As British football club Leeds United will no doubt readily testify, the love match between football clubs and the stock market appears well and truly over. In fact the match is not just postponed, the pitch is so waterlogged the surface is likely to remain unplayable for a very long time. Now leading figures in the game like Gordon Taylor, chairman of the Professional Footballers’ Association, are saying football is “losing its soul”.
He could be right if recent history is anything to go by. In Leeds United’s case their shares crashed to just 5p in August 2003 and the club was relegated from the top league. It’s a salutary lesson for all would be football investors and over ambitious chairmen, where the club mortgaged its future via a disastrous securitisation plan and took on absurdly massive debts in pursuit of European football glory.
Listed football club shares over the past few years have consistently under performed the UK’s FTSE All-Share Index. A number of clubs have been delisted, acquired or gone private. Many clubs that floated in the heady days of the mid-to-late 1990s collapsed to a fraction of their original flotation price. That might be viewed as perverse given the ever ballooning transfer fees in the English Premiership.
Of 26 British football clubs to have listed between 1991 and 1997, eleven clubs (c.40%) were subsequently delisted between 2002 and 2006. These have included the likes of Aberdeen, Bradford City, Bolton Wanderers and Chelsea FC through ChelseaVillage, which was taken over by Russian billionaire Roman Abramovich.
Footballing giants Manchester United were at one time listed on the London Stock Exchange before being acquired by the Glazer family and taken private. The club, which has a healthy turnover, will no doubt continue to challenge for top domestic and European honours. They can reap rich rewards globally from merchandising.
Manchester City, which boasted a listing on the OFEX market, was acquired by Shaikh Mansour, the ‘richest man’ in football. Highlighting just how some clubs have been run, on an operating profit before player trading basis Man City posted a whopping £81.6m loss in one recent financial year.
The problems for soccer clubs appear to have been over valuation on flotation and other factors such as absurdly high player salaries. Many clubs failed to control player wages, with TV revenues going straight into their pockets. Furthermore, some clubs with huge debts are still paying fairly average players hefty wages of £50k or more a week. Many observers warned this situation was simply unsustainable.
Today English Premiership clubs can no longer rely on match day receipts alone, but need the deep pockets of a wealthy sugar daddy. Indeed, Deloitte’s annual yearbook of football has shown that just six of the twenty two football clubs in England’s top flight league made a pre-tax profit in their financial year ending May or July 2011. That group included Arsenal, Tottenham Hotspur (‘Spurs’), Newcastle United and West Bromwich Albion (‘West Brom’).
As a football club’s share price is intrinsically linked with its performance on the pitch, they have proven to be decidedly precarious investments and mainly attractive only to die-hard supporters who bought shares in order to feel they were backing their team. Few have seen any decent recent return.
For example, Midlands club West Brom floated shares at a whopping £260 each in 1997 but by mid 2003 were worth £65. And, it’s a picture mirrored elsewhere. Aston Villa floated at around £11 a share in 1997 but fell back to just 345p before being delisted and acquired by American Randy Lerner.
In Scotland, both the ‘Old Firm’ clubs in Glasgow have fared badly. Celtic, which was set up in 1888 by Brother Walfrid as a way of raising money to support children in the East End of Glasgow, saw its share price fall off a cliff from £2.80 a share in 1998 to a mere 38p by 18 October 2011 (implying a market capitalisation of £34m). While more recently Rangers FC was mired in financial mismanagement and subject of tax investigations, the club has raised money via a new share listing.
Even Spurs, which floated at £1 a share in 1993, saw its shares languishing at the 40p-mark by October 2011. This meant the club had a market value of around £90m and broadly equivalent to the touted transfer price for Gareth Bale’s services.
When the White Hart Lane club finally exited the stock market and was taken private shares in the club were trading far lower than 40p a pop, leaving many fans well out of pocket. North London rivals Arsenal, who despite not having not won a major title for six years, by contrast retain a listing and their shares trade at a healthy price.
But for other clubs outside the top flight it’s a whole different ball game. For example, Premier League attendances were 479,000 higher in the 2012-2013 season while overall attendances in all four English professional leagues were down by 247,000 (-2.3%). League One attendances collapsed by a massive 581,000 for the season and Championship attendances declined 128,000.
Over the years there have been some noteworthy examples of direct fan involvement in football clubs. Djurgaarden, a Stockholm-based club that loosely translated means Animal Farm, have played in Sweden’s top league. In 1997 the club asked an ex-hooligan and fan, Patrik Asplund, to control their supporters. It followed a teenage fan flattening a referee during a match and the club almost being kicked out of the league.
The resulting effort was to see an end to crowd trouble with Djurgaarden fans policing their other fans. Subsequently twenty supporters got sponsored by the club to pursue business studies courses and they received a stake in running a club shop, with profits reinvested in supporters’ projects.
In the UK early last year more than a thousand fans of Darlington FC, a northern English club that reached a Wembley play-off final in 2000, made cash pledges to a so-called community interest company (‘CIC’) - Darlington FC 1883. While the money was later returned to fans this May after a different ownership model was chosen, 150 supporters reinvested their cash in a new community company.
An appeal was made to the 850 ‘missing’ fans. A £200,000 target was set for a deadline at the end of June 2012, although with weeks to go £75,000 had been raised. Fans need a minimum of £100 to join Darlington’s new CIC – ‘1883CIC’ - with fans receiving discounts on club merchandise, gaining priority ticket booking and access to forums involving players.
Other clubs like Portsmouth have also embarked on fan initiatives, although chronic financial circumstances forced the situation. This April saw The Portsmouth Supporters Trust (‘PST’) set to take control of the club after a deal was done over the Fratton Park ground. In an 11th hour deal that saved the club from liquidation, fans became its owners - with PST becoming 51% shareholders in the club.
And, in May this year Oxford United fans won their bid to protect the club’s Kassam Stadium after it became the first to be listed as a community asset. Known also as an Asset of Community Value (‘ACV’) it refers to a building or other land, where its main use is to “further the wellbeing or social interests of the local community”.
The application by supporters’ trust OxVox was approved by Oxford City Council and means the group must be notified if the ground is to be sold. They will then have six months to put together their own bid for the stadium. OxVox chairman Mark Sennett noted that it was a “significant moment” for supporters of Oxford United. It should mean supporters will not have to wake up one morning to hear that the stadium has been sold - with no recourse.
OxVox’s success will no doubt interest Liverpool and Manchester United fans, who hope to protect Anfield and Old Trafford through applications to their respective local authorities under the government’s Localism Act.
Elsewhere Barnet Football Supporters’ Trust (‘BFST’) have applied for a local cricket club adjacent to the Underhill ground in north London to be classified as a Community Asset. Again it means that should an attempt be made to sell the football ground then a six-month moratorium is triggered that prevents any sale in that period.
Gerry Bates, a lifelong Bees fan and BFST director, kick-started a campaign earlier this year to bring the club back to Underhill from The Hive in Edgware, where the team plays this coming season. Dubbed ‘Back-2-Barnet’, Bates has dreamed up a campaign song and designed T-shirts to raise funds for the cause.
In the harsh light of reality, football clubs should be seen as community assets and not as a means to making a fast buck, with fans making their investment at the turnstiles - not on any stock market.