Shares of the tracking stock tied to 49ers TE Vernon Davis yesterday "rose as much as $2 to reach $12 on the first day of trading," as 390 shares were traded as of late afternoon, according to Eric Young of the SILICON VALLEY BUSINESS JOURNAL.The trading took place "on an exchange operated by Fantex," which "toured the country promoting the Davis IPO." The company said that it "sold all of the 421,100 shares," raising $4.2M. Davis will receive $4M of that cash and the balance "covers expenses related to the deal" (BIZJOURNALS.com, 4/28). In N.Y., William Alden notes yesterday was the "the first time Fantex has brought such shares to market" and will "provide a crucial test for the young company." The shares "simulate" a 10% interest in Davis’ future income, "including the value of his playing contracts, corporate endorsements and appearance fees." Therefore, the total value of Davis’ future income "has to exceed" $42M for investors to "make money." Fantex co-Founder & CEO Buck French said that the "'vast majority' of the shares were sold to individual investors, with some buying just one share and others buying the maximum allowed amount" of 5% of the offering. Fantex "offers no guarantee of liquidity, and the shares may be thinly traded at first." The investment "does not give buyers a direct legal right to the athlete’s income." While the stock "simulates owning a portion of an athlete’s brand, it is actually an ownership interest in Fantex itself" (N.Y. TIMES, 4/29). Pitt finance professor Kenneth Lehn said that the IPO is "novel and interesting," but he warned that "ultimately Fantex's long-term viability hinges on how well the model generates income for investors. And that remains to be seen" (SAN JOSE MERCURY NEWS, 4/29).
