What institutional investors want and how #fanownership could give them it Football Investment PART 1

A post where I try to show that making money is still at the Heart of Institutions buying Clubs

Thanks again to all of those Rangers Fans in particular that have responded to this Blog.

A few have been asking me questions or making some valid points about the Institutional investors so i thought i should maybe give you some thoughts on what may motivate the involvement of what has become known as The "institutional investors"

This look at the Institutional Investors and the whole notion of "investing " in football Clubs is going to be most likely split into three parts over the next few days

Institutional Investors

First and the most important major point is fundamentally Not All Institutional investors are the same, they can have massively different aims and objectives for investing

It has been an easy way to categorise what are largely faceless entities, i don't know if it one of your former chairmen (in an effort to make these guys sound more sophisticated and less suspicious) or the media (as a shorthand for Not A Sugar Daddy) are the ones that coined the phrase, i suspect it suited a number of different people at different times but it has stuck.

So what do they want.......Money! when do the want it?    now ish

Couple of points before I start

1.The first thing to recognise, and it is sometimes difficult to remember or recognise this about a Club like Rangers, which creates such a lot of media coverage, BUT it is a really really small business in the grand scheme of things and the money being spoken about from these "institutional investors" is largely pocket change to most of them.

(anyone particularly interested should look at a chapter 4 in a book called "Why England always Lose" for some analysis on the business of football)

Take Artemis for example owners of nearly 9% of RFC at a current valuation of approx £1.6m. Artemis currently has under fund an asset value of £16.8bn.  The investment is RFC is absolutely minuscule

Facts About Artemis

So frankly you always have to wonder with any scale difference such as this just how much does the investor really focus on such an investment and what is happening to it, if he loses the lot they frankly would hardly notice, if he wins the chances are it will not be a big win

2. There are basically only two ways for a Shareholder to make money from the shares they own.

Share value growth, e.g you can sell the share for more than you bought them

Dividend payment, the Company can pay a dividend from the profits of the organisation proportionate to the shares that are owned to ALL the category shareholder.

Now admittedly there are some other ways or folk would not get paid quite so much money for doing this sort of investment work but for anyone else that knows the market i think it unlikely that any of the more exotic ways of extracting value from a PLC are likely.....but you never know


3. Intangible returns.

The above outlines how you would normally get a ROI via a PLC shareholding however there are intangible ways, there are two main ones and then the odd ball one.

Subsidiary/Related party trading.

If you control the board of a company you can make it trade with other companies you might own or you might set up Subsidiaries with a different share ownership that trade with the Parent.

This has certainly happened it would appear in the history of Rangers FC and other UK Clubs.

This can be used to extract vast profit from the football club especially if the football club can gain a good line of credit and be a low risk of either default or even worse it  is defaulting at low risk of the lender doing anything about it.

It is a bit of the old story of if you are going to owe someone money make sure you owe them loads of money!

I think we can all easily think of at least 5 examples in the Scottish game alone where this has happened or is happening at the moment.

You could also fit into this category the notion of an external football agency making money buy moving players in and out for a profit in a club that they control, this is certainly the model that a number of recent buyers and potential buyers are looking at within the Scottish game at the moment

PR

 Companies sponsor football clubs normally because they believe they will sell more of their stuff and so make more more because of their association with the brand.

The thing with sponsorship money is once it is spent it is gone, so it is not a large leap for a big company to rather than sponsor the Club actually buy it instead. that way they can get the same PR boost but in theory have an asset that they can sell when finished.

I will predict now that within 10 years you will have at least a handful of clubs directly owned by corporations as marketing machines and a few may even include the brand in a renaming of the Club....have a look around it is not difficult to predict which clubs might look at this route.

"Just Fancy it"

This is the "check your business brains in at the front door option", some people and indeed businesses just have big Egos and Deep pockets and football is littered with the chaos these folk leave behind, and they just fancy buying a club....and being the Man

There is nowt you can do about them and no way of predicting what they will do next.

So that is the some of the background of how you invest and how you get value, will try and follow up with what this means for Fanownership later, as an understanding of the motivation of others provides great opportunity for fanownership.




@rchrdtknsn