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.

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NCAA President Says Change Needed, But It Won’t Include Paying Athletes

There is pretty general satisfaction with the way college athletics are governed – if you’re talking about the NCAA’s Division 2 and Division 3 schools, the smaller universities and colleges that don’t have big budgets and don’t often break into the spotlight.

But Division 1? “There is absolutely no one satisfied with the current model,” Mark Emmert, the president of the NCAA, said during an “On the Issues with Mike Gousha” session this week in the Appellate Courtroom of Eckstein Hall. The big, high-profile sports programs with huge budgets have attracted great controversy, to the point, Emmert said, that upcoming meetings will consider changes in how college sports programs are governed.

One thing that Emmert said is almost certain not to be changed is the longstanding prohibition against paying college athletes anything that would amount to salaries. Doing that has been the subject of extensive attention in the news media recently, including a cover story in Time magazine that called it “a moral imperative” to pay college athletes.

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Crime, Art, Sports, and Judge De Sanctis: An Update

De SanctisLast September, the Law School hosted a lecture by the Hon. Fausto Martin De Sanctis, a distinguished federal judge from Brazil. A former fellow at the Federal Judicial Center in Washington D.C. (2012), Judge De Sanctis has spearheaded Brazil’s efforts to crackdown on international and domestic money laundering, among other crimes. In his lecture, Judge De Sanctis described how museum-quality art served as a medium for laundering cash that left only a scant trail for investigators to follow. It is, he said, an international problem that cries for international solutions.

Judge De Sanctis has now published a book on this intricate topic, Money Laundering Through Art: A Criminal Justice Perspective (Springer, 2013).Central to Judge De Sanctis’s argument is the need to lift the secrecy that shrouds many art transactions. While art dealers proclaim the need for confidentiality and the cultivation of a mystique, law enforcement contends that this same secrecy facilitates crime and fraud. The complexities of these crimes, including references to Judge De Sanctis and his (then forthcoming) book, were recently canvassed by the New York Times in a May 2013 story. (See link)

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