Soccer is the new investment vehicle...
Sports, in general, have been known to be tough investments, but does the recent trend in soccer takeovers suggest otherwise?
As a big Blues fan (#COYB), I have been very fascinated in Todd Boehly’s takeover of Chelsea and started noticing a trend of investors taking an interest in buying soccer clubs. Recent acquisitions in the English Premier League have been a topic of much discussion in the world of football as there has been a trend of foreign investment in English football clubs, with wealthy individuals and groups from around the world buying up clubs in the top tier of English football. This led me to wonder: are soccer teams becoming the new investment vehicle for investment firms and wealthy individuals?
I’m sure we’ve all heard of Mark Cuban’s story. Cuban purchased the Mavericks in January 2000 for $285 million, which was at the time, the highest price ever paid for an NBA franchise. Since then, the Mavericks have become one of the most valuable teams in the league, with 21 playoff appearances following Cuban’s acquisition, 1 NBA Championship in 2011, and now an estimated net worth of $2.4 billion as of 2021. That’s a pretty good investment if you ask me.
Similar to Mark Cuban’s story, Manchester City Football Club was acquired by the Abu Dhabi United Group (ADUG) in 2008 for roughly $330 million. Undergoing a complete transformation after the takeover, Manchester City has won numerous domestic and international titles since and is now the sixth most valuable football club in the world, with an estimated net worth of $4.8 billion.
One possible reason for the recent influx of foreign investment in English football is the league's global popularity and the potential for significant financial returns. The Premier League is one of the most-watched sports leagues in the world, and it generates significant revenue from broadcasting rights, commercial partnerships, and matchday ticket sales. This has made it an attractive target for foreign investors looking to make a return on their investment. I believe this makes many investors see English football clubs as valuable assets that can be used to promote their business interests or enhance their personal prestige.
Some of the more recent examples are: In 2022, American billionaire Todd Boehly and his associates completed its takeover of Chelsea, FC for $5.4 billion. In 2019, Saudi Arabia's Public Investment Fund acquired an 80% stake in Newcastle United for $415 million. Other recent acquisitions include US businessman Dan Friedkin's purchase of Roma for around $700 million in August of 2020 and Ryan Reynolds and fellow actor Rob McElhenney purchased Wrexham AFC on February 9, 2021, for a reported sum of £2 million.
Here is a table comparing the financial data for the English Premier League for the 2011/12 season and the 2019/20 season. Being the most popular sport in the world and with technology making it easier for people all over the world to watch, I only see the English Premier League getting bigger and more profitable in the next decade or two. Since the 2011/2012 season, the English Premier league’s profit grew 211.9%, from £84 million to £262 million in 2019/20.
What I find interesting the most is what Ryan Reynolds and Rob McElhenney did, buying a low level club and attempting to build it into a great one. The timeline for these types of projects are significantly longer and the teams will require much more time and care, which will deter many investment firms. Yet, this reminds me of a type of angel investing, where there is a very good chance the investment/project will fail. But if it doesn’t… not only will you 100x, 1000x your investment, but the investment vehicle is also what you are most passionate about and loyal to. I think this idea could be a gold mine hiding in plain sight for passionate, successful, and wealthy individuals.
Reynolds and McElhenney bought Wrexham AFC on February 9, 2021, for a reported sum of £2 million. The purchase was approved by Wrexham Supporters Trust members, who voted overwhelmingly in favor of the sale. The acquisition was completed in March 2021, with Reynolds and McElhenney becoming the owners of the club. They have expressed their commitment to investing in the club and helping it reach its full potential.
At the time, Wrexham AFC was in the National League, which was the 5th Best League in England, behind the Premier League, EFL Championship, EFL League One, and EFL League Two. Considered a relatively small club and operating at a net loss over the past couple of seasons, Wrexham AFC was viewed as a risky investment, by almost everyone. In the 2019/20 season, total revenue decreased from £1.3 million in the previous season to £1.2 million, with matchday revenue making up the majority of the revenue. Commercial revenue was almost non-existent at £0.2 million. And the club’s total expenses were £1.4 million. To make matters even worse, Wrexham AFC’s average home attendance was 4,725 per game, a decline from the previous season's average attendance of 5,076. A trend of declining home game attendance and dependent on matchday revenue usually screams “Don’t Buy!” But Reynolds and McElhenney saw something everyone else didn’t.
With Reynold’s personal brand and McElhenney’s connections, along with their genuine love for soccer, Wrexham, and each other, they were able to secure the rights to document a series that shows the journey of Wrexham AFC worth $2.5 million. With commercial revenue of £0.2 million in 2019/20 season, they were able to 10x in revenue within a year. Not only did this help grow their commercial revenue segment, but it also led to a large influx in home game attendance.
Not only were Reynolds and McElhenney able to boost revenue with their media-savant skills, but they showed the fans and the team that they meant it when they said they want to try to achieve something great. With an inspired team, Wrexham AFC was able to get promoted to the English Football League Two this year. From a fans perspective, this could be considered one of the happiest days of their lives. From a business perspective, it’s even better. When a club is promoted to the English Football League Two, it can expect to receive a significant increase in revenue compared to the National League. The exact amount of revenue will depend on a variety of factors, including the size of the club, its fanbase, and its commercial and broadcasting deals. However, there are some basic financial rewards for all clubs that are promoted to League Two. The League Two distributes a payment of £445,000 to each club that is promoted to the league. League Two clubs receive a share of the league's central revenues, which are generated from broadcasting deals, commercial partnerships, and other sources. It usually ranges from several hundred thousand pounds to over a million pounds per club.
A true Cinderella story, Reynolds and McElhenney are showing the rest of the world how passion and media skills can turn many of these soccer clubs into promising investment vehicles. While Wrexham is very far away from joining the Premier League, Reynolds and McElhenney are taking the club on a journey and it might just one day be seen as one of the greatest investments ever, from two million to billions over the next two decades.
Some might say it will take a miracle for this to happen. To that, I say miracles do happen in soccer. Do believe me? Just watch the last 2 minutes of Watford vs. Leicester City 2013.
This was created with the help of Chat GPT