Shares

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The Daily Mail today carries an article about the performance of football shares and the continuing rise in player wages which is depressing same.

The Mail even starts off with a comment that Manure shares have "crashed" from 412p to 230p (following the bid collapse surely?)and shows the performance of other clubs since flotation. Now the Mail is not a paper of intellectual rigour and fails to show the relevant timeperiods over which these crashes have occured but it still makes interesting reading.

The comparison of Newcastle to Villa is interesting though. I believe both were launched at a similar time. Villa at launch were capitalised at £125m and are now down below a quarter of that at £30m, (surely much less than the market value of their squad?). Newcastle were launched with a market cap of £195m and is now at an all time low of £66m. Both clubs were launched at a time when confidence in football as an investment was sky high and times have changed markedly since. I think this puts our share performance in perspective - I don't think Newcastle is doing much better or much worse than the sector as a whole, which has performed dreadfully.

The paper comments that the rise in wages is the main culprit. It also speculates that pay-per-view might not generate the sums first mooted and notes that NTL pulled out of a £328m deal because it could not see how it could make the deal pay.

The Mail offers 2 things that could change matters and reverse the tide. First, media groups may offer a premium for control if takeover rules are relaxed (a fairly unpalatable propect I reckon) and secondly, if player power wilts then more money might flow through to shareholders. If player power wilts? - I told you it wasn't a paper noted for intellectual rigour. Football talent is a prime example of supply and demand. It's in short supply and huge demand - I see no hope of wages being held at all. Virtually the only thing that matters to a club (from a fan's OR shareholder's viewpoint) is performance on the pitch so the bulk of any cash coming in is certain to go towards improving that.

IMHO, football shares are for fun and not for profit. Unless, of course, you can get the shares of a club, fallen on hard times, in a lower division and not yet publicly launched. Then "all you have to do" is put some more money in, win promotion, get into Europe, become a plc and the rewards are mega. I wonder why no-one thought of this before...

-- Anonymous, December 29, 2000

Answers

Jonno, I agree with you regarding football shares not being for profit although I suspect shareholders of Man United may feel a bit differently. NUFC has the largest proportion of ST holder shareholders anywhere which tells a story.

-- Anonymous, December 29, 2000

>>>>regarding football shares not being for profit although I suspect shareholders of Man United may feel a bit differently

But surely that is the point. Man United are not a football club. They are simply a business with a bliddy good works team.

-- Anonymous, December 29, 2000


"...football shares are for fun and not for profit".

Unless, that is, they are owned by Cameron Hall Developments, Douglas Hall Esq., or Shepherd Offshore Ltd., in which case they have proven both fun and incredibly profitable - sadly not the case for the everyday punter who bought the shares and then found their only value was the 'fun' of owning them.

-- Anonymous, December 30, 2000


There is another possible outcome to the present situation Jonno.
The value of some Clubs has fallen to the point where there is a possibility of them being taken private again by wealthy individuals.
The major disincentive to this happening at NUFC is the high level of debt. However, in theory Messrs. Hall & Shepherd could take the Cub private again for only ca. £30 million.

Why would they consider doing this? Only if they felt there could be another upswing in the football cycle, and/or a take-off in the Club's fortunes that would enable them to subsequently float/sell the Club and make yet another substantial profit for the risk taken. Possible, but improbable.

-- Anonymous, December 30, 2000


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