Fantex Inc. has agreed to buy 10 percent of the future earnings of San Francisco 49ers tight end Vernon Davis for $4 million in advance of selling shares to the public.
Two weeks ago, Fantex announced the first public offering for an athlete when it filed to raise $10.6 million priced at $10 a share, according to a filing with the Securities and Exchange Commission. Fantex’s main source of income was listed as Arian Foster, a running back for the Houston Texans who has pledged 20 percent of the money he earns both inside and outside the National Football League to the company in exchange for most of the proceeds of the IPO.
Under terms of the agreement with Davis, Fantex’s plans are contingent upon its ability to raise financing to pay the $4 million purchase price upfront to Davis.
When Davis signed a five-year, $23 million contract with the 49ers in 2010, he became the highest-paid tight end at the time. His base salary this year, before endorsements, is more than $6 million.
Davis lost an endorsement deal with Vita Coco brand coconut water when he talked about a rival drink on his Twitter site this month, according to ESPN. He still has deals with Force Factor sports supplements and beef jerky brand Krave.
San Francisco-based Fantex lists among the risks in the stock the chance that a player will be injured.
Foster injured his hamstring in a game against the Kansas City Chiefs on Oct. 20. The 27-year-old is in the second year of a five-year contract with the Texans, where he’s eligible to receive a salary of as much as $23.5 million through the 2016 season, the filing shows.
Foster currently has endorsement contracts with companies such as Under Armour Inc. (UA) and Kroger Co. The Pro Bowl running back also recently acquired an undisclosed stake in Health Warrior Inc., the closely held nutrition company known for its chia bars.
Fantex Brokerage Services LLC is managing the offering along with Stifel Financial Corp. No investor will be allowed to purchase or hold more than 1 percent of any series of common stock issued by the company, the filing shows. Orders for the stock will be posted and executed by Fantex’s brokerage’s alternative trading system, and the shares won’t be listed on the New York Stock Exchange or the Nasdaq Stock Market.
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