Forest PLC for the chop?

Football shares haven't been scoring on the stock market

It has often been said that the quickest way to make a million is to start with a hundred million, buy a football club and wait.

It's a sentiment that many shareholding football fans up and down the country will understand.

Soccer shares have performed abysmally since the heady days of club flotations a decade ago.

It seemed a great opportunity for fans to get more involved in their team's fortunes.

But after an initial surge, the share price of a newly-floated club always headed the same way - down.

Influence

Leicester City's are down more than 80% on their issue price at 18p, Sunderland floated at 585p and are now at 347p while Millwall shares can be had for less than 1p each.

In reality, fans have no influence over how their club is run unless they are very, very rich or hundreds of them band together.

Relegation Zone

Aston Villa - Floated at £11, now £1.60

Leicester City - Floated at £1.10p, now 18p

Millwall - Floated at 20p, now 1p

Newcastle - Floated at 140p, now 25p

Sheffield United - Floated at 60p, now 7p

For some, that financial involvement is enough. For those looking for a return, the truth is that events in the boardroom, rather than on the pitch, are more likely to affect shares.

A takeover can boost the price, but it's really about looking at other ways to make money.

In the City, as well as on the field, one club soars ahead of all the others. Manchester United is a very successful business, largely on the back of its merchandising operation.

At 137p its shares are way off their high, but the business is in good shape.

Miserable experience

Chelsea Village shares are less than half their 50p issue price, but the business has diversified to include property and travel, and is one of the better performers.

But the further down the glamour table you go, the more miserable the experience.

Ask anyone who bought shares in Nottingham Forest.

Forest get big crowds but are £20m in debt

Twenty years ago the club won the European Cup in two successive seasons, but the glory days are long gone and three years ago Forest fell out of the top flight.

Relegation from the Premiership can be a financial disaster for a club. Its players will be on lucrative contracts that cannot be supported by the takings down in the Nationwide League.

So-called parachute payments from the Premiership are meant to cushion the blow for relegated clubs.

But if they don't get back quickly, trouble looms. That's exactly where Forest finds itself.

It's losing more than £100,000 a week. Forest shares have been suspended on the Alternative Investment Market (AIM) because the club has so far failed to publish its annual results.

Even the chairman of Marks and Spencer didn't find himself being booed by tens of thousands of shoppers every time he walked into a store

It's £20m in debt and is being forced into selling its best players, making it even harder to return to the top flight.

The millionaire venture capitalist and supporter Nigel Doughty has already ploughed in £12m to become the majority shareholder. He's prepared to invest another £5m.

Meanwhile a group of fans has launched an internet campaign to raise enough money to buy the club themselves.

It's not as far-fetched as it seems; supporters of Chesterfield Town have just succeeded in doing exactly that.

Community

And on Working Lunch we've told the story of how Bournemouth became the country's first community-owned club.

There's a good chance that whoever succeeds will want to end Forest's PLC status and turn it into a limited company.

The feeling persists that football shares don't perform in the same way as other stocks.

For one thing, the aim of the club is not to make a profit - it's to win trophies. And buying the best players to achieve that can put a club into the red.

What's more if a soccer club is performing badly, there's the fans to consider.

Precarious

After all, even in its darkest days the chairman of Marks and Spencer didn't find himself being booed by tens of thousands of shoppers every time he walked into a store.

But that's an every Saturday feeling for the owners of a football club.

When the difference between success and failure rests on the width of a goalpost or the eyesight of a linesman it's bound to be a precarious ride on the stock market as well as on the pitch.

The feeling persists that soccer shares are for the diehard fans - and the diehard gamblers.

All share prices correct at 7/02/02