Newcastle United may go private Financial Times; Oct 1, 2001 By MATTHEW GARRAHAN

Two of the largest share-holders in Newcastle United are understood to have sounded out bankers over taking the company private. The move is likely to prompt other Premier League clubs to do the same.

Douglas Hall and Freddie Shepherd control more than 50 per cent of Newcastle United's equity and are thought to have grown frustrated at its languishing share price. Neither man was available for comment.

Newcastle, which has on its books players such as Alan Shearer, the former England captain, and Laurent Robert, the French international, has a market capitalisation of about £40m - a significant discount on its flotation valuation of more than £190m.

Negative sentiment in the football sector has prompted a number of other Premier League investors to consider an off-exchange move.

"We'd be crazy not to be looking at going private, with the share price where it is," said the chairman of one Premier League club.

A private consortium is also thought to be close to bidding for Leicester City and taking it off the market.

Sir Rodney Walker, chairman of Leicester City, said no official bid had been made. He added: "Any club looking to access significant new funds would have to consider (a move into private ownership) as an option."

John Fender, chairman of Newcastle United's plc board, said no discussions about taking the company private had been held at board level. But Mr Hall and Mr Shepherd are thought keen to explore the option.

There would be many obstacles to taking listed football clubs private - not least the task of raising the funds needed to buy shares from disgruntled investors at a sufficient premium.

Most publicly quoted football clubs - barring Manchester United, which today reports its full-year results - have been unable to translate increasing media income into improved bottom line performance because of rising player wage bills and transfer fees.

-- Anonymous, October 01, 2001

Answers

Any Pink paper readers like to comment on the poss consequences?

-- Anonymous, October 01, 2001

My opinion is that becoming a plc was the worst thing the club could have done from a footballing perspective. A plc is legally obliged to act in the interests of it's shareholders and whilst these shareholdings lie predominantly with people who aren't supporters of the football club, the interests of the team will always be secondary to the interests of the bottom line. There's no question in my mind that the restrictions of the plc have had a serious adverse impact on the club on a number of occassions.

Why did Keegan leave? Because he wasn't getting his (deserved in my opinion) cut of the vast amounts of money the Halls were collecting from the flotation of the club. Five years and 3 managers on we're still nowhere near the heights of the Keegan days.

Why did we sell Les Ferdinand? because 6 million was too much for a plc to turn down for a player his age, even though we clearly needed a player of his calibre in the squad. That decision didn't look so smart when we lost twice against PSV after playing with NOBODY up front (I'm not counting Ketsbaia) and crashed out of the Champions League, even less so when we couldn't even finish in the top half of the premiership.

Why did the club suddenly adopt a policy of signing old men on free transfers? Aside from KD's jobs for the boys policy I would suggest that here was a belief at the board room level that the side was capable of fulfilling it's financial potential without further investment in the side. After all, we were qualifying for Europe fairly consistently and selling out SJP every week. This policy of selling good players and replacing them with aging free transfer (I mean, come on, swapping Les Ferdinand for Ian Rush????) smacks too much of cashing in to be a coincidence. Whilst I've been a huge critic of Dalglish's reign (and I still think he was far worse for the club than Gullit) I really think that the plc has to take some of the blame.

The above examples all represent key turning moments in the club's recent history but there are countless other examples. Why do the club persist in taking fewer away tickets than are offered? because that way they can sell more tickets to beam-backs and don't run the occassional risk of being stuck with a few excess tickets. Why were long standing season ticket holders turfed out of their seats to make room for corporate tickets? Because they thought they could make more money that way.

Having said all that, I'm finding it hard to muster any enthusiasm for unlisting the club. Why? Well there's no way in a million years that Hall wants to do this to further the club's position on the field, or to improve the lot of "ordinary" supporters. If he goes ahead then it'll be because he's not happy with the massive profit he and his family have made on the club over the past 10 years (50 million? more? who knows?) and wants to screw us all out of some more.

-- Anonymous, October 01, 2001

Beg to differ ADK.

The Club is 'public' in name only. The two major directors hold ca.60% of the equity and have essentially continued to manage it as a private company - they can, and do, operate exactly as they please. They have given scant consideration to other shareholders, and indeed that is but one reason why the share price has fallen so far - the shares have been viewed as 'toxic waste' by the City Institutions ever since the Spanish brothel incident, and particularly it's aftermath.

