TELL SID IT’S OVER – FOOTBALL’S FLIRTATION WITH FLOTATION

One of the few recognisable upsides of individuals, foreign or domestic, buying whole football clubs is their disappearance (‘de-listing’) from the Stock Market – many of them among the vanguard who went floating down various market routes in the mid-90s…before nearly sinking.

It was called ‘shareholder democracy’ in Thatcher’s Britain when nationalised utilities were sold off, ‘giving’ (selling) individuals ownership of electricity, telecommunications and, most memorably thanks to enigmatic TV ads urging people to ‘tell Sid’, gas companies. Companies previously owned by…er…them.

Being Thatcherite, this pandered to greed and produced no democracy. People sold their ‘gift’ to big institutions as soon as they sniffed a profit. And football made and broke the same promises, producing profit – lots of it - only for a breed of moneymen like Newcastle’s Sir John Hall and Manchester United’s Martin Edwards.

‘There ought to be a law’ you cry. Well, there was. FA Rule 34 basically disallowed personal profit from football clubs. So ‘holding companies’ (PLCs) were formed, with clubs as subsidiaries. And personal profit came from these companies instead.

“Typical Nazi trick” spluttered Dad’s Army’s Captain Mainwaring when told how the Germans had breached France’s supposedly-impregnable Maginot Line – “they went round it.” But at least Mainwaring spluttered. Faced with blatant circumnavigation of their rules, the FA didn’t even manage that. Whether it was Thatcherite non-interventionism or simply the FA Council’s collective bath-night is no longer worth speculating. The damage was done.

Initially only Tottenham listed, in 1983 – part of ‘diversification strategies’ which left football producing 30% of company turnover. And chairman Irving Scholar, the strategies’ brainchild, saw Tottenham’s share price perform worse than the team (some achievement at times). Trading was suspended and Robert Maxwell nearly owner before Scholar sold to Alan Sugar in 1991.

Backing Millwall to be England’s next floated club (Edinburgh Hibernians PLC emerged to barely-suppressed Scottish laughter in 1987) would have been more lucrative than their shares ever were. ‘Millwall Holdings’ floated in 1989 and capsized in 1997 – shares worth fourpence.

But this didn’t prevent a Stock Market rush that year. SkyTV threw £670m at the Premiership, encouraging misplaced belief that football was “the beautiful business” as well as “the beautiful game.” Alan Hansen was wrong to say: “You win nothing with kids.” But not as wrong as his: “this is a serious investment” on Singer and Friedlander Football Fund adverts. “Just £1,000 turns fantasy into reality” sang the ad. Football club shares were up “696%” since 1993. In 1996, “even the sector’s dud, Millwall, did better than the market average.”

But, like privatisation, fans who didn’t buy and sell immediately saw their shares’ value plummet faster than Ireland under Steve Staunton – see Millwall above (injury to Alan Shearer once knocked £12million pounds off Newcastle’s share values). “The real gainers…have been directors” reported the Financial Times (FT), as de-listing became fashionable in 2005. Not least at Manchester United. Their 1991 prospectus justified flotation as “widening (the club’s) ownership” and didn’t hide the “increased liquidity” (cash) available to existing shareholders. With Rule 34 by-passed and dividends available, directors cashed in.
Not just the afore-mentioned Hall and Edwards. There was Doug Ellis, Villa chairman for decades – except for two years which saw them League and European champions. Southampton’s Keith Wiseman was the small matter of FA chairman when his bank balance went north after a painful-sounding ‘reverse takeover’ of a property company. And Sheffield Wednesday’s Dave Richards, ex-Premiership chairman, whose wealth grew in proportion to his club’s decline under his leadership there.

But others floundered. And when the wave of billionaire owners arrived, half the listed clubs had de-listed. Flotations failed – Scholar made it two-out-of-two when Nottingham Forest’s flotation raised 10% of its monetary target. Tottenham shares only increased in value thanks to two decades’ inflation. And only Manchester United shares proved worthwhile investments.

Some clubs ‘down-listed’ to the less stringently-regulated Alternative Investment Market or OFEX (now ‘Plus Markets’ and itself subject to takeover talk). The “second and third division” markets, according to the FT (Championship and League One, if you must). As Southampton finance director David Jones said in 2004: “We have downlisted because compliance on a full listing was too onerous.

‘Shareholder democracy’ remains a pipedream, the burgeoning ‘Supporters Direct’ trust organisation the only significant movement towards it. Bar Manchester United again. Threatened with SkyTV takeover in 1998, their shareholders united against SKY chief Rupert Murdoch to form the imaginatively-entitled ‘Shareholders United Against Murdoch.’ 60% of United was institutionally-owned. But SUAM organised much of the rest – including Alan Embling, great-nephew of James Gibson who saved United from pre-war bankruptcy before the family sold to the Edwards’, with consequences including the 1998 board’s recommendation of SKY’s bid.

Ultimately, monopoly issues, not voting power, scuppered the bid. Individual shareholders were now organised. But United’s 28,000 shareholders, whilst a breathtaking number, were just 1% of United’s claimed UK support. And despite a collective 23% shareholding, stock market rules stopped them halting Glazer. Nonetheless, if Arsenal supporter-shareholders were as organised, how much power would they have in the club’s on (and on)-going takeover saga?

Football’s flotations were nonsense. Every mid-90s prospectus emphasised clubs’ potential success and the exploitation…sorry…’financial’ value of supporter-loyalty, ignoring two fundamentals. Supporters had little money left after funding players’ hyper-inflationary wages through ticket-price increases. And football’s structure guarantees ‘failure’ (no silverware or Champions League spot, let alone relegation) for the vast majority. Get rid of those structures, especially relegation, and you lose the sport.

“Few areas of business have demonstrated (football’s) capacity for destroying shareholder value” wrote the FT in 2005. “Making money, beyond that required to survive and develop, shouldn’t be the goal of a football club” wrote ‘When Saturday Comes’ in 1989. Even UEFA spokesman William Gaillard told Supporters Direct’s 2005 conference that PLC’s were ‘wrong’ for football. It was crazy to have ever thought otherwise.

BTW: The Carling Cup quarter-finalists were four London and four North-West clubs. And the draw produced four London/North-West ties, avoiding local derbies until the more lucrative two-legged semi-finals. What a stroke of luck!

Wasn’t it?

‘MotorMurph’ is written by Mark Murphy

Entry Filed under: MotorMurph Column

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