When the European Super League was announced, shares in member clubs Juventus (BIT:JUV) and Manchester United (NYSE:MANU) jumped 19% and 10% respectively. Now the league has collapsed, these gains have been erased.
But are these stocks, which have typically offered lacklustre returns, undervalued or back where they should be? And is the idea of a super league dead and buried?
The concept of a European Super League seemed at first glance an excellent idea. Certainly the market liked it and what investor wouldn’t like the prospect of better broadcasting revenue, a major source of income for clubs, and the resulting merchandising revenue? This would surely solve those long festering gripes about Uefa’s ability to deliver enough games to secure clubs’ profitability.
But, apparently, nobody had foreseen the outrage from fans and politicians and even the broadcasters they sought to woo distanced themselves from this alternative to Uefa’s Champions League and Europa league. JP Morgan withdrew its $5 billion backing, saying it had “misjudged” how fans would view the deal.
Clubs need change
It’s hardly surprising that these football clubs would think to cook up such a deal; they have been pummelled by stadium closures as a result of the pandemic. In their most recent quarterly results, neither Manchester United nor Juventus dared to offer a financial outlook for the rest of the year.
Even before the pandemic, shares in these clubs attracted little interest; they are typically volatile, offer limited returns and low dividend yields. Despite repeated victories in Serie A, Juventus only saw a sharp increase in its share price when it signed Cristiano Ronaldo in 2018 while Man Utd has been hammered after various changes in management. Now Ed Woodward, executive vice chair, has quit following the league collapse and fans are calling for the co-chairs, the Glazer brothers, to quit.
There are investors who have taken an interest in clubs. Among them, Luis Garcia, manager at asset management group MAPFRE AM in Spain wrote in the firm’s newsletter: “The attention caused by the announcement of the Super League may have been the definitive catalyst that directs the market’s gaze towards a sector hitherto forgotten, rejected and misunderstood.”
But, he added that it makes more sense to invest in clubs such as Borussia Dortmund (ETR:BVB), Ajax (AMS:AJAX), or Olympique Lyon (OLG:PA), noting that they are “well managed, with healthy balance sheets that allow them to survive the crisis and that they have already demonstrated their ability to create value for their shareholders”.
Will there be a new deal?
A fillip for clubs could come in the form of a new deal. The press decried it as poorly conceived and certainly it was a PR disaster. Nonetheless, the collapse of the league doesn’t solve the frustrations against Uefa. There were also some astute business brains behind it. The Glazer brothers, for example, are heavyweights in America’s National Football League, recently signing arguably the world’s best player Tom Brady to play for the Tampa Bay Buccaneers.
One possibility is that the Glazer brothers, renowned for their tough business acumen, would have wanted to emulate not only the closed shop aspect of the NFL in the super league and secure better broadcasting revenues but also look at cost-cutting measures such as salary caps that are in place across the NFL. Expenditure on transfers are essentially what limit investor returns.
In the short-term, however, we are likely to see a lot more volatility in these clubs’ share prices. The uncertainties are enough to make us want to take a wait and see approach. In the longer term, some form of restructuring, especially as clubs emerge battered by the pandemic, seems inevitable and could not only “save football” (the goal of the super league) but also give better investor returns.
This article was brought to you in partnership with The Armchair Trader.
Emma Portier has more than 20 years’ experience as a financial journalist, starting out as a regulatory correspondent for Euromoney and then joining the Financial Times group as a wealth management writer. She has spent several years as a financial markets reporter for AFX News in Stockholm and then as an EU antitrust reporter in Brussels where she then joined Reuters.
Emma’s core expertise is following EU regulatory developments and how these affect financial markets. She set up the climate change and energy news service for the regulatory risk news agency MLex and then worked as a special EU correspondent for the Bureau of National Affairs. Emma has advised key players in Brussels on their media relations strategy and provides content to a range of private and institutional clients.