's linked to the underlying cash flow associated with the brand of San Francisco 49ers tight end Vernon Davis and Buffalo Bill's quarterback EJ Manuel on

San Francisco 49ers’ Vernon Davis (85) runs the ball against Dallas Cowboys’ Sterling Moore (26) in Arlington, Texas.
Getty Images
San Francisco 49ers’ Vernon Davis (85) runs the ball against Dallas Cowboys’ Sterling Moore (26) in Arlington, Texas.

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The athletes receive a lump sum up front in exchange for a percentage of their future earnings on and off the football field. Davis received $4 million in exchange for 10 percent of his future cash flow. Manuel received $5 million for 10 percent of his future earnings.

Just like the NASDAQ and NYSE, some days are better than others.

Manuel's stock price has dropped more than $4 over the past week, a reflection of his performance on the field. He's been benched as the starting quarterback. Davis' stock has been less volatile but has dropped slightly on news of back spasms and a questionable status for week five of the season.

"The more proven players [like Davis] can have a lower risk rate, lower upside too, but they are more, as I like to say 'GE-like.' They have done it, they are going to continue to do it," French said.

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Manuel's stock is "more of a potential growth-type stock," he added. So are anticipated shares of Cincinnati Bengals wide receiver Mohamed Sanu, which are expected to start trading later this fall.

Two other IPOs are pending as well.

The IPO of Houston Texans running back Arian Foster, the first player to sign up with Fantex, has been delayed due to injury since last year.

Chicago Bears wide receiver Alshon Jeffery is also awaiting IPO. He'll receive $7.94 million for 13 percent of future earnings.

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Invest in a football player?
Invest in a football player?   

Financial advisor Jack Brewer, a former player with the National Football League, thinks it's a smart move for athletes.

"In the NFL, average careers are 2.3 years, and if you look at a case like Vernon Davis or EJ Manuel, these players got pretty fair valuations for their talent levels. From an athlete's perspective, I think it's more of an insurance policy, more than anything," he told "Power Lunch."

"It's an opportunity to hedge yourself, you're not taking on all of the risk, you're passing 10 percent of your future earnings risk on to investors."

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While money is one reason athletes sign with Fantex, French said it isn't the primary one.

"They want to build a sustainable brand in their post-career, and they see this as a tool with which to achieve that," he said.

The company also plans to branch out beyond the NFL.

"Our goal is to sign athletes across the world of sports and to go in the entertainment sector," French noted.