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The Ev - how NOT to run a football club

That looks wrong to me re Everton. The PL media revenue includes equal shares and then variables based on league finish and the number of games on telly. Everton (19 games) were on UK telly more than Brentford (14) and Forest (15), and they finished above them both in the league table, so their variable share should be higher than both of those teams.
I cut/pasted from the Mirror so let's assume they are wrong. They are due a decent wedge whichever but I guess a drop in the ocean when compared to debt
 
Arf.

The fact that it was in the "Grauniad" explains why I hadn't seen it. That glorified chip wrapping is as far over to the left as the "Star" or the "Scum" the other way.
 
Arf.

The fact that it was in the "Grauniad" explains why I hadn't seen it. That glorified chip wrapping is as far over to the left as the "Star" or the "Scum" the other way.

It was probably in the Daily Mail too, so no excuse.
 
Arf.

The fact that it was in the "Grauniad" explains why I hadn't seen it. That glorified chip wrapping is as far over to the left as the "Star" or the "Scum" the other way.
I read the sports pages from both right and left wing media outlets. Naturally all ad blockers and using archive to bypass firewalls on the right wing scum bags to make sure they get no revenue.
 
Are Everton a Portsmouth waiting to happen? They're building a 55k seater stadium but will they fill it and can they get away with charging as much as LFC do? Supply and Demand says, no.
They don't have really international fans who will fly from all over the world just to see them.
If they do go into admin after finishing the stadium, who would buy the stadium?
 
Are Everton a Portsmouth waiting to happen? They're building a 55k seater stadium but will they fill it and can they get away with charging as much as LFC do? Supply and Demand says, no.
They don't have really international fans who will fly from all over the world just to see them.
If they do go into admin after finishing the stadium, who would buy the stadium?

But… but… but!!!

They’re the people’s club!!!!
 
Some thoughts on the Everton takeover rumours.

Firstly, the reported £400m bid doesn't make clear whether this is the price to be paid to Moshiri for his shares or whether it is the value of the business.
The distinction is important. A business valuation asks what the business is worth if it has no cash and no debt. Everton has not much of the former and quite a lot of the latter (over £1bn if you include the £447m still owed to Moshiri, which you should).
So if the £400m is the business valuation, then Moshiri will get nothing, as the £400m will be used to pay off other lenders in priority and there'll be nothing left for old Farhad, and there's even a risk the other lenders won't get paid in full (777 probably most as risk on that score). By contrast, if £400m is what they propose to pay for Moshiri's shares then there's a good chance they will also repay his debt and he will walk off into the sunset having got most of his money back - I reckon in that scenario he would "only" lose about £100m.
I think there's a good chance that the £400m is the worst of those two cases - that it's a business valuation. The reason for saying this is based on some comparable valuations. Firstly, Aston Villa's shareholder company recently did what is called an "impairment review" (basically a test to see whether the club is still worth what they paid for it) and they valued the business based on 2.5x it's turnover. A comparable calculation for Everton would value the business at £430m based on the revenue in their last accounts. And in the Forbes study of the top 30 most valuable football clubs, Everton were valued at $744m in 2023, since when things have got even worse. They don't feature in the 2024 study as it only values the top 30 clubs and they have dropped out of that list. The lowest valued club is $730m, so Forbes must think they are worth less than that, although how much less is hard to tell.

Secondly, it would be wrong for the fans to get too excited about "Saudi money" (but it would be right to be concerned about human rights records). That is unless City win their case about related party transactions. Because unless City win that case, new owners won't be able to pump loads of money in to sort out their squad as they will still be subject to PSR risk (and with the precedent that they have already been punished twice on that score). By contrast, if City win on APTs then the new owners could put all kinds of over-priced sponsorships in place as a way of pumping money in but still meeting PSR. I wouldn't be surprised on that score to see the takeover dragged out until the APT verdict is in. If I were Moshiri, I would delay the sale as I could drive a harder bargain if City win. For the record, they shouldn't, but they shouldn't have been let off by CAS either.

So the measured take on this would be that moving on from the chaotic Moshiri era would be good for the club, and they would hope that new owners would impose a measure of financial discipline and competent management of the business (much as I dislike him, I have to say Dacha has done a decent job on the football side of things).
But, as with Newcastle, a turnaround is going to take time and the fallout of the last few years of rampant mis-management is going to hang around for a while yet. And the PIF, buying into Newcastle, wasn't buying the kind of basket case that Everton represents right now. Newcastle was a club run on a tight budget and with accumulated capacity to spend a reasonable amount without troubling PSR. Obviously they spent to the max of their limits in that respect, hence the current rumours that they need to sell players.
And that's assuming this even goes through. This is Everton. Snatching defeat from the jaws of victory is a specialism.
 
Secondly, it would be wrong for the fans to get too excited about "Saudi money"
As far as I can see there is just one Saudi individual involved within a larger syndicate so no big deal on that front.

