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Football: a beautiful game but an ugly investment


Investors eyeing up Tottenham Hotspur’s plan to repay some of its debts by borrowing against its stadium should be wary of buying into a sport that has a long history of burning investors.

US private placement investors may be familiar with US sports franchises such as NFL teams. But in the American version of football, because teams are not threatened by relegation, they are able to own a roughly 3% slice of the entire sport as a collective.

Football fortunes are often made and lost across 90 minutes of madness. Indeed, the old joke went that the way to make a small fortune in football was to start with a big one. By the nature of the sport, minnows can have the better of giants.

The wildly fluctuating share price of listed Dutch club Ajax and of Italy’s Juventus show how millions can be wiped off, or added, to a club’s value depending on that day's results. That is gambling, not investing.

Footballing income is more stable than it was before, but it is still largely dependent on television revenue, often linked to success on the pitch and progression through competitions.

Spurs is a storied English club, but such institutions have fallen on hard times in the past.

Investors only need to be reminded of the sad story of Leeds United to see how asset-backed borrowing can compile woe for both investors and clubs.

Surprises can happen in any capital markets investment, and mistakes can often cost borrowers and shareholders huge sums. Nevertheless, the mistakes chief executives make can often lead to investor recourse; refereeing ones rarely do.

Football is a wonderful sport graced by geniuses like Barcelona’s Lionel Messi. However, investors should be in a position where, like Liverpool fans on Wednesday night, Messi can only break their hearts, not their wallets.

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