As TV money flooded into the EPL in the 1990s football club owners flocked to the Alternative Investment Market (AIM) which developed a ‘Midas aka Cash Convertor Touch’ by allowing owners to generate cash from the newly increased value of their club and within a few years 27 teams were listed.
Some owners might have been driven by personal greed but to be fair most of the cash income went on buying players and paying over-inflated wages. But that had the effect of diverting dividends from shareholders and this had a knock-on effect of depressing club share values. This fall in value was heightened by the global stock market plunge which plunged shares lower.
At this stage it is worth giving a FINANCIAL HEALTH WARNING!
Anyone buying shares should always remember that what goes up can come down and sometimes end up with NIL value. Football clubs also had a specific problem in that tens of thousands of shareholders only held one or a handful of shares bought as gifts for soccer mad relatives, friends or workmates. This created quite significant administrative problems and costs on top of the already high expenses to satisfy the regulatory framework of the investment industry. Continue reading