Actually, do we know all the individual investors in FSG?
 
Firstly, the reported £400m bid doesn't make clear whether this is the price to be paid to Moshiri for his shares or whether it is the value of the business.
The distinction is important. A business valuation asks what the business is worth if it has no cash and no debt. Everton has not much of the former and quite a lot of the latter (over £1bn if you include the £447m still owed to Moshiri, which you should
Thanks for this. Brilliant to have this level of explaination.

I sort of gleaned the bid was to buy the club and all its debt which astounded me!
 
As far as I can see there is just one Saudi individual involved within a larger syndicate so no big deal on that front.

Actually, do we know all the individual investors in FSG?
I believe there are loads of investors in FSG, most of them holding fractions of a per cent in the capital of the business. But I also understand that most of them are high net worth individuals, or people with significant influence - for example, when the drugs in baseball enquiry was led by Senator George Mitchell, it was pointed out that he had a conflict of interest since he was a director of the Red Sox and thought to be an investor (the Red Sox weren't implicated in any wrong-doing). It's likely the same with LeBron. He probably doesn't have a large stake, but he has a huge public profile, and therefore carries influence, at least in the public eye. Wikipedia lists a number of billionaire investors and a former governor of Illinois amongst known investors, and there are probably loads more whose stakes are not known.
So although the investors may not hold big stakes, they are big hitters, and not the kind of people you want to upset.
I'd expect the Saudi investor in the Everton consortium will fall into the same bracket - even if he doesn't have a big stake, he'll likely still have a significant influence. And just because he's one individual, doesn't mean he won't have a large stake. It is rare that parties in a consortium are all on an equal basis. It's often the case that a small number of individuals / organisations front most of the money and then there are smaller stakes assigned to people with the required business knowledge to make the investment work (e.g. Staveley's minority stake in Newcastle). But I'd expect all members of the consortium will want to stay below significant influence, at least at first, so they don't have to go through the scrutiny and delay of the fit and proper person test (which applies to anyone with over 30% of the shares).
 
Thanks for this. Brilliant to have this level of explaination.

I sort of gleaned the bid was to buy the club and all its debt which astounded me!
Just to clarify how this works, in practice if the bid is £400m business value (usually referred to as "enterprise value") then the approach would be to say that the share price is £400m, less the net debt (i.e. debt less cash on hand, adjusted for "working capital" at the date of completion. If you ask 10 accountants what "working capital" means you'll likely get 10 different answers, but it is essentially an agreed set of payable / receivable balances (i.e. stuff that can be converted into cash in relatively short order).
In the case of Everton, the GROSS debt (including the amount due to Moshiri) is probably in the region of £1bn, so the price for the shares would basically be £nil (in practice actually £1) and Everton / the new owners would need to agree with creditors to wipe out £600m of debt (most of which will fall on Moshiri). The remaining £400m of debt after that is done would then be repaid by the incoming buyers - so they pay £1 for the shares, then pump £400m into the company which is used to pay-off the remaining debt.
And like I say, I could be wrong about what is meant by a £400m takeover, but I'd expect the valuation of Everton (debt-free) to be in the £400m - £600m ball park, so I think it's highly unlikely anyone is going to pay £400m for the shares and repay £1bn of debt, for a total price of £1.4bn. That massively overvalues the club, and the buyer is in a strong position here. Moshiri has a millstone around his neck and needs to get rid.
As a comparison, and drawing information from published accounts, Newcastle was bought for around £385m (share value) in October 2021, which would probably include about £10m in fees. Newcastle had about £100m of debt in its last accounts pre sale, so the enterprise value would have been c £475m. And Newcastle had a completed 50k+ stadium and wasn't a mis-managed mess.
 
Just to clarify how this works, in practice if the bid is £400m business value (usually referred to as "enterprise value") then the approach would be to say that the share price is £400m, less the net debt (i.e. debt less cash on hand, adjusted for "working capital" at the date of completion. If you ask 10 accountants what "working capital" means you'll likely get 10 different answers, but it is essentially an agreed set of payable / receivable balances (i.e. stuff that can be converted into cash in relatively short order).
In the case of Everton, the GROSS debt (including the amount due to Moshiri) is probably in the region of £1bn, so the price for the shares would basically be £nil (in practice actually £1) and Everton / the new owners would need to agree with creditors to wipe out £600m of debt (most of which will fall on Moshiri). The remaining £400m of debt after that is done would then be repaid by the incoming buyers - so they pay £1 for the shares, then pump £400m into the company which is used to pay-off the remaining debt.
And like I say, I could be wrong about what is meant by a £400m takeover, but I'd expect the valuation of Everton (debt-free) to be in the £400m - £600m ball park, so I think it's highly unlikely anyone is going to pay £400m for the shares and repay £1bn of debt, for a total price of £1.4bn. That massively overvalues the club, and the buyer is in a strong position here. Moshiri has a millstone around his neck and needs to get rid.
As a comparison, and drawing information from published accounts, Newcastle was bought for around £385m (share value) in October 2021, which would probably include about £10m in fees. Newcastle had about £100m of debt in its last accounts pre sale, so the enterprise value would have been c £475m. And Newcastle had a completed 50k+ stadium and wasn't a mis-managed mess.

