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Here’s why Fantex, the athlete stock exchange, is working

Indianapolis Colts v Pittsburgh SteelersIndianapolis Colts v Pittsburgh Steelers
Colts lineman Jack Mewhort.Photograph by George Gojkovich — Getty Images

Not everyone wants to invest in Mohamed Sanu. In fact, many football fans may not have even heard of Mohamed Sanu. But the Cincinnati Bengals receiver is trading highest ($13) on the athlete stock platform Fantex right now.

Today, the platform announced it has entered into deals with two more players: Tennessee Titans wide receiver Kendall Wright and Indianapolis Colts lineman Jack Mewhort. This brings its stable to eight.

Fantex Inc. launched almost exactly a year ago, opening up shares in its first “stock,” San Francisco 49ers tight end Vernon Davis, for $10 on April 28, 2014 (these days, Davis’s stock is down to $8.10). Here’s how it all works: when Fantex signs a new professional athlete, it sets an amount that it will pay him—a one-time fee—in exchange for the athlete giving Fantex a set percentage of all his future earnings, on and off the field, “in perpetuity.” (Yes, that means not just for the rest of his athletic career, but the rest of his life, hypothetically). Fantex must then sell enough shares in the IPO to make the amount it needs to pay the athlete. If it fails to sell enough, it will not complete the offering. The pay check it offers each athlete varies: Chicago Bears receiver Alshon Jeffery, still the biggest name Fantex has debuted, got $7.94 million, while Davis got $4 million.

The stocks, meanwhile, are non-traditional “tracking” stocks, with the price meant to reflect the current perceived success of the athlete, and Fantex holds all the power in the arrangement. When you buy a share, what you’re actually buying is a share in Fantex, the company. And most of the stocks are fluctuating very little so far, staying close to the $10 price at which each stock debuts. There isn’t enough volatility for it to be particularly interesting yet. However, at $10 a share, why wouldn’t a big fan of a certain team invest in a star from that team, even if just for fun? (Think of it as akin to being a “shareholder” in the Green Bay Packers.)

As an investment, the concept has been met with ridicule in some places. Many Wall Street traders think it’s stupid, and risky. (Fantex was supposed to debut with Arian Foster as the first stock, but he got injured just before his IPO, and the company delayed it and still hasn’t gone ahead—it showed the inherent risk in the entire concept before the platform even launched.) Felix Salmon, writing at Reuters in 2013 when Fantex was first shopping around the concept, labeled it “bad investment of the day.” In our initial primer on the business, we wrote that for the players who sign, it is basically “an elaborate PR stunt.” That is still the case, since most of the players signing with Fantex are not household names—don’t expect Peyton Manning or Drew Brees to join up—and are looking for a way to quickly earn some press and promote their personal brand. For stars with established fame and endorsement deals, it wouldn’t make sense to promise Fantex any percentage of their future earnings; they don’t need the money Fantex would pay them. But for rising stars, or those who don’t yet have any off-the-field deals, it might be appealing.

The two new athletes, Kendall Wright and Jack Mewhort, are two such names. Wright will get $3.125 million for 10% interest in his future income; Mewhort will get $2.52 million for the same percentage. Though the two of them are small names, they represent the continued growth of Fantex’s portfolio, and their signing shows that the concept is gaining traction in the NFL. Fantex has yet to sign any athletes from other sports, but says it will; CEO Buck French also told Fortune last year that he plans to go beyond sports, to sign actors and other celebrities. Fox baseball columnist Ken Rosenthal, in a piece last week about Cleveland Indians pitcher Corey Kluber’s ongoing contract talks, even suggests Kluber should sign with Fantex as a loss-of-value policy, a form of insurance for his future.

The four stocks currently trading on the site all reflect the recent fortunes of the athlete on the field, which means that in one sense, the concept is working as it’s intended. Sanu and Jeffery, who had good numbers last season, are up (Sanu to $13, Jeffery to $11), while Vernon Davis is down (to $8.10) and Buffalo Bills quarterback EJ Manuel, who played poorly, has crashed to $4.40. St. Louis Rams tackle Michael Brockers will be the next stock to go public.

Last summer, in a visit to Fortune after the debut of his Fantex stock, Vernon Davis said he expected that soon, “the whole world is going to believe” in Fantex. The company isn’t quite there yet, but it’s still chugging along, and as it continues to sign new clients, it is likely converting many skeptics.