Countless kids have grown up dreaming of becoming a Major League Baseball player, and the riches that come with success in the MLB.
Now there’s a way for those younger players to get some of that cash a lot earlier in their careers.
At least six MLB players have entered into contracts with Fantex, a stock firm that sells “shares” of professional athletes. The Los Angeles Angels’ Andrew Heaney was the first baseball player to enter into an agreement; since then Philadelphia third baseman Maikel Franco, Houston Astros RHP Collin McHugh, Baltimore Oriloes second baseman Jonathan Schoop, San Diego Padres third baseman Yangervis Solarte and Minnesota RHP Tyler Duffey have all entered into similar agreements for differing amounts.
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Here’s how it works: Fantex will look for athletes with a great deal of potential, but without a huge signing bonus and not a lot of household recognition. The company will then offer them an up-front sum in exchange for a percentage of all future earnings over the rest of the player’s life. This would include money from salaries as a coach, announcer, or, if the player leaves the game for good, income from a post-playing career. It would also include earnings from investments.
The deal is designed to give players get some long-term assurance against career-ending injury or under-performance but doesn’t come with an up-front cost of an insurance premium. It provides cash so the player can accomplish some things like buying parents a home, but of course it doesn’t prevent the money from just being blown.
Of the players listed above, Solarte’s agreement gives Fantex 11 percent of his earnings; the rest are signed for 10 percent. A copy of Fantex’s agreement can be found on its web page. Investors cannot buy stock in a particular player; instead they put their money in Faxtex stock.
Once an agreement is signed, Fantex then has to raise the money to pay the player. In an initial public offering, shares in the player generally start out at $10. If Fantex can’t raise the money through the IPO, the deal is off.
Agreements such as this, or similar, (if it makes money for Fantex, others will soon follow) does have the potential to affect the relationship between players and teams. Players with Fantex might avoid signing extensions that postpone free agency, and could be pressured into signing with the highest bidder in spite of his personal feelings about living in a particular place.
But Fantex CEO Buck French, in an interview with the Los Angles Times when the company signed Heaney in September, 2015, said while players have, in effect, a board of advisors to guide him, he retains full control of those decisions. The company acts as a “trusted advisor.”
“We basically have a seat at the table,” French said. But, “the athlete has all the say.”
Athletes from other sports have signed on; most of Fantex’s clients are football players. While the concept is relatively new, if it catches on it will likely have an impact on player-team relationships in small markets. Player agents once changed the business of baseball; now there’s a new influence on the future of the game.