Fantex is a stock exchange that issues tracking stocks tied to an athlete’s earnings. The athlete receives a few million upfront, then gives up 10% of his income for the rest of his life.
I opened an account on Fantex last summer to buy a piece of Vernon Davis. I have no idea who Vernon Davis is, but I liked the idea of turning a pro athlete into my indentured servant by proxy. (no, not really. I just like to gamble.)
I thought about becoming one of those activist investors, maybe teach Davis to code and get him a job at Google. You know, to reduce income volatility. But then I learned that I don’t actually own Vernon Davis.
The Vernon Davis tracking stock is actually one share of Fantex, Inc. It’s up to the Fantex board of directors to pay dividends based on an athlete’s income, and only if they feel like it (“permitted, but not required”).
Fine, whatever. I chose to assume that risk when I filled out their form saying I was okay with potentially losing all my money.
Until now, athlete tracking stocks could only be traded on the Fantex marketplace. But today, Fantex announced that they would offer a bundled unit of ten different athletes. And they’re gonna list this thing on NASDAQ.
Since my first purchase, Vernon Davis’s share price has traded between $12 and $4 with an average daily volume of 40. More recently, Fantex debuted a Jack Mewhort tracking stock. For the last six months, Mewhort shares had an average daily volume of 5.
That’s sad. In fact, the total number of Jack Mewhort shares that have ever changed hands on the Fantex marketplace is 471.
268,100 shares of Jack Mewhort tracking stock supposedly sold in the IPO. Where did they go?
On July 14, 2015, we completed our initial public offering of 268,100 shares of our Fantex Series Jack Mewhort. Our parent purchased 124,014 shares of Fantex Series Jack Mewhort in the offering at $10.00 per share, which was the initial offering price to the public, for an aggregate purchase price of $1.2 million. In addition, certain directors of our parent purchased an aggregate of 69,520 shares of Fantex Series Jack Mewhort in the offering at the offering price of $10.00 per share for an aggregate purchase price of $695,200.
The prospectus was filed by Fantex, Inc. The “parent” is Fantex Holdings. The only people buying up Jack Mewhort are Fantex itself and maybe Jack’s mother.
I’m not picking on Jack Mewhort here; other players see similarly little interest. Fantex doesn’t actually have very many customers. Here are all their listings and stockholders:
Fantex Holdings and its directors purchased the majority of the athlete tracking stocks at each IPO. And now all of their purchases are being pooled into an ETF thing to be listed on NASDAQ.
So Fantex raised $51 million from venture capitalists and used this money to buy career bonds from football players. They made tracking stocks for the junk bonds but couldn’t sell them on their own marketplace, so they’re repackaging the unwanted assets into collateralized debt obligations to dump on NASDAQ. And the tracking stocks are really just shares of Fantex.
1. Fantex, Inc. Files Registration Statement For First-Ever Bundled Unit Linked To Earnings Of 10 Separate Professional Athletes –fantex.com
2. S-1: Fantex Sports Portfolio 1 Units –sec.gov
3. S-1: Fantex Series Vernon Davis Convertible Tracking Stock –sec.gov