By
Brian Moore
That hegemony probably explains many
Liverpool fans’ assumption
that, in football matters, they have a right to a better viewpoint
than the rest of us.
On Merseyside the outcry has swelled to include the nonsensical
allegation that the Royal Bank of Scotland has some responsibility
for the club’s present debacle.
Since when does a lender take responsibility for footballing
decisions? One talk-show caller pointed out that publicly-owned RBS
has Liverpool fans as shareholders. Yes, it does, but it has
millions more who are not and who would undoubtedly object to one
club being given special treatment.
The latest act in this farce is the refusal of the owners to
leave quietly and without taking the usual profit that investors
rightly expect when they trade shares.
Americans George Gillett and Tom Hicks are likely to fail in
their legal bid to block any sale on the basis that the board of
directors are failing in their legal fiduciary duty to act in the
best interests of the shareholders.
This is a difficult argument to win as it depends on them being
able to show that the proposed acceptance price is demonstrably
undervalued. The argument that usually prevails is that a company
is worth what someone is willing to pay for it, not what
shareholders think they should.
Since the Americans bought Liverpool in 2007, they have made
available close to £170 million to spend on new players, compared
to Manchester City (£426 million), Tottenham Hotpsur (£177
million), Manchester United (£142 million), Chelsea (£112 million)
and Arsenal (£71 million), according to figures from Transfer
League.
Whatever the Americans have done and however it was financed,
the fact is that Liverpool have not been kept short of money to buy
players.
The issue of net transfer figures does not alter the fact that
only two clubs have paid out more and the club’s present position
of 18th in the Premier League, in the relegation zone, is not the
fault of Gillett and Hicks.
It is the fault of the scouts, former manager Rafael Benítez and
anyone else involved in player acquisitions. That amount of
spending should not leave a club in the relegation zone and the
members of the fraternity 'In Rafa We Trust’ were misguided in
their support of the now departed Spaniard.
The legitimate complaint against the Americans, that they have
not financed a new stadium, is the only one that holds water.
However, even this betrays a lack of business scrutiny back in 2007
when few supporters pointing out that the wealth of Hicks and
Gillett was not liquid. In normal business circles, the promises of
expansion would have been scrutinised properly to see where the
money would come from.
The recent announcement that a bid from New England Sports
Ventures LLC has been accepted threatens to repeat this lack of
scrutiny.
NESV has within its portfolio the Boston Red Sox baseball club,
a baseball park in Boston and a sports marketing agency. None of
these interests is easily liquidated. They may be assets against
which banks will lend, but that is the same position as before, it
is just a different set of assets.
Much has been made of the personal wealth of the figures behind
NESV but they have not pledged any personal spending and anyway
that would again depend on the willingness and ability to turn
capital into cash; the only alternative would be to use equity as
collateral for borrowing.
It is said that the Red Sox have done well under NESV’s
ownership and that the key to their success is leaving the baseball
decisions to the people that know baseball. They do not interfere
with the every day running of baseball operations.
Additionally it is said that the brand has been developed and
scouting systems have been improved.
In reality, the success is more likely due to the fact that they
own a large stake in the regional sports network that carries the
bulk of its games and annually generate hundreds of millions of
dollars in revenue. New England Sports Network, the network cable
arm of NESV has a subscriber base in New England of about 3.8
million.
One view in an American business publication is that the Red Sox
are a media company masquerading as a professional baseball team.
The money the network pumps into the team is one reason the Sox are
able to pay for top baseball talent and finish at or near the top
of the standings year after year.
Structured properly, the cable operation is also a way to shield
earnings from baseball’s revenue-sharing system.
The size of the United States and regionalisation of
broadcasting enables NESV to generate this money but it cannot do
that in England as Liverpool’s television rights are ceded to the
Premier League.
It may leverage broadcast rights to the club’s American fans but
whether this is possible, and how much it might produce, is very
difficult to predict and it certainly is no basis for budgeting for
a new stadium, a raft of new players and a bright new future.
The Red Sox made a profit of about £25 million last year but is
it likely that club will pass any of this to Liverpool and what
happens if the Red Sox make losses?
What all this points to is more borrowing. Unless personal cash
is introduced for development or there is a rights issue (which
will be resisted because it dilutes the value of the original
equity) it may be from frying pan into fire.
Liverpool fans cannot complain now; the right time to protest
was in 2007 when David Moores was urging his fellow shareholders to
sell to the Americans.
