A Conceptual Approach to Advising High-Profile Clients

This blog post concludes the series on the Fantex, Inc. IPO by analyzing the need for competent, and honest, financial attorneys with respect to managing the wealth of high-profile clients.

It is hard to imagine that NFL running back Arian Foster received legal or financial counsel before signing his brand contract with Fantex. Under the terms of the agreement, Foster assigns 20 percent of his gross earnings to the company in return for a one-time payment of $10 million, intended to be raised through the company’s IPO. The contract remains effective indefinitely and grants Fantex the right to audit Foster’s finances. Moreover, the only earnings excluded from the 20 percent assignment provision are any movie and TV roles where Foster does not portray a football player, as well as any music that he produces or writes. The one-sidedness of this contract—and the fact that Foster actually signed it—shows that Foster’s advisors, if any, did not have his long term financial interests in mind.

Continue ReadingA Conceptual Approach to Advising High-Profile Clients

Adding Context to the Fantex Public Offering

Part 1 of 3: Legitimate or Emotional Investment?

During the NFL season, millions of fans are emotionally invested in their favorite teams and players. But since Fantex, Inc. filed a preliminary prospectus with the SEC on October 17, the notion of financially investing in professional athletes has generated considerable buzz. After letting the dust settle, a careful reading of the company’s prospectus reveals numerous red-flags regarding this IPO – most notably to potential investors.

At first glance, Fantex’s strategy to raise capital appears pretty straightforward. The company will raise $10 million by selling ten-dollar shares to the general public. Fantex also entered into a “brand contract” with Houston Texan’s running back Arian Foster. Under the terms of this contract, Fantex will make a one-time, $10 million payment to Foster in exchange for 20% of his future earnings. The company expects to enter into similar brand contracts in the future with not only athletes, but also entertainers and other high-profile individuals. If Fantex’s efforts are successful, it will issue dividends to investors. Therefore, the more shares that are purchased, the more dividends investors can expect to receive – right?

As with most IPOs, nothing is ever quite so clear. The details in the prospectus reveal that Fantex lacks any clear business model. More importantly, there is no clear plan for generating a return for investors. Based on the prospectus, it is safe to conclude that any reasonable investor would not purchase shares under this IPO. However, this offering is perfect for those investors who do not actually intend to make any profit.

Continue ReadingAdding Context to the Fantex Public Offering

Toddlers, Tiaras and the Law

“On any given weekend, on stages across the country, little girls and boys parade around wearing makeup, false eyelashes, spray tans and fake hair to be judged on their beauty, personality and costumes. … From hair and nail appointments, to finishing touches on gowns and suits, to numerous coaching sessions or rehearsals, each child preps for their performance. But once at the pageant, it’s all up to the judges and drama ensues when every parent wants to prove that their child is beautiful.” (“About Toddlers & Tiaras”, The Learning Channel).

If the parent’s quest to prove her child’s superior beauty is, indeed, the point of beauty pageants, French parents may soon need to find alternative ways of doing so. The New York Times reports that the French upper house this week passed a women’s rights bill that includes a ban on beauty pageants for children under the age of 16; the measure now goes to the lower house for discussion.

Continue ReadingToddlers, Tiaras and the Law