I don't believe plc status has had any inlfuence whatseover over player transactions, although the flotation process did precipitate KK's resignation. This was, I understand, because he refused to commit himself to the Club for a reasonable period of time, which was always going to be required by the Underwriters of a public offering. You simply cannot have major uncertainty regarding the future of a very key Senior Manager going into a flotation. KK's refusal to commit himself to the Club long- term was, of course, because he was already intending to walk out. It is always possible that if he had been offered a substantial share option package, as with Peter Reid's situation at SAFC, he would have agreed to stay. Personally, I doubt this because of the man he is.

It is doubtful the Club could have raised the finance to fund the stadium expansion unless it had had access to the public capital markets - you can view that, and the resulting debt burden, as you wish.

The Halls, but principally Cameron Hall Developments and Douglass Hall, have not I believe taken massive profits out of the Club: this is a popular miconception. Indeed, as major shareholders they have suffered more than anyone from the precipitous decline in the share price, and their 'paper profit' has been substantially diminished.

Shepherd & Hall have, unwisely in my considered view, taken annual cash dividends - perhaps £4-5mm in total - at a time when the Club has been unprofitable and the Balance Sheet has been weakening. However, this is common corporate practice in the UK, and is almost viewed as an expression of confidence in the future earnings potential of the Company. Nevertheless, it is action I entirely disagree with philosohically, and have said so frequently on here.

The share price has now dipped below 30p, and the valuation of the company is ca. £40mm. If the Directors decided to take it private it would cost them at least £60mm to do so. Given their combined shareholding, I don't think they are vulnerable to hostile takeover. So, if they went ahead this would be entirely because they felt it represented an opportunity to ultimately realise a higher valuation for the Company in a private sale than they could derive through the public markets. However, this would be a massive financial gamble for them, especially given the current debt levels, and I'd be very surprised if it happened.

-- Anonymous, October 01, 2001

Clarky do you really see them having to pay that big a premium to take it private.

If the worth is £40m at 30p, and they own 60% already they only have to buy out 40% more, or £16m worth at the current price. Would they really have to pay £60m to gain those shares ??

The only complication I would see would be the NTL loan/deal in which they were to get an option 10% of the company in a few years time in return for a loan. I seem to recall the 10% was at a share price of something daft like 105p so NTL will not be interested in that anyway. They may well be looking for something else in return. Also I'd guess that 10% was planned to come from dilution of the Hall/Shepherd stake.

-- Anonymous, October 01, 2001

Clarky, I agree with a lot of your points, but I would suggest that the Halls effectively took more than their pound of flesh through the grossly overinflated price at the flotation of the club. Even if they have only removed £4-5m in cash from the club coffers their initial investment pales into comparison to the paper value of the asset they now own. And whilst they may not have removed cash from the club that doesn't mean they haven't put the bottom line first in order to prop up the share price. Also, as far as the Keegan departure goes, I understand the need to have the future of key personnel secured prior to a flotation, but surely that's the best example of all of putting financial considerations before the good of the footballing side of the club.

-- Anonymous, October 01, 2001

Macbeth,

You may be right. In coming to a tab of £60mm I'm assuming the £25mm NTL loan would need to be repaid in full. I'm then assuming they would need to offer say 50p per share for the 40% they don't own. That is another £29mm or so, giving a sub-total of some £54mm.

'Deal costs' normally run at ca. 8%, taking my 'guesstimate' to ca. £60mm - say £50-60mm.

It is conceivable they could persuade NTL to roll over their loan - and if they are going ahead, as is being strongly rumoured now on TOTT - it seems probable they have some come to some accomodation with NTL. However, NTL are not at all in good financial shape themselves, and big companies normally fight shy of owning a minor stake in private companies, because of the illiquidity of such an investment.

If this rumour proves factual, I suspect NUFC could be in trouble with the regulatory agency for such a leak of highly confidential information - especially if there a lot of share-dealing prior to any formal announcement.

Never a dull moment with the Toon!

-- Anonymous, October 01, 2001

Wouldn't it be a travesty if a Mackem was helping Dougie and Freddy crystallise the massive profits that they have made from NUFC supporters/shareholders by firstly floating the company and then taking it private at a massively lower buy-back? Shame its not true then?

Anyway, re the point above (Clarky's I think) as a Plc director it is mandatory that they act in the interests of all shareholders not just their own interests irrespective of their 60%+ combined shareholding. However, they would argue that they are as by taking it private it is the only deal in town and that this is the only way of unlocking shareholder value and teh market has changed in the four? years since the initial listing. The fact that their own interests are enhanced are seen as merely coincidental!!! (See Claims Direct).

But what you should be doing if you are concerend is lobbying the non- executive directors who are the independent custodians of shareholder value.... a weak non-exec(s) will see a poor deal for all shareholders.... the cat that a potential deal has been floated in the FT is not against any rules quite the contrary it happens all the time.....

