The World Cup has long enjoyed a reputation as the debutante ball for unknown soccer talents from around the world.
At one point, a rising star is hanging out in a low-key African or Asian league.
A few dramatic changes at the World Cup later, and their agent is taking them to Barcelona for talks.
How much of this actually happens is debatable, when today scouts are even scouring mobile phone footage of youth games on YouTube to discover the next Lionel Messi on the cheap.
But one aspect of the beautiful game that apparently fired the imagination at the World Cup in Qatar was the business of soccer itself. Because the weeks since have seen countless rumors about British clubs changing hands.
everything to play
Liverpool owner Fenway Sports Club, for example, is receiving offers from as many as 13 interested parties, including the Qatar Investment Authority.
And the Qataris, who already own French club Paris Saint-German, are said to have approached north London side Tottenham Hotspur, although that club has denied this.
Merseyside was also in an uproar before Christmas over Saudi Arabian interest, a rumor fanned by none other than the Saudi sports minister on the BBC.
It’s a similar story down the M62 in manchester united.
The most profitable brand in British football has been put up for sale by the US Glazer family, who have owned the brand since 2005. Even F1 legend Lewis Hamilton is said to be involved in shoving there.
Of course, speculation about soccer club deals is notoriously, well, speculative. It can make Twitter gossip about AIM stock seem sober by comparison.
But top-tier soccer teams seem to be in play these days, both on and off the pitch.
made in chelsea
As I said, it is attractive to attribute all this corporate activity to the hosting of the World Cup in the territory of the rich Middle East.
But the involvement of the Gulf States in British football clubs is nothing new. And the money from the US also circulates through the Premier League.
No, I suspect it was Roman Abramovitch’s sale of Chelsea last May that put the sport back on every billionaire’s radar.
Especially since Abramovich at first seems to have done very well with his investment.
The sanctioned Russian struck a £4.25bn deal to sell Chelsea to American businessman Todd Boehly, well above expectations and the £140m the oligarch himself paid for Chelsea in 2003.
On the surface, he multiplied his money by an incredible 30 times in 19 years.
But did Abramovich really achieve sky-high returns? I do not think.
To start with, do the sums and it ‘only’ works out like a 20% annualized return.
Incredible for mere mortals like you and me. But Warren Buffett Berkshire Hathaway it has done better with common stocks for many more decades.
Furthermore, only £2.5bn of the £4.25bn was dedicated specifically to buying Abramovitch shares. The other £1.75 billion was a commitment by Boehly to fund work on Chelsea’s stadium and other programmes.
True, this may have been in part shenanigans due to the oligarch being on a financial blacklist. And indeed, Abramovich ultimately earned a zero return, because he can’t access the profits.
Boehly paid £4.25bn to gain control of Chelsea, however the deal was structured.
But the reality is that the American mogul would have spent billions on the club’s infrastructure anyway, so I think the £2.5bn better reflects Chelsea’s actual transfer price.
Either way, the huge spending commitment highlights the final flaw in Abramovich’s superficially excellent performance of £140m.
You see, the oligarch loaned Chelsea over £1bn interest-free to finance her quest for cutlery.
Abramovich was successful and Chelsea was very successful. But their operating losses are said to have reached hundreds of millions over the 19 years despite everything!
In the relegation zone
We can best see how financially motivated investors judge soccer clubs by turning to Manchester United, which has been listed on the New York Stock Exchange since 2012.
Before the big price hike when the Glazers announced they would sell, Manchester United shares were trading at about $13. That’s less than the $14 that floated for a decade earlier.
Or consider the Scottish club Celticwhich made an initial public offering in London in the mid-1990s. Celtic’s shares have fallen 66% since those long-ago days of the dot-com boom.
Another superclub that appears in the list is that of Italy. juventus. Its shares are trading at 35 euro cents. They are down 70% since 2001.
All of which makes you think that only an idiot would buy shares in a football club. Interestingly though, star UK stock picker Nick Train is definitely no fool, owning a stake in all three clubs in his various funds.
Train believes that clubs’ unique brands and long-term media potential are undervalued.
But I think soccer clubs are things you should buy when you’ve already made your money elsewhere and are ready to lose it, whether you’re a billionaire or a common investor.
adjusted earnings
I say that because the economics of sports teams has many special difficulties.
Clubs need to spend increasing amounts on the best players to remain competitive.
Worse yet, these players are commercial enterprises in their own right. They can and do negotiate their own deals for everything from merchandise to sponsorship, and much of that money is never seen by the club that makes them famous.
The sums can be huge. In the extreme, David Beckham is said to have made $500 million as a result of his machinations in US Major League Soccer, for example.
Compare this with Disney either Netflix. They create a character, own it, and can whip it forever.
Mickey Mouse continues to make millions and never asks for a raise.
Some actors get a lot of influence, right. But they are interchangeable in the long run. Remember everyone who has played Batman or Spiderman in the last 30 years.
On the contrary, Ronaldo is Ronaldo: you can’t replace him with a cheaper Ronaldo. And the lifespan of football players is not long. Just a decade or so.
At least the top teams get a big chunk of the revenue from the media. But Chelsea’s financial losses and Manchester United’s dismal share performance suggest it’s not big enough.
Smaller teams get far fewer and fewer seat bums at home games. For them, the dream is to find a young Ronaldo and sell him for millions, before he has worked his magic on him.
Again, really quirky.
Imagine if tech startups similarly sold their best new products to bigger rivals to keep the lights on. There would be no zero to billion dollar stories in the markets ever again.
At least actors Ryan Reynolds and Rob McElhenney paid just £2 million for Welsh outfit Wrexham.
It seems quite modest that the income from his Netflix documentary Welcome to Wrexham could make a profit. My guess, however, would be that the club would gobble up any leftover money.
goal difference
Richard Branson once joked that if you want to become a millionaire, first become a billionaire and then start an airline.
I guess he never thought of buying a football club.
Let the oligarchs throw money at their toys, I say. And if you’re a Manchester United, Juventus or Celtic fan, buy some support shares.
But if you want to make a life-changing investment of money, I suggest that the kind of big companies that we usually recommend at The Motley Fool will treat you better. Or even a global track fund. You can always undo your fortune by owning a soccer team later, once you’ve made it!
