Valuation of the Week
#8: Valuing a Professional Athlete's Earnings Potential
In this week's valuation, I am going to go back into my archives and pull up an unusual valuation that I did in October 2013 of a tracking share in a professional athlete. The athlete in question is a running back in the NFL, Arian Foster, and the tracking shares were offered by a company call Fantex. By buying these shares, you effectively are buying a share of Arian Foster's earnings (from both his NFL team and advertisting sponsorships). You can read the blog post where I lay out the challenge here. You can download the prospecus filed by Fantex, as a prelude to the offering by clicking here. Finally, you can see my feeble attempt to value the Arian Foster tracking stock here.
The tracking store on Arian Foster was actually never issued, since he got hurt, but Fantex continued on and you can read about them here. You can see their offerings by going to the Fantex site.
As you read the prospectus, look at my spreadsheet and then at the list of the athletes, here are some questions to consider:
- Why is the NFL so over-represented on this list?
- What type of athlete is most likely to want to sell a share of his or her future earnings? What type of athlete's earnings would you most like a share of as an investor?
- What is the optimal structure of this earnings sharing? (What percent of earnings should it be? Should there be a ceiling? How about a floor?)
- As an investor, how would your valuation of a portfolio of athletes be different from a single athlete?
- If football is not your sport, take your favorite athlete in your sport and think about how much you would pay for a share?
- If sports are not your thing, do you think that this model can be extrapolated to entertainment figures?
- Arian Foster: Prospectus
- Valuing Arian Foster's Earnings Potential