Minggu, 20 Oktober 2013

IPO yourself !

Initial Placement Offer (IPO), is the first sale of shares in a company to the public - remember Facebook's IPO and now coming on, Twitter's IPO. It is when successful entrepreneurs who have built a good business cash their millions, along with those who invested early in their company. We've heard of company IPOs. But have you heard of an individual IPOing himself ! That's is what is about to happen - where else ? in the US of A.

An American Football player (remember this is American football; not soccer), is trying to do just that.  Arian Foster is a running back with the Houston Texans, a NFL team. NFL players are paid a fair few millions - being considered more valuable than surgeons or distinguished professors (Profs J and Khe please note !). Now football players are better known for exercising their brawn and are not necessarily top notch in the brains department. Enter financial advisers, brokers, agents, managers and all sorts  who want to touch and feel all that money. Being very bright, they cook up all sorts of ingenious ideas and schemes. The latest is to IPO yourself !

This is how it works, A company has been formed whose only business is the income streams associated with Arian Foster.  They are issuing 20% of the shares of this company for $10 m. He already has a $23.5 million contract with the Houston Texans. In addition he may get endorsement deals and after he retires, hopefully some broadcasting deals. Investors can get a 20% share of all this. If you believe Foster is a huge star, this will be a nice worthwhile investment. If you believe he is a dud, then well .........

This deal sounds strange, but actually is a fairly straightforward affair. The future income flows of a NFL Player can probably be predicted with greater certainty than those of a company. For starters he has a guaranteed $ 23.5 m contract - so a $4m share at 20% is assured. Knowledgeable sports buffs (like yours truly !) can make informed predictions of the future for players. So, this can be an easier evaluation than many others.

I should admit is that this is not the first instance of somebody doing this. The British rock star David Bowie famously did this a while ago. Some other, less famous people have also attempted it. What is strange is all the "innovation" happening here. Surely the best brains in the land can do more productive things than dreaming of an IPO for a player. But then most of the world's innovation is going into areas such as this and not into what society might consider as more useful areas. 

The person most vulnerable in all this is Arian Foster himself. Once he signs this deal, he has virtually pledged his soul to the financial whiz kids. He cannot make any decision anymore regarding anything. If he wants to switch teams, he has to take the approval of the shareholders. If he wants to retire - then too. If he gets injured, he will be cursed and told to get on to the field even if he hobbles on one leg. They will make him do all sorts of endorsements or whatever to earn more money. They might force him to play off season in Matabeleland. And well, after retirement, he has to keep slogging, finding ways to earn more money. Is all this worth a "mere" $10 m.

 Prof Khe might want to to consider IPOing himself too. He can become an instant millionaire. This blogger is prepared to "invest" 24 million manat for a 10% stake in him  !!
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