If you are a small NUFC shareholder I feel sorry for you today .... but... "Caveat Emptor" springs to mind....

adios...

-- Anonymous, October 01, 2001

Just wondering. If the club went private, as an investor re us in other words, do we really have to sell if they offer even at a huge premium? Guess my actual question is are all shareholders obligated to sell once a plc decides to go private? I know I won't probably see my moolah again but if we decide to keep the shares say for sentimental sake, are we allowed to do that?

-- Anonymous, October 01, 2001

As I understand it Gene, they have to make a general offer for all the outstanding shares. They then need to get acceptances for at least 95% of the shares, at which point all the shares need to be cashed in.

If they get less than 95% their offer fails, and they need to consider increasing the offer and going through the tendering process again.

Once the offer has been accepted by the required majority you cannot retain your shares in the company. You could retain the share certificates and simply not cash them in, but they would have residual value, and you would no longer be a shareholder in the new private company.

-- Anonymous, October 01, 2001

Thanks Clarky. So I guess either way, a shareholder loses out.

-- Anonymous, October 02, 2001

...... that's capitalism for you Gene! We were duped by the ideal of a new meritocracy.

-- Anonymous, October 02, 2001

I dunno.....I can see a lot of people and possibly more than 5% of the shares wanting to hold onto their bit of the club....I reckon the dirty duo could be in for a rough ride....

-- Anonymous, October 02, 2001

Clarky... not quite correct... it depends upn the terms of the offer but a bid can be declared Wholly Unconditional at 50% of acceptances but bankers cannot take security in the target company at that level (called the "whitewash" process or "financial assistance"), this can only happen at 75% of acceptances.

Therefore, is theyw anted to go private with equity support to fund the bid it can be done at 50% if they are relying on secured bank debt (senior debt) then 75% is required..... however, in my experience seeing as a minium of 50 shareholders (by number) or 5% by value can petition the court for a hearing to overturn it is normal for the wholly unconditional acceptance level to be set at 90% as it is unlikely that a court will give dissenting shareholders a hearing at that level of acceptances.

heareth ends the lesson

-- Anonymous, October 02, 2001

....... thanks for the clarification Roly.

From mewspaper reports this morning it seems that Shepherd may be trying to acquire the business himself - ie. buying out the Halls as well as the other minor shareholders.

The reports indicate he is looking to raise ca. £40mm bank finance to accomplish this. Shepherd only owns about 11-12% of the equity, so with a current market cap of ca. £44mm it seems extremely unlikely that he could acquire the other 85%+ for £40mm. In addition, given the existing level of long-term debt - circa £70mm, I believe - I'd be very surprised if he could raise another £40mm senior debt. However, I'd really appreciate your insight into this Roly.

I think the likelihood is that he will attempt to take the company private, and acquire a controlling interest only for himself. This would necessarily involve another equity partner, or partners.

The Halls may elect to stay involved but with a reduced stake. The NTL loan is another major issue in any refinancing, and they may have agreed to convert their loan wholly or partly into equity - I believe they are still limited to not more than 9.99%.

It certainly seems as though something is brewing, and that FS has smelt an opportunity given the continuing weakness of the share price.

I have to say it seems very risky to me. However, but if he does it I will admire and applaud his fortitude - despite the financial losses my family will incurr - as well as wishing him the very best of luck. As a Toon nut, I have a strong vested interest!

-- Anonymous, October 02, 2001

Ok briefly.... what is a fair price to pay for a football club... errrrr media asset!!!!!

well emotion plays a part particularly whenyou get someone like Shagger Shepherd trying to purchase but basically his strategy will be to get the Hall's and NTL (who are in deep financial distress) onside and then the other minority shareholders will follow.

The valuation could be anything and this is for the non-execs to apply their minds to but a normal technique is to take the shareprice average for the last 6 months and apply a 12% uplift if this is above the share price today then you are on a starter....

Then you need to:

1) Value the assets (net book value) on a valuation basis

and/or

2) Value the assets on a cashflow basis....

No 1 is quite easy but will only value the real estate and otehr assets as a football club (not a prime city centre piece of real estate) and will probably only value the club at about its bank debt.... (whatever that is I dont have it to hand)...

No2 is where you would look to take the Adjusted EBitDa (or unadjusted if you want to pawnbroke the value) and that is the "Earnings Before Interest, Taxation, Depreciation and Amortisation (loan amortisation/repayments) for the year - if you use the adjusted methjodology you remove one off costs (extraordinary or proprietorial) from the calculation such non-recurring items or the cost of Dougies hookers (as this will not be a cost in the future) so that you basically arrive at a net operating cashflow number and then you apply a multiple to derive a valuation....

