Arian Foster and Vernon Davis Injuries Expose Risk in Fantex Player IPOs

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The Arian Foster IPO is off, at least for now. With the star running back out with season-ending back surgery, sports marketing company Fantex says it is postponing its plan to allow investors to get in on a share of Foster's future earnings. No word yet on what it plans to do with its second star under contract, 49ers tight end Vernon Davis, who was sidelined last Sunday with a concussion.

Fantex issued a statement Tuesday night, saying that with Foster's planned surgery, postponement of the IPO "is a prudent course of action under the current circumstances. We continue to support Arian and his brand, and we wish him well in his recovery. We will continue to work with him through his recovery and intend to continue with this offering at an appropriate time in the future based on an assessment of these events."

Did it really have a choice?

Stalling out at the start
It's hard to imagine Fantex's athlete IPOs getting off to a worse start. After it first announced the Foster deal Oct. 17, the running back turned in what would otherwise be a very forgettable performance, rushing just four times for 11 yards in a loss against the Chiefs. Before he could take another handoff, news broke that Foster would need back surgery to repair a lumbar-spine issue.

While spinal surgeries are often successful, they are also known for being particularly unpredictable when it comes to recovery, and the chances of a patient needing a second operation are relatively high.  Studies have raised questions about the effectiveness of surgery over less-invasive techniques, suggesting that patients might be better off trying other methods first.

But an athlete like Foster doesn't have time to experiment with alternative treatments. For him to return to play as soon as possible, surgery is the best bet.

While all that was quietly unraveling in Texas over the past few weeks, Fantex announced a $4 million deal with Davis, the uber-athletic, 29-year-old tight end. That announcement came on a 49ers bye week, so there was no poor performance to worry about on Sunday No. 1. But just a bit more than a quarter into the next game, Davis walked to the sidelines and took himself out after falling hard on his head during an incomplete pass. It's not yet known if he'll be back this week, but this was Davis' second concussion over the past year.

No regrouping, no reinventing
The damage may already be done for Fantex. After two announcements that drew plenty of press, the company is suddenly left without a healthy star. The pitfalls of investing in an athlete's future could not have been better demonstrated in such short time.

Companies -- even small ones with few products on the market -- can respond to their failures by regrouping, innovating, or transforming themselves. Ford thrived after the Edsel. Coca-Cola rallied after it foolishly (small "f") ditched its recipe in favor of New Coke. Apple survived the Lisa desktop and the ill-fated Newton message pad to become the biggest company in the world by market cap.

Athletes, however, operate in a much more precarious state. An injury, even one that seems relatively routine for athletes, can derail a player's career in a moment. With an average retirement age of just 30, players have a short window in which to operate. Injuries steal away valuable playing time, put non-guaranteed NFL contracts in jeopardy, and bring down a player's value on the open market.

Odds of injury are high
Injuries are plentiful in football. Edgeworth Economics has been studying NFL injuries for several years. Among its findings released before this season: NFL players in 2012 suffered 1,496 injuries that kept them out for at least two games. Some 345 of those injuries required surgery.

Previous research by the company showed a total of 16,522 recorded injuries between 2004 and 2009. That comes out to 1.5 injuries per player, per year. Each season, a player stood a one-in-three chance of suffering an injury that kept him out of three weeks of play. And perhaps the most telling statistic: Every player walked into each season with a one-in-seven chance of ending it prematurely with an injury that required surgery.

What's more, running backs like Foster tend to suffer a disproportionately large amount of the league's injuries. A full 10% of the injuries recorded by Edgeworth from 2004-2009 were suffered by running backs. Quarterbacks had just 3%, and offensive linemen, of whom there are five on the field for most plays, suffered a cumulative 11%. Tight ends like Davis suffered 6% of the injuries, twice that of quarterbacks.

The Foolish bottom line
None of this is a guarantee that Fantex's athlete IPOs won't work out. Both Davis and Foster may well return and have stellar years ahead. But if the red flags weren't waving high enough to see after the initial announcements, prospective investors couldn't ask for a better view of the risks than they have right now.

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John-Erik Koslosky

Fool contributor John-Erik Koslosky has been picking his own stocks since the market crashed in 2008. He aims for a mix of value and growth, but mostly, just looks to buy great businesses.

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