Unloved football stocks await segment revival

On the 06/24/21 at 7:17AM


Adrien Paredes-Vanheule

Sport-focused fund managers continue to shun football stocks but new football clubs may be further listed, starting with CF Intercity, a fourth division team set to become the first football club to be listed in Spain.

Football stocks remain index orphans since 28 August 2020. The Dow Jones Stoxx Europe Football index, the sole benchmark tracking shares of 22 listed football teams run by Qontigo's Stoxx, was discontinued 28 years after its launch. “It is not usual to decommission indices, sometimes, there is just not enough interest in the market,” a spokesperson at Deutsche Boerse told Asset News as to reasons why the football-focused benchmark got stopped.

Nevertheless, the spirit of the index survived within annual reports of only one European listed football club. French club Olympique Lyonnais has designed an internal index with the same 22 components of the Stoxx Europe Football as of end August 2020, in order “to keep tracking relative stock exchange performances.”

Robin Steden, head of investor relations at German football team Borussia Dortmund (BVB), said to Asset News the index termination had a low impact on the club’s activity. The team is listed on the Frankfurt Stock Exchange since 2000 and estimates 50% to 60% of its free float is in the hands of professional and retail investors. BVB’s investor relations head said the evolution of the football stock universe “should be worth a thought for every football club” and that current market conditions look favourable to new listings of football teams.

Sport funds do not support football investments

One listing is much awaited in Spain. CF Intercity is set to become the first Spanish football team to list. In May, shareholders of the Spanish fourth-division team backed the club’s listing plans. The team, founded in 2017, is located in Sant Joan d’Alacant, nearby Alicante. It is expected to be listed by end June with an initial market capitalisation of €4.5m, a sum raised ahead of the listing, CF Intercity’s chairman Salvador Marti told Bloomberg.

The club targets at least two more increases with a view to reach €20m in market cap if CF Intercity reaches Spain’s football third division, Primera Division RFEF, which is a professional league. Other plans include the building of a sports complex in the city of Alicante and of a new stadium with a capacity of around 7,000 seats.

Mapfre AM’s portfolio manager Luis Garcia - invested in three football clubs (OL, Ajax, BVB) through the Mapfre Behavioral Fund - considers CF Intercity’s listing a good news and believes that could further trigger new IPOs of football clubs. But not all portfolio managers are convinced by the current potential of football stocks.

Asset management companies Allianz Global Investors, Mandarine Gestion and Uzès Gestion all run a sport-focused fund but none has invested in football stocks. At French boutique Uzès Gestion, an expert committee is advising the Uzès Sport fund to support its asset allocation. The fund is split across seven sectors, three of which are traditional sport sectors, namely events/marketing, sport equipment (brands) and economic sport players (football teams, infrastructures, etc). The four other “satellite” sectors include media broadcasters, e-sport, healthcare-well-being and tech innovation.

“We currently do not have a positive stance on the football industry. Therefore, our sport fund does not invest in football teams for several reasons. The current environment for football clubs is not compelling due among others to the Covid-19 crisis, the lack of diversification in revenue, the drop in ticketing as well as in television rights and the difficulties for clubs to curb the main liabilities, i.e. players’ salaries, when there is a downturn like 2020. We number too many significant hazards, including sporting hazards (qualification to European tournaments, players trading), which form as many burdens for financial investors to invest in football stocks in the end,” Arnaud Morvillez, manager of the Uzès Sport fund, told Asset News.

Uzès's expert committee believes a closed model such as the European Super League (ESL), applied to European football clubs, would set a friendlier environment for professional investors. Morvillez referred to the shares of Italian club Juventus Turin “which experienced a sharp rise in value” when the ESL project came out mid-April. “Very few listed football clubs such as Olympique Lyonnais try to diversify into new businesses. But for the majority, they remain dependent of TV rights, especially in France. It is globally complicated to make money in the football universe currently,” he said.

