From Locker Room to Stock Market: What does going public mean for football clubs?
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Football clubs that have gone public have done so in the hopes of achieving financial security and boosting team performance, but the upsides have been limited, new research by global Fintech company IG, found.
Key Findings:
- Initial public offerings (IPOs) do not boost a club’s performance on the international stage such as the UEFA Champions League; only football clubs from lower local leagues seem to benefit from IPOs
- Funds raised through a share sale might not move the needle as much for top dog clubs, whose players already earn significant salaries
- Larger clubs might also be restricted in the long run by shareholder obligations in terms of spending and debt
There has been little match performance or financial improvement for football clubs that have gone public, IG research has shown. In fact, most football clubs seemingly fared worse in their respective divisions and leagues after an IPO than before, according to an International Journal of Sport Finance study.
It's not just domestic performance that takes a hit; an IPO also does not boost a club’s performance on the international stage, such as the UEFA Champions League for example.
One explanation is that the funds generated from IPOs are used more for clearing the balance sheets rather than adding players to the team or upgrading the club's infrastructure. The biggest clubs, with their high-salary players and substantial shareholder obligations, found that in terms of financial influence, an IPO doesn't significantly change the needle.
Only lower-tier clubs appear to enjoy a modest improvement in on-pitch performance post-IPO, according to the research.
Football Stocks vs. Broader Market
Football stocks are also consistently outperformed by the broader stock market. As a comparison, the 10-year return of Manchester United shares (listed on the New York Stock Exchange) as of May 2023 stands at 7.3%, versus the S&P 500 index’s 10-year return of 146%.
Despite the apparent disadvantages, some of the biggest names in football, such as Manchester United, Juventus, and Borussia Dortmund, have opted for share sales over the past quarter-century.
What's Driving Football Clubs to Go Public?
Axel Rudolph, Senior Market Analyst at IG, offers some insights. Football clubs, he suggests, may choose to go public to raise funds for new player acquisitions, stadium improvements, or debt reduction. However, he believes the primary motive often ends up being a defensive play – reducing debts rather than investing in growth.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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