That multiple could be established by a similar precedent on a prior deal (ie, Adidas aquiring Bayern Munich) or by a willing seller willing buyer goodfaith negotiation....

That multiple would be typically be between X4 and X8 Adjusted EBITDA.....

clear as mud????

I'll let you do the maths as I have no numbers in front of me for NUFC Plc.....

ciao

-- Anonymous, October 02, 2001

The club have released the Preliminary Results for the year ended 31 July 2001 FINANCIAL HIGHLIGHTS

* Turnover increased by 22% to £54.9m (2000: £45.1m)

* Operating expenses before player trading increased by 8% to £47.7m (2000: £44.3m).

* Operating profit before player trading £7.2m (2000: £0.8m)

* Profit on disposal of players' registrations increased by 39% to £3.2m (2000:£2.3m)

* Player trading deficit reduced by 38% to £12.3m (2000: £19.9m)

* Operating loss after player trading reduced by 73% to £5.1m (2000:£19.1m)

* Final dividend held at 2.04p per share

* Retained loss for the year was reduced by 31% to £13.3m (2000: £19.4m)

* Shareholders' funds £23.0m (2000: £36.4m)

-- Anonymous, October 02, 2001

Having looked at the figures and tried to make some sense of them !!!

The revenue for the year should be what the club can expect going forward assuming the current 52000 crowds. They make monies other ways, like hosting England games, or getting into Europe but the base figure of £55m should be a norm.

Operating expenses went from £37.8m in 1999, to £42.1m in 2000 to £47.7m in 2001. This is 84% to 93% to 86% of turnover and must limit their profit potential if it remains that high.

The biggest change seems to be in Operating Loss reducing from 19.1m to 5.1m This great but difficult to work out how it happened. Looks to me like it comes from player trading. I don't recall how the timing of transfers went a year ago, maybe a sale or purchase was carefully in one year rather than the other. What ever the reported difference in player trading is £7m, or we spent £7m more a year ago to this last year. This could well be Bobby getting rid of rubbish and Freddie making sure we got good deals. Not sure it's repeatable.

A comment on the dividend which has been maintained at last years rate. Shareholders have taken out of the company

1999 £2.5m 2000 £3.8m 2001 £3.8m Total = £10.1m

In those three years the company has lost £25m.

If Shepherd has 10% (ish) of the shares then he has taken £1m in dividends, Hall at 45% (??) has taken £4.5m

Looking forward there seems little chance, to me, of operating profit ever appearing, unless they come down hard on salaries or get megabucks from Sky, something that isn't clear from these accounts.

If Sky can pump in £20m a year then suddenly everything looks very rosy as it is straight to the bottom line (or dividend !)

-- Anonymous, October 02, 2001

Macbeth,

The problem lies in your final para. Every time Sky put in another £20mm, the players take £15mm of it and you're back to sqare one. Unless this problem is addressed there is simply no way to derive what would be regarded as a reasonable profit. Then, after you figure in the cost of acquiring new players, the Club is running at a loss.

This is precisely the current situation, and how FS could persuade ANY financial institution to bankroll him in paying shareholders, possibly/probably including the Halls, a premium to the current market price, simply for the privilege of owning the resulting private company, is quite beyond me - especially when the Club's shares are already viewed as 'toxic waste' by the City Insititutions. I wonder whether he might even be using Shepherd Offshore's assets to underwrite the deal.

Very interesting situation.

-- Anonymous, October 02, 2001

Bearing in mind how poorly we have played for the past four seasons, our turnover is remarkable: there are teams who have been in Europe consistently who will have lower turnovers than us. However, I really hope that the club learnt its lessons during the close season with the scares over ST sales. Too much depends on a full SJP for home games for us to be complacent about our financial health. A return to European football is essential.

-- Anonymous, October 02, 2001

don't forget that the deal structure is a share purchase not an asset purchase... so the balance sheet simply moves over in situ.... therefore, the bondholders still have their rights protected, ie, you cannot count on that ST revenue unless you pay back the bonholders as they have rights tothat... so it may not be as simple as paying £40 million (ish) for the shares FS may have to pay back the debt at another £50 mill? also .... making the deal more difficult if he needs to get access to that ST revenue... also the debt providers will probably have "change of ownership" control clauses in the deal.... and may exact a price to waive their rights....

back of a fag packet numbers mind.... but in total FS may have to raise as much as £120 Mill to buy the shares, pay off debt and provide working capital.... he of course will be a benefeciary of any purchase as a shareholder and he may choose to re-invest/rollover his proceeds but unlikely as they always want to use other peoples money these guys.... making it difficult as the city does not trust them....

