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NFL Stock Market Hinges on Arian Foster's Finances

Updated from 10:20 ET to reflect Fantex CEO Buck French comments throughout

NEW YORK ( TheStreet) -- Arian Foster, the Pro Bowl Houston Texans running back who is started in more than 98% of Yahoo! fantasy football leagues, apparently is selling stock in himself in what looks like a clever initial public offering.

I am not so sure.

After reading disclosure documents filed with the Securities and Exchange Commission regarding the "Arian Foster IPO," it appears that prospective investors are actually buying a convertible stake in Fantex Brokerage Services , a money-losing firm that is just 12-months old and is seeking to turn NFL player contracts and earnings steams into a tradeable marketplace.

Worse yet, Foster fans hoping to invest in the star running back's future could find out they are actually lending him money with no strings attached. Still, after an email exchange with the company, it seems that this prospective listing is a serious attempt at offering NFL fans with a new experience and players with a product that can help them financially.

In a previous version of this article TheStreet analysed the S-1 documents and highlighted Arian Foster's creditworthiness as the biggest risk of the offering.

However, Fantex CEO Buck French said in an e-mail exchange that a due diligence process showed Arian Foster had "substantial amounts of cash and liquid investments and no debt." In other words, Foster carries a debt-to-asset ratio of zero, according to French, who said that Foster has current assets that exceed his current liabilities by an amount at least equal to the next 24-months of payments anticipated as part of the share offering.

Those comments provide new information to what is disclosed in Fantex's S-1 and help to alleviate some of the risks stated by the company in its Arian Foster offering.

The New York Times Dealbook section also has a good  profile of the Harvard MBAs, hedge fund managers and all-pro players behind the offering who may have opened up a new Pandora's Box for football addicts if gambling lines, cable TV, fantasy leagues and in-person attendance have become a bore.

Still, a read through disclosures of the share offering raises question marks that prospective investors should be weary of. They should know what they will own and the associated risks of the equity.

What jumps out is that Foster fans will not have any claim on the income he will earn from football contracts, endorsements and the like.

They, instead, are investing in Foster's so-called "brand income" as collected by Fantex Inc. , the actual equity being sold. 

Prospective investors are paying $10 million for a tracking stock that is tied to Fantex's 20% interest in the "brand income" Foster will generate from future contract and endorsement earnings after February 2013. Investors will, however, have a direct equity interest in Fantex and all of its associated expenses, stock compensation and management judgment.