9th November 2022


9th November 2022

Liverpool’s owners have decided to look for ‘new’ shareholders. Translated from media double-speak, this would appear to be a statement of sale. However, given that it is football, there will be a few twists and turns along the way.

We have written at considerable length over the years about football’s failing financial and economic model, the lack of economic profits and value creation leading to regular capital injections and loans from owners and the influx of American investors seeking returns on their money.

The perspective delivered by the utilisation of the economic profit metric pointed to a structural shift which would enable clubs to guarantee revenues and control costs. The solution as we saw it was a closed league with minimal financial risk for its participants. In other words, a Super League. We first postulated this model with clear data-driven evidence in 2016. As events have subsequently proved, FSG came to the same conclusion.

In 2020, Project Big Picture was released. This vision of the future from the hands of the Glazer family and FSG pointed towards more financial power for the bigger clubs. A stepping stone, perhaps, to what was to follow…

When Super League finally emerged in April 2021, the influence of FSG was quite clear. Indeed, when the backlash from fans became too great to bear, John Henry, FSG’s owner, was one of the first leading figures to publicly apologise. Nevertheless, it revealed much about the American mindset regarding football and its financial modus operandi. Not that we didn’t know it already and indeed we explored extensively the American investor perspective in 2018. We expected Super League – it was not a shock.

Fast forward to last Monday (7th November 2022) and it seems that FSG is to be the first of the American big guns to head back home. For FSG, the game is not providing the economic returns it perhaps sees in its other sporting endeavours. Indeed, Liverpool FC remains the only Premier League club in the current divisional cohort to have achieved a collective economic profit during the period 2017-21. It is just £17.54m. From a revenue of £2.33bn That’s a ‘lotta lotta’ of work for a very, very small return.

In addition, with two state-funded Middle Eastern entities in England’s top division, the competitive landscape has moved. With a returns-focused approach, perhaps the thought of digging ever deeper into the cash reserves for talent to achieve parity on the pitch was just one step too far. The controls offered by Super League would have provided a more uniform financial landscape. Instead, the wild west beckons once again.

But there is an upside. The cost of money has been incredibly and historically low since the floodgates of quantitative easing were opened. The investment herd has moved from one asset class to another, inflating values along the way. Football has only become a stopping point in recent years. We read of the game being ‘undervalued’ and of it being a good investment opportunity. So, we speculate if FSG is calling the top of the market given that there is a global recession around the corner and the cost of money is heading upwards.

We have seen prices of £3-5bn being quoted for Liverpool FC. Manchester United’s market cap is £1.9bn. The latter loses more money as the former treads water and annual revenues are now broadly similar given United’s increasing lack of Champions League football. Of course, in a business that sees little profit, values tend to be relative based on the day’s particular multiples which appear to be derived from the direction of the wind.

Chelsea was sold for £2.5bn with an investment rider of a further £1.75bn despite averaging economic losses of £74m for each of the 10 years between 2012-21. The magnitude of change required to generate a return on these billion-level numbers beggars belief especially when Newcastle United was sold for £305m and currently sits in 3rd place in the Premier League. A bargain if ever there was one. But we wonder when the investment herd will move on to pastures new….

Nevertheless, if a price of £3bn+ can be achieved for Liverpool, it will represent a fabulous return on the original £300m purchase price over a 12-year period. The next owner may find such a return on the asset price a much bigger if not a near-impossible challenge.

Super League was a solution to a dysfunctional economic model. That solution has gone for now yet the dysfunction remains. One of its bigger supporters is getting out. Indeed, if a third state-funded entity were to enter an already-distorted domestic competition, the average fan may think that the game of football is nothing more than a pursuit to discover who has the deepest pockets. Losses become irrelevant for those owners who don’t care, relevant for those who do and painful for those who can’t afford it any more.

We’ve previously referred to a mid-Atlantic identity crisis as the game wrestles with its financial and economic imbalances. Maybe this sale brings home the fact that, for some, an easier life with a pocket full of money is a preferable choice than fighting a long-term losing battle.


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