-- Anonymous, October 02, 2001

Yeh, I thought I had already made that point Roly.

The projected "£40mm deal" looks highly suspect to me - unless the Bondholder AND NTL are 'cool' (or 'onside' as you put it) - and both seem questionable at best - AND the Halls were agreeable to substantially rolling over their equity, or a good part of it.

Even then, given his poor standing in the City, I just can't see who would bankroll FS to the tune of another £40mm, or so, based on the current and projected financial position.

The only possibility I can see is another private equity partner with an interest in being associated with one of the glamour brand-names within PL Football - say a foreign entrepreneur like Lamar Hunt?

-- Anonymous, October 02, 2001

yeah sorry,.... you are right stranger things have happened and alliances are often forged in the most unlikely of furnaces....

unless someone like Juventus come in and take you on as a nursery club!!!!!

:OP

-- Anonymous, October 02, 2001

...... some bloody "nursery" club, with a 68 year-old Manager and Rob Lee (35), Gary Speed (32), Alan Shearer (31), Warren Barton (52), and Marcelino (14) at the core of the squad!!

-- Anonymous, October 02, 2001

The following article is in the Guardian today:

Newcastle directors head for new row

John Cassy (October 3, 2001) The Guardian

Newcastle United directors Douglas Hall and Freddie Shepherd could be heading for another run-in with the club's supporters if they press ahead with plans to take the company private.

United's shares are trading at less than a quarter of their float price, and fans who invested in the club could be forced to absorb heavy losses if the two men take advantage of their majority control to launch a full bid while the price remains low.

Although some fans would argue they invested for love of the club, not money, analysts believe many would be angered if they had to sell their shares at a loss - particularly to two men who, according to past tabloid reports, ridiculed supporters and described local women as "dogs".

A £1,000 investment made in United at the time of the float is worth £235. It is unlikely the pair would have to offer much of a premium to the present price.

Chairman John Fender, speaking after announcing improved full-year financial results, refused to comment on the likelihood of a bid. "There have not been any discussions at plc board level about the club going private."

Mr Hall and Mr Shepherd, who is thought to be the driving force behind the possible approach, would have to resign from the board before making any offer. A renegotiation of cable TV firm NTL's relationship with the club could also smooth the way to a deal. NTL owns 9.8% of the shares.

Although United's performances on the pitch have not achieved the heights of those five seasons ago, the club's finances are improving. In the year ending July 31, turnover rose 22% to £54.9m as the club took advantage of increased capacity at its St James' Park stadium and growing TV revenues. Better cost controls saw pretax losses halved from £19.9m to £8.9m.

-- Anonymous, October 03, 2001

TOTT are running a poll to see at what price fans would be prepared to sell their Toon shares to Fred S.

At the moment (11:30am):

9% - have said 50p
27% - have said £1.35 (the original purchase price)
64% - have said "he can sod off!"

Seeing as how it is rumoured he believes he can buy the Club for 35p per share this is a clear sign of troubled waters ahead!

-- Anonymous, October 03, 2001

Clarky but less than 10% of the shares are disperssed amongst small fans/holders.... the lawyers will just steamroller it through and the minority will just be swept up....

lots of pr agrro and shite I agree but do you think that the dirty two really give a toss????

-- Anonymous, October 03, 2001

You are entirely correct Roly - they certainly would steamroller it through at the minimum possible premium (probably at 35-40p) - sticking two fingers up at the suckers, like me, who "bought a stake in their Club".

We would not be able to do a thing about it because the remaining institutional investors would be only too happy to get out at even a modest premium to the market.

-- Anonymous, October 03, 2001

Interesting dealings with 45,000 changing hands just before close yesterday with the price dropping to 30p as a result this morning. Dribs and drabs throughout the day and then 125,000 this afternoon. Probably be down to 28p tomorrow. I'd have thought the price would be rising with a rumours of a buyout. Perhaps one of you financial wizards can explain it to me - my money plany died.

-- Anonymous, October 03, 2001

Dougy and Freddy shorting the market to drive the price down....

maybe not the gruesome twosome but someone is shorting....

-- Anonymous, October 03, 2001

....am I right in thinking it would be unlawful for Director's of the Company to either do this, or collude with a 3rd party in arranging to do this on their behalf, Roly?

