Should I invest in football shares?
I am a massive football fan and also a keen investor in the stock market.
Beautiful game: Watford F.C. are one of those on the stock market with financial difficulties
I constantly see football clubs listed, although my own is not on there. However, I have been thinking about buying shares in a football club.
I know nothing about how they have performed in recent times or if they make a wise investment at all. Would you be able to give me some clarity? Mr A.W.
Lee Boyce, from This is Money, replies: With the start of the Barclays Premier League season fast approaching this weekend, football fans are bouncing with excitement up and down the land.
The thrill of watching your club with a Pukka pie and a cup of hot Bovril on that first Saturday in August is like reacquainting with an old friend.
However, investing in football shares is not quite as glamorous as it sounds.
As recently as five years ago, there were 14 UK football teams that were trading on a variety of exchanges. This number has now decreased to seven.
In fact, 22 clubs have been public at some point in the last 15 years.
The boom of teams listing on the market was down to the massive broadcasting deal with BSkyB in the mid-nineties which triggered many clubs to float.
In recent years, teams such Aston Villa, Birmingham City, Charlton Athletic and Newcastle United are examples of clubs that have taken themselves off the stock market.
The clubs that remain, consist of four in and around the London area, two in Scotland and one in the North West.
Listed clubs:
• Arsenal Holdings
• Celtic
• Millwall Holdings
• Preston North End
• Rangers Football Club
• Tottenham Hotspur
• Watford Leisure
Interestingly, four of the clubs make up some of the biggest rivalries in the sport. Arsenal and Tottenham the North London rivalry, Celtic and Rangers of course Glaswegian rivals.
Even more interestingly, they are on rival exchanges; Arsenal and Rangers on the PLUS market, Celtic and Tottenham on the AIM market.
Taking Rangers as an example, they are believed to be around £30m in debt. They are in talks with 43% taxpayer owned Lloyds Banking Group about a new business plan - it shows how heavily in debt clubs can be.
Shares in the club have fallen by almost 60% in the last five or so years, this despite winning the league twice, the Scottish Cup twice and finishing as runners up in the 2008 UEFA Cup final.
The list of clubs could be almost be halved again, with Arsenal, Rangers and Tottenham all being subject of takeover speculation in recent times.
Add to this the suspension of Preston North End shares due to a winding up petition from HM Revenue and Customs and it is clear to see football shares are dwindling to nothingness.
The majority of listed clubs are private companies in all but name, controlled by a single owner or a group of investors. This means they are rarely run in the best interests of shareholders.
Football clubs tend to make bad investments for serious investors, who tend to steer clear of them – they are ugly investments in the beautiful game.
If we analyse for example Millwall shares since the start of the year, it is clear why football shares hardly make the best investment.
It hit the dizzy heights of 0.038p in the summer, after promotion from League One (The third tier of English football) to the Championship (the second tier).
The club has already stabilised back down to 0.03p. It's hardly going to shoot up enough for serious investors to ever see it as a worthwhile punt (I'll eat my words if they win the Champions League down the New Den in the next few years and the share price goes through the roof).
You would probably be better limiting yourself to an emotional investment in your team with the thrills and spills of the season, or if you do have a financial inkling, a trip down the bookies would probably be a better option.
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