Update, June 2020: The beautiful game has been on pause during the COVID-19 outbreak, but games are slowly returning, including the Premier League.
Here’s our look at the world of investing in football clubs.
With the Champions League just over, it seems like a good moment to take a look at investing in the beautiful game.
More money has poured into football recently than ever before, largely supported by the value of TV advertising around football. €2.04B will be distributed across the clubs competing in last year’s Champions League, much of which is based on sponsorship and TV rights.
Football’s one of the last few reliable live TV events with huge audiences; advertisers are effectively buying TV ad-space that operates on pre-Sky Plus and Internet rules. Media companies bid huge sums to win the TV rights and secure that advertising spend.
And the TV rights money then trickles down to the clubs.
The huge numbers everyone sees are usually around player salaries or transfer fees.
But how do football clubs do as businesses? And if you wanted to, could you invest in them?
In a way, the football business is quite meritocratic: winners usually do well. A huge brand, a large supporter base and presence in a big city will certainly improve financial results. But performance on the pitch is still a huge contributor.
That’s because a large part of the precious TV money is distributed on the basis of performance. Winning the Champions League or the Premiership could offer a big payday.
If you achieve consistent success and are managed with financial discipline, then football clubs can be profitable businesses.
There’s a lot of money sloshing around the game, but that includes a lot of costs. Those costs can rack up over revenues and cause big losses. If you’re calibrating your club for a certain level of performance (spending on expensive players and salaries), but miss your targets, that loss can be even bigger.
Some clubs are subsidised by wealthy owners (e.g. Roman Abramovich of Chelsea, the Abu Dhabi Investment Fund for Man City) who are happy to absorb losses or high costs for years.
That said, a decent number of football clubs make steady profits. In 2016-17, most Premier League clubs made an annual profit before tax.
There aren’t that many publicly listed football clubs available to the average investor. It’s worth remembering that even listed clubs might not have the same incentives as a regular public company. Depending on culture or the priorities of big shareholders, they may look to maximise glory, tradition or emotional goals over shareholder value
Arsenal is technically listed on a small exchange, but the small number of shares are very expensive individually and rarely available to buy. It’s public, but with very little market liquidity.
Scottish club Celtic is listed on the London Stock Exchange. The liquidity is quite low and we don’t offer them on Freetrade (but might consider if we see major demand). Scottish rival Rangers used to be listed but financial troubles led to the club going into administration. The successor business still lists shares on a niche platform called JP Jenkins.
Looking to Italy, clubs AS Roma, Lazio and Juventus are listed on the Milan Stock Exchange. Of these Juve is the biggest, most successful and most traded, but not a business I personally have that much insight on.
The biggest example of an investable football club is Man United (and it’s on Freetrade). They listed on the New York Stock Exchange back in 2012.
Their performance as a club has been rocky since the departure of long-term manager Alex Ferguson. However, their commercial and merchandising muscle, popular brand and huge global fanbase meant that the club still managed to make an annual profit in 2014, 2016 and 2017.
2018 saw a big loss of £37m, though this was largely due to an accounting quirk around deferred US tax in the wake of a policy change.
They still saw a record revenue last year of £590m. Among the elite global clubs, only Barca and Real Madrid outstrip Man Utd in total company value (although the first two aren’t public so they don’t have a tested market cap).
However stock performance has been pretty flat since the IPO.
This is just a quick snapshot into football x investing. What does everyone think about them as investments? And would anyone like a stock take-esque deep dive into a publicly listed football club (which will likely be Man Utd tbh)?
P.S. there’s a good thread going here too!
Freetrade does not provide investment advice and individual investors should make their own decisions or seek independent advice. The value of investments can go up as well as down and you may receive back less than your original investment. Tax laws are subject to change and may vary in how they apply depending on the circumstances.