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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17th May 2022 – Money Heights – Valuation models fail to match the price paid to buy loss-making Chelsea.
25th April 2022 – Same but Different – UEFA’s proposed changes to Champions League qualification mirrors aspects of aborted Super League.
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10th February 2022 – Underwater – Manchester United’s share price fails to defy gravity and sinks below its IPO level. Has the market got wise to the club’s poor economic performance?
1st December 2021 – Fantasy Football – The Fan-Led Review findings fall short of the necessary value-driven approach to regulatory reform.
23rd June 2021 – Road to Nowhere – Football stands at the crossroads ahead of the Fan-Led Review process. We examine the key questions that it must answer.
11th May 2021 – Prime Numbers – Football’s elite clubs seek a route to profit as fans yearn for sporting tradition. In between lies a gulf of mistrust and misapprehension.
26th April 2021 – A Bitter Pill – GSK’s new strategic direction fails to find riches in the middle of a pandemic when other pharma companies have prospered.
25th April 2021 – The Wrong Stuff – American-style football league won’t wash but the conditions that led to its launch are still present and are likely to get worse.
19th April 2021 – Super League Arrives – As we predicted, football’s elite breakaway emerges from the shadows.
30th March 2021 – $hooting B£ank$ – Arsenal’s commercial performance analysed.
22nd February 2021 – Measure for Measure – Take two financial measures, add pandemic and stir.
18th January 2021 – The Football Factory – If football was an industrial entity…
8th January 2021 – The Oil Majors – An Update – A shareholder return performance review of the 4 major oil companies in 2020.
10th December 2020 – Pump Up The Volume – ExxonMobil comes under fire from an agitated investor.
16th November 2020 – The Pain Game – Manchester United’s Q1 2021 financial release opens the lid on a Covid-19-affected financial can of worms.
11th November 2020 – A Tight Squeeze – Football’s Elephant in the Room leaving little space for financial relief.
29th October 2020 – Form and Function – Proposals-a-plenty for football’s structural reform.
13th October 2020 – Project Big Profit – Americans come bearing a proposal for football’s structural reform, just as we predicted in 2016.
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11th September 2020 – Distance Learning – New rules and new values as Covid-19 challenges traditional mindsets and misconceptions.
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30th April 2020 – Home, Alone – Initial indicators from the wider economy point towards economic and financial downsizing in sport.
6th April 2020 – Board Games – Government, football clubs and players adopt separate ‘brace’ positions as Covid-19 crashes the sports economy.
27th March 2020 – Markets, Mayhem and Manchester United – A look at the questions posed by the share prices of publicly listed businesses.
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10th March 2020 – Futureworld – The potential economic effects of the COVID-19 outbreak.
19th February 2020 – Lemon Law – How Financial Fair Play can give a misleading view of football club finances.
8th February 2020 – Hammered – Our financial perspective on some of the clubs involved in the Premier League relegation battle.
12th December 2019 – The Cost of Chasing Gold– In collaboration with the BBC, we look at the high price being paid by clubs to gain promotion into the Premier League.
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7th September 2019 – Not Just A Loss But… – A detailed look at the decline in Marks & Spencer’s fortunes.
29th August 2019 – Telling It Like It Is… – What really happened when we talked to the English Football League.
5th July 2019 – Chopping Board – Knives out for former Tesco chief.
25th May 2019 –Repeat Prescription – Few believed us the first time around regarding football’s financial plight…
19th March 2019 – Stuff and ‘Nonsense’– Why the Economic Profit metric is the most transparent measure of business performance.
13th March 2019 – Financial Fair Play – Guilty as Charged? – Our thoughts on FFP schemes and their key weakness.
18th December 2018 – Long Division – The Post-Ferguson years at Old Trafford have come at the expense of declining economic and on-pitch performance.
20th November 2018 – The Relegation Game – Tales of woe and economic performance at the wrong end of the Premier League table.
9th October 2018 – A Different View – Why fans ought to be acutely aware of football’s financial dynamics.
17th August 2018 – The End of the Beginning – La Liga heads west to conquer new worlds.
9th August 2018 – Reaching for Sky – the sequel – Latest offer price for satellite TV company is good for shareholders, less so for prospective owners.
8th August 2018 – American Dreams – English Premier League economic dynamics and American money – is a Euro Super League the next step?
3rd August 2018 – Mall Administration – Retail Property Co. bonus payouts at odds with increasing shareholder value.
20th April 2018 – Goonernomics Part Deux – The departure of Arsene Wenger…
18th April 2018 – The Price of Everything – Tesco’s latest numbers offer little in value.
12th April 2018 – Say What? – WPP’s very mixed message.
14th February 2018 – In Case of Emergency – Premier League’s UK TV rights auction comes up short.
7th February 2018 – Lost in Transmission – Top Premier League clubs look beyond domestic TV rights.
4th December 2017 – A Billion here, a Billion there… – The Premier League reaches a major milestone, quietly…
25th November 2017 – Getting out of Toon. – Is Mike Ashley pitching the sale price of Newcastle United at the right level?
16th October 2017 – Goonernomics. How the ‘Bank of England’ club falls short of its North London neighbour.
25th September 2017 – Highlights. More record-breaking numbers from the biggest football club in the land, but no economic profit…
23rd September 2017 – Football’s Economic Back Pass. A guest blog for the Soccernomics website.
12th September 2017 – Crystal Balls-up. Changing strategic direction is not a good idea when you haven’t looked at the economics.
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11th July 2017 – Football Special. Observations following the launch of ‘We’re So Rich…’
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12th January 2017 – Shopping for Godot. A never-ending quest for value in Retail.
27th December 2016 – Reaching for Sky. Is Rupert Murdoch’s £10.75 per share a fair price?
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