Fantex: The Vernon Davis Valuation

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Yesterday we looked at the Fantex valuation of the Texans’ Arian Foster and today we turn our attention to their valuation of Vernon Davis of the 49ers. Fantex has agreed to pay Davis $4,000,000 in exchange for 10% of his future brand income. Is this a reasonable investment for a 29 year old Tight End?

While we do not have the specifics of the Davis brand contract I’ll assume that it includes salary earned in 2013, similar to how Foster’s income included his 2013 wages from the Houston Texans.  Davis currently is under contract to the 49ers through 2015. In that time he has base salaries that total $15,122,000, workout bonus that total $600,000, and $1,200,000 in bonuses that are paid in $25,000 installments for each game in which Davis is active. If Davis was to play his entire contract out Fantex would be eligible to receive $1,692,200.

Davis has found himself in a good situation in 2013 due to injuries to the 49ers wide receiving corps and is making the most of his situation. He is currently on pace for 1,184 receiving yards which would shatter his prior career high of 965 yards. The 49ers are in a bit of a tight salary cap situation in 2014 and Davis has the 4th largest cap charge on the team per OTC estimates. Releasing Davis would have saved the 49ers over $3.2 million in cap space but his play this season has made that option unrealistic for San Francisco. He could be eligible instead for an extension that reduces his salary cap charges and adds another three years onto his existing contract.

Getting an extension at the age of 30 is not the hardship that it would be for Foster as this position has much more life. Jason Witten of the Cowboys received a long term extension when he was 29 while Antonio Gates received an extension with the San Diego Chargers at the age of 30. Tony Gonzalez has received multiple contracts since turning 30. However drawing a comparison to any of these players would be difficult as they are multi-time Pro Bowlers and All Pro players. Davis has just one Pro Bowl in his prior seven seasons. He will also be negotiating with a very tough set of contract negotiators in San Francisco who rarely overpay for their players.

Most likely Davis’ numbers would come in somewhere between Owen Daniels $5.5 million a season. and Witten’s $7.3 million a year. So for the sake of argument we can call it a $6.4 million a year extension with $10 million or so guaranteed. As a five year value that would make the contract worth $29.45 million when we include his 2014 and 2015 current seasons into the contract. That would bring him to 34 years of age and likely signal the end of his career.

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In this case I think a fair assumption would be that he would earn 75% of the contract’s total value and then maybe get one last season at around $1 million in salary. That would bring his total NFL takehome, while under a brand share contract to Fantex, to be about $29.76 million. Fantex would receive $2,975,590 meaning they would need him to earn $10.24 million in his non-playing career to recoup their initial investment. This is assuming that his 2013 wages are included in the calculation.

Much like the Foster deal this has almost no chance to be a profitable investment if profits are determined by players paying back these “advances” with interest. These deals are absolute bonanzas for the players who are nearing the end of their careers. The actual determinations of future earnings by Fantex, in regards to  these two players, shows almost no fundamental understanding of the NFL lifecycle and NFL contract structure. If the goal is to gain notoriety by signing “name players” to enhance trading on their platform and gain company interest then we can look at these as endorsement deals of sorts, except Fantex is not funding them with their own endorsement dollars, but relying on investors to get caught up in the name value and fantasy betting crazes that are extremely popular right now. Fantex may prove to be profitable but the initial investors that are funding the company on the brands of players have little chance to do anything but throw money away.

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Questions about this article? Reach Jason Fitzgerald on Twitter at @jason_otc