-- Anonymous, October 03, 2001

Did Roly or Clarky see the editorial in the City page of the Torygraph? Interesting little comment on the club's corporate governance. Equally interesting is Mihir Bose commenting that Leeds posted about the same losses as us but of course aren't having a dividend, probably on account of having just negotiated a £60 million bond (repayable over 25 years) and wanting to look credible.

-- Anonymous, October 03, 2001

Roly, can you explain "shorting the market" to a financial novice like myself. Thanks.

-- Anonymous, October 03, 2001

Dougal,

No I didn't see the article, but any Directors - who also happen to be majority shareholders - who award themselves several million in dividends when the Company has concurrently reported an annual loss of

£19mm

, does not even recognise the phrase "corporate governance". They also have no conscience.

-- Anonymous, October 03, 2001

clarky,

not necessarily, the company is paying dividends out of surplus cash left over after the bills & taxes are paid. it has a few choices:

1) invest the cash in the company to generate further revenues (new players, a new hot dog stand) 2) buy back shares 3) squirrel away the cash to pay next years bills (only if you think you're not going to be able to do so from operating income) 4) pay dividends.

the decision to pay dividends may be justified on the premise that the losses are one time non recurring and the need to bolster shareholder/potential shareholder confidence - i.e. talk up the prospects of the company - (i know you know all this shite but bear with me)

if the move is seen as irresponsible from a business stand point, then short term creditors and vendors may choose not to render their services for fear of not being paid next year. long term debtors may get a bit pissed off and threaten to sue the pants of the board/majority shareholders, but to my knowledge no rumblings to date.

your "no conscience" argument is presumably predicated on the notion that a good team playing attractive football & winning trophies is the overarching goal and responsibility of nufc plc. unfortunately its not, as long as you keep buying your season ticket that is.

now if i was you i'd give my shares back to fred & dog, nufc has more chance of success as a private gig willing to sail close to the financial wind once in a while in order to be successful on the field. when you think about it individual clubs as public co's is a fucking crazy idea............

-- Anonymous, October 03, 2001

George,
Forgetting for one moment about the ethics of the management of a plc extracting substantial cash dividends as a 'reward' for their stewardship that had just resulted in a £19mm loss - reduced to "only" an £8mm loss this year(!) - it is also very bad management practice imo.

Under the direction of this Board, NUFC brushed with relegation for 3 consecutive seasons. In that situation, it was abundantly clear that major additional investment was required in the playing resources. In addition, the Club was leasing sub-standard training facilities, desperately needed investment in a Youth Academy was being continually delayed, and the stadium expansion had generated incremental debt of some £50mm.

Given the overall business situation, and the obvious need for investment across the board, I find it inconceivable that the Directors could vote to voluntarily further deplete its vital cash resources by paying itself utterly undeserved dividends.

With regard to the other shareholders - the Directors should have had the nuts to get out front, explain the real situation, and just why cash could not be paid out in dividends. That is what truly professional management would have done!

-- Anonymous, October 03, 2001

I stand alongside Jacko on this, being a bit of a divvy financially a lot of these debates tend to go over my heed , I bow to the knowledge of Roly, Clarky, McBeth and a select few others and being my club and this being our forum I am interested in what is being said. For whatever reason I found besty`s posting easy to identify with, do not have a clue if he is correct but it strikes a chord with me, cannot speak for others but I personally would be grateful if some of the `city` jargon was replaced by the `nut`s and bolts` of life,

-- Anonymous, October 03, 2001

wouldn't disagree with you vis a vis their judgement, although i haven't looked at cash flow numbers,- frankly i'm not that interested - i don't think they've done anything illegal though. your gripes seem to be from the perspective of a fan rather than a shareholder, unfortunately, as i said, the two aren't aligned.

going forward, i do think the club is better off in private hands although it might depend on whose hands.

-- Anonymous, October 03, 2001

just glanced at the #s in mcB's post.

clarky, we were both right, looks like the club is bleeding funds which leads me to believe that either

1) dividends will be cut next year (probably not) 2) the club is expecting a huge new swedge of revenue (turnover) 3) no more big money transfers for a couple of years

i reckon its a combination of 2&3 meaning they're banking of folk like yourself continuing to fork out to watch gary speed play football, a scenario good for the shareholder but rather frustrating for the fan.

-- Anonymous, October 03, 2001

Simple solution - sell Elena.

-- Anonymous, October 03, 2001

It's actually easier to get the club to stop paying themselves dividends than it is to sell Elena.

Apparently Elena tried to get his finger in Shepherds pie and that was what caused the injury.