I love picking your brain on this! That took two reads - two full reads not @tombrown ones lol

So _IF_ an incoming buyer did want to pump money into a club without concern regarding FFP/PSR they could do it by buying a club for more than the Enterprise Value to allow the balance sheet to be put in a healthy place for a couple of years of big spending?
 
I love picking your brain on this! That took two reads - two full reads not @tombrown ones lol

So _IF_ an incoming buyer did want to pump money into a club without concern regarding FFP/PSR they could do it by buying a club for more than the Enterprise Value to allow the balance sheet to be put in a healthy place for a couple of years of big spending?
I feel like I get a bad press in this place
 
I love picking your brain on this! That took two reads - two full reads not @tombrown ones lol

So _IF_ an incoming buyer did want to pump money into a club without concern regarding FFP/PSR they could do it by buying a club for more than the Enterprise Value to allow the balance sheet to be put in a healthy place for a couple of years of big spending?
No. You would never buy for more than enterprise value. That's just over-paying for the business. The excess in that scenario goes to the selling shareholder(s) not the club.
The issue isn't how to pump money in. You'd typically either make a loan or issue some new shares. The only question there is whether you'd charge interest on the loan - if you did then those costs would count towards PSR so most owners do it interest-free.
The issue is what you do with that cash. In Everton's case, the £400m in this scenario will probably go in as interest-free debt, and be used to repay existing debt. This removes interest charges and longer-term reduces the club's losses and means it would do better on PSR. Everton don't regard this as so much of an issue at present as most of their interest charges are being added to the costs of the stadium, so they don't hit profit (although that is still subject to review next season by a separate appeal commission, a hearing which I think they should lose if it's argued correctly).
But if that cash is spent on new players, then you'd get higher amortisation and wage costs going through the profit and loss account over the duration of the player's contract, and that puts pressure on PSR.
Ignore all of the smoke and mirrors Everton have put out about the stadium being at the root of their problems (it didn't help, but it wasn't the root cause). They got into such a mess because they spent too much on players. Moshiri put cash in interest-free, they spent it on players and the related costs pushed their losses to the brink. They were counting on those players improving their performance to a point where they'd earn enough money (PL merit income, maybe Europe) to cover those extra losses, but they didn't because the players they bought were shit (which the very first commission basically said in pretty clear terms).
This is why the over-priced, related-party commercial deal is a golden bullet, provided City win their case on APTs. It gets money into the club in a manner that counts towards profit and therefore offsets the losses that come after it is spent. The only downside is that the income would be taxable in the UK, but if the club still makes losses (but within the PSR limits) then they won't pay tax anyway. And, spoiler alert, most football clubs are really good at making losses.
 
OK. Right. So why the fuck are so many potential investors interested in Everton? The Beeb listed four other parties along with the consortium incorporating a Saudi party. The most mind boggling being the two local guys with £150m loans!
 
OK. Right. So why the fuck are so many potential investors interested in Everton? The Beeb listed four other parties along with the consortium incorporating a Saudi party. The most mind boggling being the two local guys with £150m loans!
The two local guys are fans. I'm not sure they have the necessary funds to turn the club around long-term.
As for others interested, it's a distressed asset, it will go for a relative bargain price, especially when you think that clubs like us or United would be priced in the £3-6bn range. And it's absolutely for sale, which we are not, unless you put serious moolah on the table.
Finally, much as I may mock them, Everton are a stronger "brand" (sorry) than City were when Abu Dhabi took them over. They'll look at City and think that's where they could be in a few years' time if they can find a way to spend a couple of billion. Still cheaper than buying us or United. That's the sports washer model.
Actual business people would aim to do with Everton what FSG did with us - buy cheap (in distress), run sustainably, grow value. And they won't have a stadium to develop during that time.
 
The two local guys are fans. I'm not sure they have the necessary funds to turn the club around long-term.
As for others interested, it's a distressed asset, it will go for a relative bargain price, especially when you think that clubs like us or United would be priced in the £3-6bn range. And it's absolutely for sale, which we are not, unless you put serious moolah on the table.
Finally, much as I may mock them, Everton are a stronger "brand" (sorry) than City were when Abu Dhabi took them over. They'll look at City and think that's where they could be in a few years' time if they can find a way to spend a couple of billion. Still cheaper than buying us or United. That's the sports washer model.
Actual business people would aim to do with Everton what FSG did with us - buy cheap (in distress), run sustainably, grow value. And they won't have a stadium to develop during that time.
Thanks so much for taking the time. Got it.
 
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