No Pain, No Gain: Why football shares always shoot wide of the goal

Most football shareholders are, of course, not in it for money. Their involvement is purely sentimental; they want to demonstrate their support for their club.

Indeed many of them - as we witnessed with Manchester United - would be furious at being forced to accept what, in investment terms, is a generous offer but from what is regarded as an unfriendly source. A dozen football clubs are quoted and three are on the fringe Ofex market. I do not think any deserve serious investment attention.

Many football shares are trading a long way below the prices at which they were floated. An uncomfortable number have failed to survive, either going bust or being taken private on penny-pinching terms.

Of the remainder, there is a chance that Aston Villa, run and effectively controlled byDoug Ellis, and Newcastle United, which has splashed out £16m for the England striker Michael Owen, are in the takeover frame. Aston Villa, where the potential for property redevelopment looms large, has had a few approaches and there are hopes that directors will bid for Newcastle. But one thing is certain. If bids do materialise, early investors will not get all their money back. Newcastle, now 56p, floated at 135p in April, 1997, and Aston Villa (373p) at 1,100p in the following month.

Manchester Utd, as is so often the case in the crazy world of football, turned in a winning financial performance. The Glazier family's controversial 300p a share offer was some 20 times above the flotation price. And Man Utd was one of the few clubs making profits and paying dividends.

Arsenal, one of the Ofex contingent, is another to reward shareholders - combining success on the pitch with a soaring share price. It is difficult to find a starting point for the Arsenal display because it was one of the shares traded on the Stock Exchange's old matched bargains market.

The decision to kill what was a valuable fringe share trading facility is one of the abiding City mysteries. Still it led to the creation of Ofex where Arsenal shares have risen from £700 10 years ago to around £4,450. The club's commercial potential, according to some observers, will be transformed when its new north London stadium opens next year.

In the meantime it has produced nearly doubled profits of £19m but there is once again no dividend. Arsenal shares are a narrow market. The club's directors have substantial stakes and the heavyweight price does not help.

In investment terms there is no doubt that most football clubs have been an absolute nightmare. Many floated in the heady days of the last decade when the City, quite inexplicably, decided it could cash in on the football boom. In general it is only the star players and related back-up staff that have attracted cascades of cash. Some directors and executives have also scored. Clubs in the lower divisions are often impoverished.

Rupert Murdoch's BskyB is the major corporate beneficiary through its television deals. But even its monopolistic role is under threat as the European Union seeks to end its exclusive deal with the Premiership. If Sky's football coverage is reduced it could hit both broadcaster and clubs.

Signs of a slackening in the game's popularity could also make the bizarre world of football finance even crazier. Make no mistake: any fall off in the cash flowing into football clubs, particularly those where players have achieved king's ransom contracts, could have a devastating impact. And if the top clubs suffer the already fragile finances of the rest will come under increasing strain.

Football shares were not made for the stock market. Indeed most sporting shares are ill equipped for such a relentless and unemotional world. Takeover bids, in general, are unpalatable to club supporters but meat and drink to investors. And with profits often unobtainable and dividends a rarity, there is little chance of the gap between the demands of fans and investors ever being closed.

Michael Owen is thought by Newcastle to be worth £16m but the stock market is far from convinced. The club's shares were unimpressed by his arrival. In footballing terms he may justify his transfer fee and four-year contract. Certainly the club's supporters think so. Whether he will enhance shareholder value is harder to say - that is why Newcastle's shares did not join the celebrations.