It’s that time of year when Mel Kiper Jr. and other NFL draftniks talk about players whose stock is rising or falling.
The Buffalo Bills’ first draft pick from last year, EJ Manuel, is about to experience that terminology in the Wall Street sense. Starting on Monday, a brokerage firm called Fantex will sell stock in the Bills’ quarterback. The San Francisco-based firm will offer 523,700 shares, priced at $10 per share, through its website, Fantex.com.
What in the wide world of sports is going on here?
During the offseason, Manuel signed a contract with Fantex in which he received about $5 million up front in exchange for 10 percent of his future “brand income,” in the company’s words. That includes his football contracts, endorsement money, appearance fees and future endeavors such as broadcasting.
Manuel is entering the second year of his four-year, $8.9 million rookie contract with the Bills.
Investors are not literally buying shares of Manuel, so forget about holding shareholders’ meetings at his house. They will be purchasing shares of a so-called tracking stock that is tied to Manuel’s performance as a brand name and money-maker. The offering is regulated by the Securities and Exchange Commission. Like traditional securities traded on the New York Stock Exchange and the like, the value of Manuel’s stock will fluctuate based on what others are willing to pay for it.
Fantex last week began selling shares tied to Vernon Davis, the San Francisco 49ers tight end. Davis’ stock also opened at $10 per share, rose to $11 by Wednesday, and closed at $10.50 on Friday. Manuel will become the firm’s second athlete to be represented by shares of stock.
“This coming Monday people can go to Fantex.com and reserve their shares in the security,” Fantex CEO Buck French said in a phone interview. “We’ll finish up our process with the SEC and when they say you can turn those reservations into orders, that’s when we’ll take the money and give them the stock.
“The key to all of this is that it’s linked to underlying cash flow of the athlete and our goal as a business is to help increase that cash-flow stream so that ultimately we create better shareholder value.”
Fantex cautions on its website about the risk of any securities investment.
“Fantex Tracking stocks are highly risky and speculative and should be considered only by persons who can afford the loss of their entire investment,” the company says.
A known risk with Manuel, of course, is his ability to stay healthy after a rookie year in which he dealt with three knee injuries.
“It’s not that he’s not going to make any more money,” if he gets hurt, French said, “but you’re probably worried that he’s not going to play as long as you thought he was going to play. Or maybe he doesn’t play again at all, so you would see people wanting to sell, but then you might see people on the other side who are buying because the price is low and they think, now people have oversold.”
Fantex will also serve as a marketing adviser to the Bills’ quarterback. Manuel met with Fantex’s team in San Francisco over the winter and attended what it calls a CEO bootcamp to discuss branding strategies.
“Our goal is to help more broadly define in the marketplace the EJ Manuel brand such that we create an audience that’s more diversified than just people who are fans of football, quarterbacks and the Buffalo Bills,” French said. “Ultimately we believe that your brand can create a higher probability of sustainability if you actually show the other interests that you have.”