-- Anonymous, October 04, 2001

Marsha's latest excuse supposedly out with a groin injury now....

-- Anonymous, October 04, 2001

Jacko.... Shorting = basically selling shares that you don't currently own to drive the price down only to buy them back to meet your settlement obligations three days later (under the T3 settlement rules) at a lower price than what you have sold them for once the market price has "collapsed"....

Clarky yes it is "illegal" but only during reporting/disclosure periods outside of these periods they can do what they want BUT this kind of activity would be seriously frowned upon if they got caught!!!! if they were doing it that is..... but others traders/arbitrageurs do it all the time especially market makers....

-- Anonymous, October 04, 2001

Roly - so how do you sell shares you don´t actually own ?? When I sell through an online broker I always assumed they actually check I had a shareholding before they transfer the sale money into my account ?

-- Anonymous, October 04, 2001

shorting:

you enter into a contract to flog said shares at a set price at some date in the future. if the price on said date is lower than set price in the contract, you're in, if its higher you're knackered.

selling short is used as a hedge against a precipitious drop in value or as a means of gambling/ speculating.

shorting a stock does not necessarily drive the price down except to the extent that the market may interpret an increase in short contracts as a sign that somebody has inside knowledge that the stock is going to tank.

an insider at the company doing lots of short selling the immediately prior to some bad news (eg. speed has signed a new deal thru 2009) would be easily found out & jailed.

roly is taking a news item inventing his own extrapilatory interpretation and basically talking shite

-- Anonymous, October 04, 2001

My money is on the black n white blazer - get in there Georgie Boy!!

-- Anonymous, October 04, 2001

I'm curious gb - why are you so certain Roly is wrong?

There is normally a limited float in NUFC shares, but the recent market - particularly on Tuesday - certainly had some unusual characteristics.

The thought that 'someone' might be shorting the stock had fleetingly crossed my mind, but it seemed a little too far fetched.

-- Anonymous, October 04, 2001

Bin Ladin is being suspected of shorting the shares of some companies, like the airline ones.

In the US where share certificates have been replaced by electronic trading it is very easy to sell shares you don't own. So lets say Bin sells 100,000 American Airlines share on the Monday for $30 each, the (made up) going rate. When the markets reopen the next Monday AA have been hammered and go down to $10. Bin then buys 100,000 shares in AA. Without ever owning them he has made 100,000 lots of $20 or quite a few bob.

What is being sugessted is that Freddie and Doug have been selling a few shares at say 32p. Their stock brokers won't need to see any certificates at the moment, as these are 'respected' businessmen. The market will see all these shares on offer, will know that something is up, and will refuse to pay anymore than 24p (say) to anyone else looking to sell.

Next week F and D decide to announce they are to buy all the shares in the company and take it private again. They will explain to the current owners of the shares that the market price is now 24p yet they are prepared to offer a huge premium of 33% on that to persuade you to sell at 32p.

Clever lads have ended up looking as though they've paid hugely over the odds at 32p when in reality all they did was fiddle the market and really only paid the going rate. Of course they may have to pay up for the shares they sold short, but all they do is take that out of the huge dividends they'd just awarded themselves.

I think this is the scenario that would most amuse Roly.

Whether there is a grain of truth in a cock and bull story like that is of course hugely unlikely given the known high moral and business ethics of the individuals concerned.

-- Anonymous, October 04, 2001

And you thought it was complicated how Milo bought fresh eggs from Malta for 7 cents apiece and sold them to the mess for 5 cents and everybody made a profit.

-- Anonymous, October 05, 2001

bollox retort Georgie

I'll quite happily stick to my definition thanks,,, do I think its happened ... No.... do I think its possible ..... Yes (happens all the time)..... Do I think it could be D & F .... its possible if not in any closedperiod or using insider information not already in the public domain.... for example story goes out re potential take private.... punter shorts stock ..... as long as its not the other way round.... no legal problems....

-- Anonymous, October 05, 2001

Not strictly true MacB, as any trade has to be settled - ie transfer ownership - think of the other side (the buyer)who'll want his shares on the date agreed when he traded. Roly points out that you can sell and buy back before settlement, thus avoiding having to actually deliver anything, because settlement commonly takes place 3 days after trade date (T3). This is short term, intra-day stuff.
But you can also borrow shares, in order to sell them, and I would say this is the most common approach if you want to short for more than a few days. Excessive borrowing of shares in a market increases liquidity - ie the amount of shares actually changing hands, and therefore tends to reduce the price on the market (pure supply and demand). To be fair this effect is minimal with big stocks - but the knowledge that there are shorts out there (have to be disclosed) can have a psychological effect more damaging on the price and shorting becomes a self-fulfilling prophecy. It's a dangerous game to play though, because when the market turns and the short sellers want to buy shares back to give back to the lenders, the market goes crazy - everybody wants to buy with nobody there to sell. WAKE UP AT THE BACK! It's also not something that private individuals can do easily, since they wouldn't always be able to borrow shares.

