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Is it profitable for football clubs to invest in the stock market?

Published on 22/07/2014

Football is the sport that moves more money around the world. Although it is complicated to come up with a specific figure, a rough estimate calculates the impact of football to be about 20,000 million euros a year. A real money maker that leads us to believe that the stock-market entrance of the biggest football clubs in the world could be a safe business.

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However, the mix between football and business could be explosive. And the Spanish teams have not yet dared to take the plunge and jump into the trading floor. Not even Real Madrid and Barcelona FC, the two most valuable clubs in the world, ahead of Manchester United and according to the ranking compiled by Forbes magazine. Moreover, in the case of these two giants of Spanish football, we should keep in mind that they have not become SAD (public limited sports company in its Spanish acronym) and that they maintain their status as football clubs, leaving control to the mercy of their partners.

The business model of teams like Real Madrid or Barcelona FC is, supposedly, the right one to take the plunge to the markets. They are economically viable teams with a strong international presence and a strong brand on five continents. But what would be the value of capitalization of a football team just landing on the trading floor? There are several factors to be taken into account, namely the market value of their players, the capital of the company, the social mass they have or their classification at the time of the IPO. In the case of Real Madrid, a study from Euromericas Sport Marketing Spain sets the value of the club at 2,600 million euros in a hypothetical IPO.

But the biggest clubs -in economic, sporting and social terms- have not always taken the lead in the market adventure. A clear example is Tottenham Hotspurs. A team that is not in the top five of the Premier League, but that was the first to go public in 1983, paving the way to the market for English clubs. In the nineties, up to 21 teams from the Premier League were quoted on the stock markets.

In the rest of Europe, where the most important teams in the world are concentrated, not many have dared to take the big step. And in general, experience has not been very rewarding so far.

The Stoxx Europe Football Index groups 23 of the listed teams. If we analyze the behavior of this index since 2002, we see that it accumulates a loss of over 40%. However, if we just look at the behavior of the value of top teams such as Manchester United, Ajax or Borussia Dortmund, the balance is somewhat more positive.

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What is clear is that the behavior of the action depends on the events affecting the clubs, just as it happens in listed companies in other sectors. Football is no exception. When Alex Ferguson announced he was leaving Manchester United after 26 years and 38 titles, the English club shares fell 5%. The day after the landslide of Borussia Dortmund over Real Madrid (4-1) in the semifinals of the Champions League of the 2012-2013 season, the value of the German club’s securities rallied more than 6%.

Although no Spanish team has yet taken the step, and they don’t seem to be going to do it in the near future, there are several clubs which have already considered it. Earlier this year, even the press speculated that Florentino Perez had struck up talks with some American funds to seek to place its bond public offering. The truth is that going public entails a number of risks that teams must weigh; for instance, taking a series of direct and indirect costs and acquiring a number of obligations relating to the transparency of their financial status. Will we someday see Florentino ring the bell on Wall Street for his team’s launch on the floor?

Rodrigo Prieto, Account executive. Financial Communication Division

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