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Investing in football club shares: fruitful or fantasy?

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Written by:
23/04/2014
Rich Stephens works on the trading floor at IG. Here he takes a look at how share prices in publically listed football clubs can move as fortunes on the field fluctuate.

As we enter the last weeks of the 22nd Barclays Premier League season, affectionately christened ‘squeaky bum time’ by Sir Alex Ferguson, countless fans sit nervously poised.

Some teams are on the brink of a title or lucrative Champions League qualification while others face a relegation battle or a promotion chase. The 2013/14 season has had it all. As many of us tweak our Fantasy Football teams for the final games and place various bets for league title or golden boot winners, how many of us have ever contemplated online trading -usually either financial spread betting or CFD trading -football club shares?

In the most recent edition of the Deloitte’s annual ‘Football Money League’, published in January 2014, Real Madrid were crowned winners, completing a record breaking 9th consecutive year at the summit and achieving best ever revenues of €518.9m for the year. Key to their success is their ability to generate significant commercial revenue on a global scale.

Paris Saint-Germain

This brings us to a relative newcomer to the top 10 in the Money League: Paris Saint-Germain (PSG). The past year saw PSG generate €254.7m in commercial revenue, a ‘Football Money League’ record. The PSG brand has gone from strength to strength, helped in part by David Beckham’s brief four month spell. Interestingly, before David Beckham arrived, only 1% of PSG’s merchandise products sold online went outside France. Beckham raised the proportion to 10% and it has stayed there ever since.

The cumulative revenue of Europe’s top 20 earning football clubs is now set to top €5bn annually, testimony to the industry’s resilience to challenging market conditions. It is now abundantly clear the world’s most popular sport has evolved dramatically from its roots and is fast becoming a titanic industry.

While the majority of the top clubs remain privately owned, several of Europe’s elite clubs are publically listed: Celtic (CCP LN) is listed on AIM, Manchester United (MANU:US) is listed on NYSE, AS Roma SpA (ASR:IM) and Juventus Football Club SpA (JUVE:IM) are both listed on Borsa Italiana, and Germany’s Borussia Dortmund GmbH & Co KGaA (BVB:GR) is on Xetra.

So, looking back at the 2012/3 season, were there any opportunities or news flow relating to these clubs the savvy online trader could have traded profitably? The answer, of course, is yes.

Way back in August, AS Roma SpA (ASR:IM) announced the sale of winger Erik Lamela to Tottenham for €30m – an unexpected boost to their finances at the start of the new season. They followed this up with a Serie A record of ten wins from their first ten matches. The combination of this off-field shrewdness and on-field success saw their share price rocket from a 30 August closing price of €0.4899 to a price of €1.70 at the close on 21 October.

Although they have subsided slightly since, the price has stabilised around the €1.10 mark by April 2014, more than double the price at the start of the season. With qualification for the UEFA Champions League now almost a certainty for the Italians, it will be interesting to see how their progress in next season’s competition impacts their share price.

Manchester United

In contrast to AS Roma SpA (ASR:IM), Manchester United (MANU:US) endured a challenging first year of the post Ferguson era. The immediate aftermath of Sir Alex Ferguson’s retirement on 8 May 2013, led to a fall in Manchester United’s (MANU:US) share price of almost 6%, from the previous day’s close of $18.77 to a day low of $17.73, reducing the club’s value by almost £100m.

The share price, like United’s season, has been volatile ever since. Expiring sponsorship deals such as Hublot, the luxury watchmaker, along with the team’s poor start to the domestic campaign saw the December share price tumble from a high of $17.76 to $15.15. The team’s tally of just one point from a possible nine at the start of December certainly didn’t help.

Further poor results saw the downward trend continue to an eventual low of $14.32 on 21 February 2014. At this stage of the season it became abundantly clear the club would struggle to qualify for the Champions League and therefore miss out on the near £20m revenue this would generate.

At this point the club saw fit to announce they would seek lucrative friendlies in the Middle East, United States and India if they failed to salvage European qualification. The tour of India seemed to particularly interest investors. The club claim to have 35 million followers in the country and previous efforts to visit India have always proved difficult in pre-season, as these tours coincide with the wet season in the subcontinent.

Investors reacted positively to the announcement along with the declaration the club would not be afraid to ‘do what it takes’ in the summer transfer window to overhaul the underachieving squad.

This has seen a corresponding increase in the share price from the February low of $14.32 to an April high of $17.95.

Building on this trend Manchester United’s (MANU:US) shares reacted positively in the first few hours of trading in the aftermath of David Moyes’ shock departure after just ten months at the helm. The stock was up as much as 5% in the main session from the previous day’s close.

These two examples represent just a few of several share trading opportunities from this season and next season promises many more.

Just how much impact will Manchester United’s (MANU:US) failure to qualify for the Champions League have on their share price? How will investors react to the next managerial appointment?

How will the AS Roma SpA (ASR:IM) share price react to their imminent qualification to the 2014/15 UEFA Champions League and the possible approval of their proposed new, privately-financed, Stadio della Roma?

These scenarios are an exciting prospect for the online shares trader.

Rich Stephens is a dealer on the premier execution desk at IG

 

Spread bets and CFDs are leveraged products. Spread betting and CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

 

 

 

 

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