Nonetheless, he pointed out the fund would “probably consider investing” in listed football clubs playing in second or third division. These are well structured and much less dependent on TV or to European tournaments’ qualifications, he added. In short, “a different case.”

Belgian rout

For Morvillez, the CF Bruges’ IPO postponement illustrates the fact that the current stock market environment is not that favourable to football clubs seeking a listing. Bruges’s football club was due to list last March on Euronext Brussels, in order to raise funds for the building of its new stadium. It was ready to float 28.3% of its shares (even up to 40.7%) for an expected initial market cap of €230m but the Belgian team eventually postponed its IPO, blaming on market conditions for the postponement.

“Even Bruges, a top Belgian football team, cannot get listed, as this equity story could have been the opportunity to invest in an industry at its bottom. Unknowns around qualifications, TV rights, ticketing, lack of hospitalities are a brake for the development of football clubs on stock exchanges. Adding to this, Bruges’ valuation was fairly high according to us. We estimate that clubs that have the ability to sell players for a very important amount, for 50+ million euros, deserve a higher valuation, like Ajax or Dortmund for instance,” the fund manager analysed.

From a financial perspective, valuations of most listed football teams are simply overvalued, assessed Stefan Prigge, a financing and accounting professor at the Hamburg School of Business Administration. Prigge co-authored a number of thesis around investors in football stocks. The segment is niche, its trading activity rare, he said.

“Nobody can pretend to know what the real value of those stocks is but they are more expensive than standard stocks. Investors holding football equities are not stupid obviously but we can speculate that they are perhaps buying an extra return, something else on top,” he told Asset NewsIn Prigge’s view, pure financial investors, seeking dividends and returns, are not interested in football stocks as they acknowledge the return they get is too small for the price to pay. However, he said there might be other types of returns that make football stocks a compelling investment.

“For instance, fan investors might just want to support their clubs, regardless of returns they may achieve by buying shares of their teams. In Germany, football teams issue fan bonds. Hence, we stress fans printing coupons as well as faced value documents and not giving them back to the club. They do not want the money. Also, in Germany, a football team getting listed on the equity market is critically looked at by the fans because it is a sign of commercialisation and could bring non-fan external influence,” Prigge explained.

The German professor said that whether football clubs are listed or not, they face huge losses as a result of the Covid-19 pandemic and need new equity funding. He believes it could be attractive for football clubs in Germany to bring in fans as shareholders and to give them influence.

“We have seen fans buying tickets for games that played even without spectators physically present in the stadium. Another example is fans mobilising against the commercialisation of their team’s stadium name like it happened in Nuremberg where fans raised money through crowdfunding for this purpose,” he said.


Prigge sees a potential “win-win situation” in football clubs listings as clubs would get fresh equity and fan investors would defend their club against unwanted external influence. However, some club managements would not survive proposing a listing on stock exchange because fans would consider this as another step of unwanted commercialisation, he argued.

An alternative for German clubs would be the setup of a cooperative, which would imply selling their stadium but would be an investment opportunity for fans that are not profit-oriented. Uzès Gestion's Morvillez suggested special purpose acquistion companies but rather for US sport franchises (NBA, NFL, etc) that are not listed.

“Some Spacs may try to grab shares in those franchises but they need the go from their leagues which is uneasy to get. We would look into those Spacs opportunities since US sport franchises evolve in closed leagues, therefore there is no sporting hazard, and revenue is ensured,” he said. Spacs targeting European football clubs would depend on the sellers' profile but “Spac founders would still need to convince investors that buying a football club is the right thing to do. Yet, we note limited appetite for European football clubs.”

What about listing national football teams? Prigge answered that on the one hand, the national team can be considered a cashflow generating asset thus there should be a value on it and room for possible trading on stock exchange. “National teams, like football clubs, need funding, even more if we face one or two more years of coronavirus. Nevertheless, they would not float their full capital, only part of it. The German football national team received income compensation by an insurer last year after three friendly games were cancelled. On the other hand, various factors need to be taken into account. National teams are only paying a small part of football players’ salaries, the clubs mainly do.”

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