Football stocks: You have to be football crazy to invest in your team
Want to make money from the beautiful game? You'll need more than a passing interest, says James Daley
Saturday 23 August 2008
A few weeks ago, the Chelsea and England midfielder Frank Lampard signed a deal that will make him the highest paid football player in British history. The £150,000 salary that he will command every week is more than the average UK citizen will earn in five years – an indication of how much money now swills around in the world of football.
According to accountants Deloitte, the total wage bill for Premiership clubs hit almost £1bn last year, while total revenues raised from TV rights, ticket sales and club merchandise were only around £1.5bn. As a result, all but the biggest clubs now struggle to break even each year, and many pin their hopes for financial success on making progress in a European tournament, or winning a domestic trophy.
With the road to profit so challenging, it's perhaps no surprise that there are now only a handful of clubs left that are quoted on the stock exchange. Back in the 1990s, as broadcasting deals helped clubs to boost their revenues year on year, clubs looked like a much more attractive investment – and several capitalised on this by listing on the market.
But as wage inflation accelerated and the growth in broadcasting revenues began to slow, the shine started to come off the sector. What followed was a handful of takeovers, as football clubs became the must-have toy for billionaires. Other clubs which were not lucky enough to be rescued by a rich benefactor, quietly delisted. But a few remained.
Today, there are 10 clubs left in which you can buy shares – Arsenal, Birmingham City, Celtic, Millwall, Preston North End, Rangers, Sheffield United, Southampton, Tottenham Hotspur and Watford – each of which have seen mixed fortunes over the past few years.
Of these, the only clubs that look to have any long-term stability to their profits are Arsenal and Tottenham – both of which are tightly held, and hard stocks for private investors to get their hands on.
Around 45 per cent of Arsenal's shares are held by members of the board, who have an agreement not to sell their stakes to any outsiders before April next year. And even then, the directors have first call on each other's stakes until October 2012. Furthermore, one Arsenal share will set you back £845, putting them out of reach of most small-time investors.
Tottenham is 68 per cent owned by ENIC, an investment company controlled by the English billionaire Joe Lewis. Like Arsenal, its share price has made great gains, rising almost 500 per cent over the past five years, as the business has been streamlined and the team performed better in the Premier League. Part of the success of these clubs' share prices has also been down to takeover speculation. But the likelihood of such returns being repeated in the near future are small.
For now, it is hard for top-level clubs to get their wage bills under control. If private club owners such as Chelsea's Roman Abramovich agree to pay their players £150,000 a week, this quickly becomes a benchmark, which other clubs have to compete with if they want to attract the best players and contend for a place in the lucrative European tournaments.
David Glenn, a partner at Pricewaterhouse Coopers, says wage inflation has become a particular problem for the Scottish clubs, which now receive next to nothing for their broadcasting rights, and so rely on making progress in Europe to boost their revenues.
"The lowest clubs in the English Premier League are getting around £15m a year in TV revenue," says Glenn, "whereas Rangers and Celtic are only getting about £1.5m each. Championship clubs now get more money for broadcasting rights than the Scottish Premier League."
Earlier this month, Rangers crashed out of the Champions League in the qualifying stages. Glenn says that financially this is a heavy blow for the club. "They had a fantastic run last year, going all the way to the Uefa cup final, which would have made them an extra £20m," he says.
Sadly, the economics of football are such that the chances of making money as an investor in the long-run are not strong. The best hope for investors is that their club gets bought out by the next Abramovich. But it's a gamble, and with the smaller clubs, there's as much chance that you'll lose everything.
If you want to invest in your club as a sign of solidarity, www.framedshare.co.uk will frame a share certificate for you to pin up on a wall at home. If you want to get involved any more seriously than that, make sure you're playing with money you can afford to lose.
Diving in at the deep end is no excuse for shirking the style stakes
Mark Dampier: A safe harbour if the market recovery has overreached itself
'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers
Bargain Hunter: Eurostar offers child fares for £1 each way to Paris, Brussels and Lille
Relaxed pensions rules: Guide to what they mean to you
Moment of truth for payday lenders: Watchdog plans to curb cost of short-term loans
- 2 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 3 Why I'm on the brink of burning my Israeli passport
- 4 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Sustained immigration has not harmed Britons' employment, say government advisers
War is war: Why I stand with Israel
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Australia facing international condemnation after turning around Sri Lankans at sea
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
iJobs Money & Business
£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...
£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...
£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...
£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...
Day In a Page
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square