Soccer shares win new fan club

Soccer shares win new fan club

By Mike Verdin
BBC News Online business reporter

JP McManus: Why is he buying into Manchester United?

Ever heard that investing in football is a mug's game?

Sure you have.

Not when the clubs were floated, of course, typically in the mid-1990s, as soccer swapped its sheepskin jacket and pastie image for City suit and canapé.

But ever since, as club share prices fell harder than rain at a January cup tie, taking, say, Sheffield United shares from more than 100p in 1997 to 9.2p on Friday,

Preston North End now has a stock market value of £3.8m, Sunderland - a Premiership team - £7.4m.

Fourteen clubs, listed or otherwise, are in administration.

Going cheap?

So why are JP McManus and John Magnier, two well respected businessmen, ploughing money into Manchester United shares, faster even than the club is paying out in player wages?

Jack Walker: Bought Blackburn success

Some investors hope it is a case of it being darkest before the dawn.

"Football has inherent financial strengths," says John Moore of stockbrokers Bell Lawrie White.

"It has steady income, even in times like this.

"It may well be that football shares have become cheap."

Local hero

The trouble has been that, however predictable football's income, however high ticket prices and income from TV rights have risen, player wages have increased faster.

Within England's top four divisions, just 18 clubs ran at a profit during the 2000-01 season, accountancy firm Deloitte & Touche calculated in its latest sector report.

The best hope for clubs seemed to be once again to find a magnate with deep loyalty and deeper pockets.

A Jack Walker, who converted steel millions into hard success at Blackburn.

Changing times

Yet clubs are also embracing new tactics - not least sound off-the-field management.

Selected stock market values

Manchester Utd, £335m

Newcastle Utd, £42.9m

Chelsea, £27.8m

Leeds Utd, £17.4m

Spurs, £17.3m

Charlton, £13.5m

Aston Villa, £12.6m

Celtic, £9.5m

"We have seen the emergence of disciplines which football has never had before," Mr Moore says.

Even on Friday, Leeds United was announcing £3m in back-room cost savings aimed at helping the club "deal with the considerable challenges facing the football sector".

Players, meanwhile, may be starting to see sense about contracts.

Defender Dan Eggen, for example, paid a reported £30,000-40,000 to escape obligations to Spanish club Alaves and move to Glasgow's Rangers.

"The idea of a player doing that two years ago would have been unthinkable," Mr Moore says.

Going global

And this at a time when a new revenue stream is trickling over football's horizon - fees for international TV rights.

"Premiership football is an attractive proposition for international audiences," Mr Moore says.

"And the money you could get from that would dwarf what BSkyB gets for UK rights."

Signally, the roll of recent investors in Manchester United includes Malcolm Glazer, owner of American football club the Tampa Bay Buccaneers.

And it is little surprise that the shares holding up the best are those in clubs - Manchester United, Newcastle - with greatest hopes of qualifying for a potential European superleague.

Newcastle shares have rocketed by more than 50% since October.

Lucrative equation

Not that this means the prices of shares in other clubs are beyond hope of revival.

For the decline in, say, Aston Villa shares means that the club's stock market value of £13m is lower than the £20m value of its stadium alone.

A difference which, in Villa's case, cannot be explained by large debts.

So, in theory, an asset stripper could buy the club, sell Villa Park for a £7m profit, and still be left with the squad.

Mr Moore notes the rumours that Enic, controller of Tottenham Hotspur, is poised to buy outstanding Spurs shares and take the club private.

"Spurs has assets of £50m and a stock market value of £35m.

"If you take the club over, and can capitalise on that difference, you stand to make a fortune."

Back to the future

You also avoid the strict undertakings involved in running a stock market listed firm.

And the overtures required in maintaining relations with all-powerful City pundits.

But then, at an icy January cup tie, suit, wine and vol-au-vent never was a substitute for sheepskin jacket, pie and beaker of tea.