Tuesday 12 December 2017

Roar and shout for your soccer team -- but don't even think of buying shares in it

Rangers' fans display messages before their Scottish
Premier League soccer match against Kilmarnock in
Glasgow, Scotland, last Saturday. The club went into
administration earlier last week following an unpaid tax
bill to Britain's tax authorities
Rangers' fans display messages before their Scottish Premier League soccer match against Kilmarnock in Glasgow, Scotland, last Saturday. The club went into administration earlier last week following an unpaid tax bill to Britain's tax authorities
Laura Noonan

Laura Noonan

GLASGOW Rangers' investors were among the hardest-hit when the club limped into administration last week, but anyone who had done their homework on the vagaries of investing in sports teams can't have been taken completely unawares by their plight.

Even a cursory analysis of returns from Rangers plus 10 other sports teams reveals that the sector is one of the most volatile out there. And that volatility is rarely compensated for by long-term growth significantly above what you'd get from a 'safe' investment.

Take Italy's Juventus, which maintains a listing in both its home country and the US. Its shares are down about 39pc in the year so far. Recent returns have more ups and downs than 'Space Mountain' -- up 51pc in 2006, down 41pc in 2007 and up 18pc in 2009.

The trade-off for that volatility? In the five years to the start of 2012, shares were down an average of 7.35pc a year, or a total of 26pc over the period.

It's a similar white knuckle ride at Turkey's Besiktas Futbol Yatirimlar Sanayi ve Ticaret, which plays in the Turkish Super League. Its shares have fallen almost 50pc in the last year, having risen 175pc the year before that.

Over five years, you'd be up an annual equivalent of 26pc, which is arguably reward enough for the slings and arrows of outrageous football clubs, although there is every possibility that the shares will go into another tailspin before too long.

Compared to that, investors in fellow Turkish club, Fenerbahce Sportif, have had a relatively calm time of it -- they're down 46pc in the last year, but in the year before that, they were up 56pc.

They also get a high rate of return if they stay the course. Over the five years to January 1, 2012, they have enjoyed share-price growth at an annualised average of 12.89pc.

You could be forgiven for thinking that football-team results on the stock market are bound to be volatile, since the weekly match results are similarly up and down.

But Fenerbahce's recent history shows things don't always play out that way. It won the Turkish Super League last May and its shares subsequently plunged about 20pc.

Meanwhile, shares in the competition's runner-up, Trabzonspor, rose 11pc the day after the team had lost the big final.

An academic study of some 20 quoted UK football clubs back in 2000 found that while wins and losses did impact on football club results, the impacts were typically minor.

A win led to an increase of 1.3pc, while a loss led to a decline of 1.8pc and a draw resulted in a 0.34pc fall.

Probability enthusiasts take note of the underlying negative bias -- assuming the chances of winning, losing or drawing are equal, the expected return of any game is a share-price decline of just under 0.3pc.

It's not all full steam ahead for the winning teams either. Success often comes from spending big bucks on superstar players, which can hit the club's bottom line and scare investors.

Just look at Manchester United -- one of the most successful clubs in the world in sporting terms.

At the time of the 2000 academic study, United was the standout success, with its market worth eight times its listing value in 1991.

But over five years before the club delisted in June 2005, its shares fell at an annual equivalent rate of 5.24pc, leaving investors down a cumulative 23.6pc.

And the yo-yoing share price isn't confined to soccer clubs. The Brisbane Broncos, a football team quoted on the Australian stock exchange, has shed 20pc of its value in the last year.

In the year before that, its investors were down about 11pc -- having been up a whopping 42pc in the year from February 2009 to February 2010.


With inexplicable share-price movements -- not to mention significant volatility in underlying businesses, amid big signings and relegations/promotions -- it's perhaps not surprising that the number of UK soccer clubs opting for public listing is well below its heyday when they were so numerous that Nomura even dedicated an index just to them.

Even Manchester United has shied away from a return. The boys in red were eyeing up listing some shares on the Singapore exchange late last year but ultimately demurred.

These days, Tottenham Hotspur cuts an increasingly lonely figure on the UK exchange. Its investors are out 43.7pc in the last year. Their five-year return is 50pc over the whole period, or an annual rate of 13.1pc. Ouch.

Not forgetting Rangers, of course. The thing that marks its share-price performance out from the others in the group is a continued negative trend. In 2011, its investors lost 61pc, in 2010 they were down 28pc, 2009 brought respite in the form of breakeven after losses of 25pc in 2008.

In the five years from 2006, shares were down close to 80pc. Even investors who haven't studied the form of other quoted sports clubs should have been steeling themselves for a development like last week's.

Or better still, the boyhood dreamers among them should have ditched the shares and supported their club the old-fashioned way, by showing up for matches, roaring like a lunatic and buying the occasional over-priced piece of memorabilia.

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