Arian Foster IPO gets sidelined

The offering has been postponed because Foster suffered a back injury and will sit out the rest of the season.

By InvestorPlace Nov 14, 2013 12:40PM

File photo of Arian Foster of the Houston Texans on December 16, 2012 (© Scott Halleran/Getty Images)By Tom Taulli

It certainly was a unique idea: Startup company Fantex entered into an agreement with Arian Foster (pictured), star running back for the Houston Texans, to get 20% of his career earnings in exchange for a $10 million upfront fee.

The purpose: To launch an initial public offering of sorts in the running back, in which people could buy and sell Arian Foster stock.

The company started putting together the necessary papers for an IPO, but things didn't go as planned. The deal has been postponed because Foster suffered a back injury in his latest game. He’ll have to get surgery for a ruptured disc and sit out the rest of the season.

The timing couldn’t have been worse, and now it seems likely that the idea of an athlete-backed IPO may never be a reality.

Fantex had also been planning an offering for Vernon Davis, a tight end for the San Francisco 49ers. However, Davis had to leave the game this Sunday because of a concussion, raising questions about the viability of an IPO for the tight end.

Let’s face it, IPOs are already fraught with risks, as seen with recent deals like Tremor Video (TRMR) and Violin Memory (VMEM). Just look at this week’s offering from Chegg (CHGG), which is down 15%.

The IPO market is not for conservative investors.

With an offering is based on the performance of an NFL player, the risk levels are probably even too much -- even for risky investors. Besides, if people want to bet on the fortunes of the game, they can sign up for the myriad of fantasy leagues, right?

So while Fantex should be commended for being innovative, not every good idea works in practice. And when it comes to football, it’s probably best for players like Arian Foster to stick to their game on the field, not the experimental stock markets.

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Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO StrategiesAll About Commodities and All About Short Selling. As of this writing, he did not hold a position in any of the aforementioned securities.



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