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Header costs Juventus shareholders €390m, shows perils of sport stocks

By Sam Kerr
18 Apr 2019

The elimination of Juventus from football's Champions League on April 16 wiped €390m off its market capitalisation by the following morning, highlighting the risks of owning equity in Europe’s premier football clubs.

Matthijis de Ligt’s winning header for Ajax cost the club’s investors dearly.

Juventus has roughly 1bn shares. Given the change in share price between €1.69 at market close on Tuesday April 16 and €1.30 at the market open April 17, a fall of 23%, the 90 minutes devalued it by €390m.

Television and broadcasting rights are the largest contributor to Juventus' revenue. In 2017 it reached the Champions League final, enabling it to make €110.3m of TV revenue from that competition. 

However in 2018, Juve was knocked out in the quarter finals, the same stage as this year.

Revenue from the Champions League last year was €78.2m, implying that earlier elimination cost the club €32.1m of broadcasting rights; it also meant the club collected €2.3m less in ticket sales.

Given that Italy’s largest club trades at roughly 14.5 times earnings, a loss of potentially €34.5m of revenue is bound to have an effect on the share price, especially since Juventus had been the favourite to win the game. 

The team's stock had risen earlier in the season as it did well in the Champions League. In March, when it came from 2-0 down after the away leg to defeat Atletico Madrid 3-0 at home, courtesy of a Cristiano Ronaldo hat trick, its value grew by €320m overnight, more than three times the €101m Juve had paid to secure Ronaldo’s services in the summer.

Juventus, which is also an issuer of corporate bonds, is one of a small family of listed football clubs. Roma and Lazio also trade publicly, as do England’s Manchester United and Arsenal, Germany’s Borussia Dortmund and Scotland’s Celtic.

Ajax is also a listed entity. Its shares rose roughly 10% between Tuesday’s close and Wednesday’s open, adding about €34m to give it a market cap of around €348m. Again, that was largely due to the revenue benefits of Champions League progression.

Since club's elimination from European competition, WorldQuant LLC has opened a 0.5% short position against Juventus, according to data from Breakout Point. The shares are trading at €1.27 as of April 26.

Manchester United was also eliminated from Europe on April 16 by Barcelona. Yet its share price rose on Wednesday morning.

This is because Man Utd depends less on revenue from European broadcasting rights than Juventus, partly because of a lucrative domestic Premier League television deal, and partly because of its commercial partnerships, the largest contributor to its earnings.

The English club's fans often complain that it concentrates too much on sponsorship deals and not enough on performance on the pitch, but it means single games have less impact on the share price.

Juventus' continued domestic success and regular participation in the latter stages of European competition has made being a fan of the Italian club a pleasurable experience, but it is almost certainly less stressful being an investor in Manchester United.

Alternatively, perhaps the rise and fall of Juve’s share price because of its European form shows why football clubs may not be the best long term investments, until of course bookmakers get the capacity to offer institutional investors a way to hedge that exposure on individual games.

By Sam Kerr
18 Apr 2019