WSC 216 Feb 05

Football has provided a poor return for City investors, but for fans the stock market is an opportunity. Go to a stockbroker and for a flat fee as low as £12.50 you can buy shares in your club, whether they are listed on the Stock Exchange, the Alternative Investment Market (AIM) or Ofex, the less regulated third level of the UK stock markets.

With shares in most clubs at low levels, you will probably be stitched up by the spread, though. The share prices in a newspaper are a mid price, which is halfway between the lowest and highest price in a range set by market makers.  As a retail investor, rather than a bank or pension fund, when you buy you will probably buy towards the top end of the spread and sell near the bottom. Supporters Direct (SD) is aiming for a different sort of democracy. Trusts operate as industrial and provident societies, which are regulated by the Financial Services Authority (FSA), and one member has one vote. Establishing trusts at some quoted clubs has been successful, with fans buying shares then transferring the rights to vote at a club’s annual general meeting that go with those shares into a trust, yet retaining the actual shares.

Rangers are listed on Ofex and fans have been buying club shares and transferring them into a trust since April 2003, but many companies on AIM or Ofex are often ones where a handful of investors have large stakes. As a result, shares can become illiquid, with not many available for purchase. If share prices rarely move, this is probably why and buyers will pay at the top end of the spread.

If your club is not a public limited company, buying shares can be more problematic. All England’s Football League clubs are limited companies.  With the majority of clubs, the articles  of association state that if shareholders want to sell their stake, they must first be offered to another existing shareholder.  In some cases, this regulation has been removed, but this can allow developers to take control of clubs.

In recent years, many clubs have had share issues to raise cash and this can offer a way in. Issues are usually for a limited period, but shares are often left over and fans can approach clubs directly and ask to buy some. The articles of association may allow the board to prevent this and, even if they don’t, another problem is establishing the value of shares in a privately owned company. Some club directors agree a set price – Northampton’s settled on £3 per share – but this is not always the case. All this can militate against fans buying shares in their club. At Huddersfield, for example, one person owns the club and is not selling any shares to the fans’ trust.

To fund a new home, AFC Wimbledon made a public offer of shares to help support the trust, which runs the club. This was successful, but can be problematic: clubs must raise at least £500,000, but up to £70,000 of that can be eaten up in fees. Not all companies making a public share issue must be listed on a stock exchange but, just like companies on the stock markets, a public share issue allows richer investors to take large stakes and outmanoeuvre fans with small holdings.

SD advocates fans wanting a say in the direction of their club to join a trust, which usually operate by membership or subscription, and transfer voting rights  for any shares they have into the trust.  A recent share issue by Radio Cabs restricts the sale of shares to taxi drivers within this one scheme and SD wants to apply this to ownership of football clubs.

Only a handful of clubs in mainland Europe are quoted on a stock exchange – Real Madrid, Barcelona and most teams in the Bundesliga operate as members’ clubs. This is from where SD has been drawing its inspiration to try to help fans join a club and secures votes on the board. If trusts can raise enough money to help quoted clubs delist or to pay off the debts that many clubs are saddled with due to overambitious private owners, then a move to fans really controlling their clubs could become more of a reality.

From WSC 216 February 2005. What was happening this month

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