Back in April, Fantex opened up trading on Vernon Davis securities as the first offering on its new brokerage platform. Fantex paid Davis $4M in exchange for 10% of his earnings for the rest of his life. These were repackaged as shares that investors could trade on Fantex.
Now that I am a shareholder, I get a percentage of Vernon Davis’s earnings both present and post career. Do life insurance payouts count as post-career earnings?
Because pro athletes tend to be prudent managers of their personal finances and have a track record of being candid about their income, I’m sure we can trust that Vernon Davis and other Fantex offerings will dutifully turn over 10% of their earnings for the rest of their lives.
Celebrity securitization is not a new concept; David Bowie issued “Bowie Bonds” against his future income to promote a new album back in 1997, well after anyone even knew who David Bowie was anymore. The bonds were later downgraded to junk status.
As with any investment, there is some risk involved, and not just that of high profile athletes having a history of financial problems. The investor also assumes Fantex counterparty risk because the exchange platform is itself a startup (See Also: Mt. Gox).