-- Anonymous, October 05, 2001

Exactle right Pete.... stock borrowing more than plays its part in this, however, two weeks ago most of the large pension funds announced that they were not going to allow their investments to be used in theis way.... therefore, stock lending has essentially stopped at the moment.

Therefore, you are absolutely correct to identify T3 settlement terms as key (as I posted yesterday)... did you know that certain trades are still done on a T10 basis?????

Also, not applicable to NUFC Plc but companies with dual listings on NYSE and LSE (for example) are prone to arbitrage activity because of timeframe differences, currency and ADR differences and settlement terms....

Over to you Georgie boy!!!

-- Anonymous, October 05, 2001

NTL Inc. is considering its options for the sale of its 9.9% stake in listed football club Newcastle United PLC (U.NCU), the Financial Times reports. Two private investors holding 50% of the club's capital are thought to be keen to buy NTL's interest, but the company is also mulling a role in managing the club's Internet and television rights in exchange for its shares. Newspaper Web site: http://www.ft.com

-- Anonymous, October 05, 2001

Tosh. They, in the guise of Premium TV have had the rights to the web site for a year or so. Can't see any difference form a year ago, can't see how they make any money at all on it, stops other sites from being voted worst though

TV, maybe.

-- Anonymous, October 05, 2001

so shorting the stock in the same week as a rumored buy back makes sense then does it?

bit risky i reckon

-- Anonymous, October 05, 2001

.....presumably it does if it depresses the share price ahead of any offer, georgeb - or am I missing something very obvious in this convoluted conversation?

-- Anonymous, October 05, 2001

exactly right Clarky..... but a bit too conspiratorial for my tastes.... but these things do happen....

have a good weekend i'm out of here...

-- Anonymous, October 05, 2001

roly, your argument fails because there is no law of nature that decreeing that prices cannot rebound even beyond their original point when news of the deal gets out. with this in mind, shorting the stock in the period when rumors are flying around(ie. news that should drive up the price) is just ridiculous.

-- Anonymous, October 05, 2001

Yeh, good point georgeb - that was why I instinctively dismissed it. However, since the Institutions dumped the stock in the wake of the NOTW exposes, and the subsequent resignation of all the non-execs - there has been little interest, apart from a slow trickle of selling that has gradually brought the price down.

Given the unofficial status of the shares as what is known in the US as "toxic waste", it is conceivable that these characters in particular might try a little exploratory messing around ahaed of any General Offer - just to see what happened. Certainly, the odd trading pattern was fairly short- lived, and things seem to be back on an even keel - ie. dead.

I think we're all agreed that is probably just a little too conspiratorial - good talking point in a dead footy week mind! ;o{)

-- Anonymous, October 05, 2001

Errr thats correct Georgie but we all work on that key premis anyway.... the reason that people do short is that they make an assessment of the risks and allocate a certain amount of their capital to that activity.

Presumably you keep all your cash in the building society and/or under your mattress..... well you are quite right to do so but many insititutions and individuals do short because they make an assessment and take a risk.... sometimes they lose and sometimes they win....

no more for me I think we've done this one into the ground.... but Georgie has me baffled...

he must be from Gateshead...

-- Anonymous, October 07, 2001

Is the theory behind all of this stuff gathered together in one place that a dunderheed like me might access to get a bit of a grip on what this thread's been about ? Or do I have to have spent years in the trade ?

-- Anonymous, October 07, 2001

Nah, just buy me a pint and and packet o crisps PB, and I'll give yer the lowdoon. ;o{)

-- Anonymous, October 07, 2001

Watch it PB. I hear Clarky's anybody's after a pint and a packet o' crisps (some even said a packet of winegums only).

-- Anonymous, October 07, 2001

roly, congratulations, you've finally disappeared up your own arsehole

-- Anonymous, October 09, 2001

ouch

get the fucka oot quick

cheers Georgie

xxx

RG

-- Anonymous, October 09, 2001

The share price just rose to 31p so some enterprising sole immediately dumped 80,000 shares.

-- Anonymous, October 11, 2001

Their spreadsheet probably told them to do it ;-)

-- Anonymous, October 11, 2001