There is a growing consensus on the Sevco fan forums that what their club needs, what it really needs above all, is a share issue. This, so they reckon, will be the magic wand solution to all their problems. It will provide fresh funds for the players. It will allow a debt-to-equity swap for those shareholders who’ve provided soft loans that will go some way towards compliance with Financial Fair Play rules, which are all that will satisfy UEFA.
Not since Warburton’s Magic Hat was found to be nothing more than a sick bag full of airplane food have the Peepul believed in such utter nonsense. This simply isn’t going to happen.
For one thing, the numbers do not add up.
Scottish clubs have done share issues before, with Celtic’s being the best example.
In 1999 we pushed a share issue out that raised £21 million for the club. In 2001, we raised another £25 million. Four years later we pushed out share issue number three and another £15 million floated into the kitty. Every single one of these issues was successful. Each one had a stated purpose. The first was to build Celtic Park and give the fans a stake in the club. The second was to recapitalise Celtic on the verge of the O’Neill era. The third was to build the Lennoxtown complex.
Two of those share issues were for major infrastructure projects.
That’s how you get serious investors in the door; you spend that money on stuff that improves the overall health of the club. You do not raise it to spend it on transfers and to get out of hock, as Murray did in his last effort to keep the train on the tracks, which he had to underwrite out of his own pocket as the fans didn’t want to do their bit. You do not use it to meet running costs, as Charles Green did after explicitly saying it would go towards infrastructure.
According to The Sun, Sevco’s intent in promoting a share issue – and please bear in mind that this is nothing but media talk; they have taken not one single concrete step towards this – is to repay the soft loans given to their directors. Note that. It would be a debt for equity swap, nothing more. It would not raise a single penny for the team or for Ibrox or for the myriad projects over there which need sustained spending on them.
The reputed sum they’ll be seeking is £16 million.
But as with everything over there, the devil is in the details. Even if they were shooting for the moon, in an effort to raise twice that, there are obstacles in the way which are so great they make the whole concept ridiculous to the outside observer.
In order to get a share issue off the ground you need to have a nominated advisor.
They haven’t had one since King waltzed in the door. They then have to create a share prospectus. They have to decide which exchange they are going to be listed on. There are several, but all require a minimum level of disclosure, which is the last thing Dave King wants.
He told their fans this right from the start.
We predicted that King would de-list from the Stock Exchange well before he did, because that’s the only way this guy can operate. If he did everything in the open fans would go insane. Every detail of how the club is funded, every commercial agreement, would be subject to scrutiny.
It’s still the one thing he wants to avoid, above all. Even the low-regulation AIM market demanded too much in that regard, and the idea of listing on the LSE is a complete non-starter even if they could be convinced to accept the club.
There are costs associated with this too. Charles Green said his share prospectus would cost the club £2.5 million. Even the initial purchase of the assets cost £300,000 in fees. Putting something like that together is not cheap and eats into the bottom line … and those costs have to be met upfront. No-one is going to put it together on tic.
And what exactly would they be selling?
Well it will work like this.
First an AGM or EGM will approve the debt for equity switcheroony which the papers are talking about. But that raises no cash whatsoever for the club. It doesn’t give the shareholders their money back, but instead issues them with pieces of paper which might well prove to be utterly worthless.
That’s where the actual share issue comes in.
Sevco fans have just spent around £15 million on season tickets. Do they have the stomach for another round of spending? Because that’s what it’s going to take. They will, in fact, be buying the shares that those directors have had converted from debt. That’s what would be on offer to them. The last few years of recklessness would be paid for by the fans … and all it would do is give those guys who kept the lights on their cash back.
Oh it might well be that the club will make a few million from the deal as well … but this would be a costly exercise with nothing at the end of it but prying eyes and regulations where the club doesn’t want any. Money for the team? Nada. Money for infrastructure? Zero.
There would be no pot of gold for Pedro … just enough perhaps to pay him off.
And you have to wonder; taking all this into consideration, is it really worth the effort and the inevitable grief? Why would King and his board bother? To even contemplate this seriously means opening up the books. It means diluting the values of everyone else’s shares, including those held by the fan organisation Club 1872. There are rules on how much you are allowed to do that. There are rules about concert party control, which all the directors will be wary of.
And then there’s the original concert party ruling, the one King still has to face sanctions for. Even if all the other obstacles were removed and the club wanted to do this and thought it could find £20 million from the supporters on top of season tickets to make it all worthwhile … the Takeover Panel problem remains, and with it serious concerns over asset ownership which Craig Whyte, free of his own fraud trial, is keen to revisit in court.
The legal minefield which they have to navigate is substantial.
On top of that, a share issue is a temporary balm. It is not, as the Sevco fans believe, a magic wand. Even if you raised £20 million and all of it went on new players there’s no guarantees that they could take the club forward … and even if they did, the subsequent rise in running costs would necessitate more soft loans, more FFP scrutiny, more trouble mounting up for the future … the only solution to such a downward spiral is living within your means.
Which we know they have no appetite for at all.
Ashley has departed the scene. We were told, constantly, that he was the obstacle to the club getting its house in order. It was garbage then and it is garbage now. With the bogeyman having upped and left, who will King find to blame when even the most gullible fans in football realise that the numbers just don’t add up?
The Unseen Hand maybe.
It’s worked for other Ibrox chairmen.