BVB, Manchester United & Co: Football stocks – why they play with their own rules here

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by Florian Hielscher, Euro on Sunday

It was finally that time again: On August 5th, the Bundesliga started its 60th season. From now on, king football will again determine the weekly events. It’s not just athletes and fans who follow what’s happening on the pitch with excitement. Because there are now enormous sums of money behind the sport, not only through sponsors. Anyone who wants to benefit monetarily from the sporting events could resort to sports betting or try their luck at the betting game. But there is another way: Some football clubs are listed on the stock exchange, so that fans and investors can put a piece of their favorite club in their portfolio and benefit from sporting and financial success. Investors are investing in football stocks in a market worth billions.

In Germany, however, investors will only find what they are looking for to a limited extent, as two clubs are listed on the stock exchange. On the one hand there is the reigning runner-up Borussia Dortmund, Bayern’s first pursuer for years. After a spectacular transfer offensive, the Ruhrpott club wants to attack Bayern at the top this season. The second German club is the Spielvereinigung Unterhaching. In 2019, the club from the Munich suburb dared to make the leap onto the trading floor. With the fresh capital, the then third division team wanted to head towards the second Bundesliga, but things turned out differently. The SpVgg now plays in the Regionalliga Bayern.

In view of the clear selection in Germany, it is worth taking a look at Europe: For example, the renowned major clubs Manchester United from the English Premier League and the Italian top club Juventus Turin are listed on the stock exchange. Clubs such as Sporting Lisbon, AS Roma, Celtic Glasgow and Ajax Amsterdam can also be found as shares.

financial tension

As part of the entertainment industry, football clubs suffered greatly from the corona restrictions, and ghost games lost millions in viewer revenue. Borussia from Dortmund, for example, claims to earn up to four million euros from ticket sales and catering at a sold-out home game. These sales sometimes failed to materialize last season, when clubs had to hold a number of ghost games, i.e. without spectators. For the financial year that ended in mid-2021, BVB had to report an annual loss of more than 70 million euros and subsequently carried out a capital increase. Accordingly, hopes of a return to normality this season rest. It is uncertain whether this will happen, after all, another corona wave in autumn could cause empty stadiums again.

In addition to transfer income, income is the most important source of income for clubs. These are easier to plan than profits or losses in transfer periods. Most recently in the headlines: FC Barcelona. The Catalans are saddled with huge debts but have spent more on transfers than any other European club this summer, at over €150m. This is made possible by the sale of long-term broadcasting rights and part of the association’s studio for audiovisual productions. The sale of the naming rights to Barca’s stadium brought in more money. The streaming giant Spotify secured this and will transfer up to 70 million euros annually until 2026, so that Europe’s largest stadium is now called “Spotify Camp Nou”. However, since the club uses most of the proceeds from the sales for transfers, the debt remains high. Listed clubs like Manchester United or Juventus Turin are also lugging around huge mountains of debt.

Success not only monetary

But is that really a problem? After all, when it comes to the question of success, not only financial aspects should be considered. For companies like Apple or Amazon, the success of a year is measured by key figures such as sales and profits. In the case of football clubs, the sporting performance, such as qualification for a European competition, plays a particularly important role because it is directly related to financial resources. In order to achieve one of the coveted places, high expenses are sometimes associated. A look at the clubs shows a mixed picture: BVB has established itself as a Bayern hunter, but they were eliminated quite early in the Champions League.

Juventus Turin have won eight championships in Italy in the past ten years, while Ajax Amsterdam have won five in the Netherlands. In the premier class, the club surprisingly stormed into the semi-finals of the Champions League in 2019, and the share price rose massively. After winning the first leg, the team conceded a last-minute goal in the second leg, which meant elimination from the club’s most important competition. The following day the paper lost massively. And Manchester United has been chasing their own claims for years and is only playing the Europa League this season.

The Spielvereinigung Unterhaching is far away from financially lucrative European competitions and accordingly thinks in other dimensions. When striker Karim Adeyemi switched from RB Salzburg to BVB, the share rose sharply. The reason: As the striker’s training club, Unterhaching received a higher single-digit million amount through a resale participation. A lot of money for a team in the fourth division.

Despite all the uncertainties, analysts also see positives. In a study on the Manchester United paper, Deutsche Bank highlighted the strengths. The club is “one of the most recognized sports brands in the world, allowing the team to progressively monetize its position through broadcasting rights, sponsorship, merchandising and ticketing,” the analysts wrote. Deutsche Bank hardly sees a high volatility in income due to sporting performance: more than 60 percent came from advertising and matchday sales. These are largely immune to the annual performance of a team.

thrills offered

In the past, however, the papers were not a hit for investors, and analysts have so far paid little attention to the shares of the clubs. However, with fans returning and the prospect of increasing revenue, football stocks appear to be an exciting area of ​​re-opening. However, they are subject to their own influencing factors, which are not just economic. Individual games or events can have a major impact on the course, and there are sometimes complicated ownership structures. So there is tension.

INVESTOR INFO

BVB has established itself as number 2 in Germany. Thanks to top-class newcomers, the club could still be fighting for the Bundesliga title this season after the departure of star player Erling Haaland. In the financially lucrative Champions League, the groups have yet to be drawn. After losing millions last year, a lot depends on whether there will be new corona restrictions in autumn. At current levels, the stock seems worth speculating on.

The game association from the Munich suburb now plays in the regional league, after a good start to the season there is hope for a return to the professional field. This one could bring new imagination. When talents are sold, new financial resources are possible immediately or later through participations. There doesn’t seem to be much price fantasy for the paper at the moment, also due to the manageable trading volume. The stock is more for fans of the club.

balance sheet capitalization

FC Barcelona had the lowest working capital (current assets minus current liabilities) among European football clubs in 2020/21. Manchester United and Juventus were also unable to fully cover liabilities, unlike Germany’s premier Bayern Munich.

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