Football Share Review

Malcolm Glazer’s takeover of Manchester United and subsequent removal from the London Stock Exchange signalled an end not just of Red Devil ownership, but also an era of football financing.

Many fans and investors in football shares will now be asking what the future holds install for football as an investment.

There is no hiding that most of the football clubs which were floated in the mid-to-late 1990s are now finding themselves worth just a fraction of their original floatation price.

The top leagues and clubs have felt the financial effects from many events, including over-valuation on flotation, the dotcom crash, the collapse of ITV Digital and increased player wages. That said, most clubs are now slowing the growth in player wages - with the exception of the deep-pocketed Chelsea – according to reports from the Deloitte football finance report.

Today, it seems apparent that only die-hard football club fans are prepared to invest in football shares. Most Premiership clubs look unlikely to be floated any time soon.

"It is possible that a top club like Arsenal could seek a full flotation," says Vinay Bedi, football analyst at stockbrokers Wise Speke.

"I don't say it will never, ever, happen again - but it would have to be a top club playing in Europe every season. For a club like Arsenal, it would be a significant way to raise significant amounts of money.

"For other clubs, such as mid-table Premiership, or a "yo-yo club" going up and down between Premiership and Championship, I think it is unlikely."

Bedi used North-East football clubs Newcastle United and Sunderland as examples of stock market failure.

Newcastle United Shares

Newcastle United floated in 1997 at 135 pence per share. The issue was over-subscribed and thousands of loyal supporters and businessmen alike paid approximately £500 for a stake in the club. Unfortunately, shares in the club are now trading at around 45 pence.

Mr Bedi said, "The reality is that Newcastle have never really got back to anywhere near their float level. It had a little move upwards after flotation but it has been a generally downwards pattern ever since."

A large chunk of Newcastle United Football Club is in the hands of the Hall family who may, according to Mr Bedi, be eventually willing "to sell, if they could get a premium price".

Sunderland Shares

Just down the North East English coast, Sunderland delisted its shares in the autumn of 2004 after floating on the stock market in December 1996.

As with many other football clubs, Sunderland saw little potential for raising capital on the stock exchange.

Sunderland still remain a public limited company with shareholders, but will no longer be listed on the stock exchange.

Shares went on sale at 585 pence, valuing the club at £62 million. The float raised £10.7 million, allowing the club to build the Stadium of Light. When Sunderland delisted, the shares were worth just 31.4 pence each.

Their constant promotions and relegations did not help the club. The loss of revenue after dropping from the Premiership would cause financial difficulty for any club, especially one who were building a new stadium at the time.

Clubs with listed shares

Arsenal (Holdings)
Aston Villa
Birmingham City
Celtic
Charlton Athletic
Heart of Midlothian
Manchester United
Manchester City - Ofex
Millwall (Holdings)
Newcastle United
Preston North End
Rangers - Ofex
Sheffield United
Southampton (Leisure)
Tottenham Hotspur
Watford (Leisure)
West Bromwich Albion

Along with Sunderland, a number of other football clubs have withdrawn their listings over the years, including Aberdeen, Bolton, and Chelsea, which were famously bought by Russian billionaire Roman Abramovich.

"I would not be surprised if a number of other club shares are eventually delisted. To be honest most football shares have done pretty badly," says Harry Philp, an analyst at football consultancy Inner Circle Sports.

"The reason has generally to be with high football issues, such as high levels of wages and the power of the players."

Philp mentioned that recent share issues at Glasgow rivals Rangers and Celtic were underwritten by major shareholders already at the clubs - David Murray at Rangers and Dermott Desmond at Celtic.

"Most of football shares are not actually being traded… the only ones buying in are fans who do not already have shares, they are buying for sentimental reasons to have a share in their clubs.

"Other fans, who bought shares initially, are wary about getting their fingers burnt again."

Date: 26.07.05

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