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Reply | TFC respond to WSH exclusivity
at 21:47 12 Mar 2024
Resolution 2 at the EGM might be read to imply that as shareholders we have now given the Board authority to sell nine million shares at 0.22 pence to any buyer of their choosing. However, in general, a Board would not sell a company without shareholder approval and that’s especially true in this case where at least one of the directors (the Chairman) is fundamentally conflicted.
Simon Gauge has already made one expensive legal misjudgment and it is to be hoped that he will now be more cautious. Shareholders could reasonably argue that resolution 2 was approved primarily as a mechanism to enable the club to be sold and in the expectation that there would be only one possible transaction available, given the very tight deadline. The fact that there appear to be two relatively comparable bids has created a very different scenario and shareholders might well be able to argue that they did not envisage the Board making a choice without further consultation.
Given its large shareholding perhaps the Trust can make representations on behalf of all shareholders and request the club explains its decision making process and why the Board does not intend to hold another EGM. [Post edited 12 Mar 21:48]
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Reply | TFC respond to WSH exclusivity
at 21:28 12 Mar 2024
I’m not suggesting that Simon Gauge won’t act in good faith and in the best interests of the Football Club, but he is clearly conflicted.
TFC’s offer in respect of his debt isn’t particularly generous. It’s a part equity conversion (which, realistically, has little value to him) and a vague offer to discuss the rest of his loans. We don’t know what WSH is offering, but it might be much more attractive to him.
In these circumstances, he ought to recuse himself from the decision making process. He certainly shouldn’t be making any decisions about who to sell to. |
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Reply | Another Interested Party..
at 12:50 8 Mar 2024
I can’t believe the board would make a decision to sell the company without shareholder approval and nor would any informed buyer want to risk entering into a transaction that hadn’t been put to shareholders. I assume they’ll be another EGM, therefore.
Most likely, the board will recommend a sale to one of the interested parties to shareholders, no doubt with a gun pointed at our collective heads, but it will be difficult for the board to do this without at least some reference to the pros and cons of the alternatives.
Unfortunately, the ins and outs of any sale may prove to be academic. Three weeks to sign, seal and deliver a transaction isn’t very long at all and it may well be that even if there is more than one party with serious and genuine interest (and we don’t even know that for sure) the club will be sold to the buyer who can complete within the required timetable. |
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Reply | EGM - which way are you voting?
at 11:42 5 Mar 2024
Many thanks. That’s very good intel. I had meant basketball! Don’t know why I typed baseball!! |
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Reply | EGM - which way are you voting?
at 10:41 5 Mar 2024
Thanks. That’s interesting.
Can I ask where the Steve Demetriou link has come from? I’ve seen that name mentioned before, but I can’t find any connection between him and WSH. I’m no sleuth though to be fair.
Demetriou’s experience with Baseball’s D League (now G League) is interesting. There’s a lot to unpick there though it would very much point to a player development model.
A typical concern with any owner like WSL is whether they really understand what it is they’re getting into and the challenges they will face. In that context it’s a big positive they have had experience with their investment in MVV. |
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Reply | World Soccer Holdings
at 11:34 4 Mar 2024
No worries. To state the obvious, the time to do this is now. It shouldn’t be difficult to organise or to secure shareholder approval for it at another EGM. The Trust is the obvious entity to hold this Golden Share.
Once control is ceded no owner is likely to make this concession and, of course, a Golden Share could potentially be structured to bind all future owners, not just WSH. [Post edited 4 Mar 12:18]
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Reply | World Soccer Holdings
at 10:16 4 Mar 2024
This is a helpful link.
https://www.forsters.co.uk/news/blog/implications-of-golden-share-football
If the Board hasn’t or isn’t considering this kind of option then it would be a fundamental dereliction of duty in my view.
The fan owned model was always unrealistic, but the motivation was clear and understandable. To transition from that philosophy to an approach that fails to consider any of the available options to protect the long term future of the club from a “bad” or reckless owner would be extraordinary and hard to justify and understand.
If a buyer objects, fair enough. There’s then a choice to be made. An objection and the reasons for it would contain potentially valuable information though.
To be clear, I’ll vote my shares in favour of the resolutions because there is no choice. I hope the Board is across the issues though. We’ll see. [Post edited 4 Mar 10:28]
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Reply | World Soccer Holdings
at 09:38 4 Mar 2024
Brentford’s Supporters Trust did something similar when they sold Brentford FC to Matthew Benham. Benham then needed their agreement before he could move the club from Griffin Park to the Gtech Community Stadium.
There is no reason Rochdale’s board can’t negotiate something similar. If WSH refused to accept this kind of arrangement (noting that it’s the structure at MVV) then that would be a red flag.
Let’s see. |
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Reply | World Soccer Holdings
at 21:23 3 Mar 2024
This is also highly significant.
“MVV reports that 735,000 euros are involved in the share transaction and that the other shares of the club, including the 'Golden share' in which core values such as the playing city and club colors are anchored, remain untouched.”
In other words, MVV’s shareholders have taken steps to protect the future of the club. It appears WSH did not object. This is exactly the sort of thing I’ve posted about. No reason Rochdale can’t do something like this which could include not moving from the Crown Oil Arena without the agreement of the holder of the Golden Share, for example. |
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Reply | Fans' Forum Tomorrow
at 19:50 29 Feb 2024
Not necessarily. There are two very different things at play here.
First, the unwieldy ownership structure makes it very difficult to execute a sale of the club, especially if the buyer wants every penny they commit to go into the club’s bank and not into the pockets of existing shareholders. If existing shareholders were simply asked to gift their shares to a new owner the odds are they wouldn’t agree, but that is, in effect, what’s being achieved by the issuance of nine million A shares without any preemption rights for existing shareholders. To be clear, I don’t object to this.
Second, is the question of what is being sold and whether there are any conditions or restrictions built into the sale. There are examples of clubs being sold without ownership of their stadium, for example, and others where the seller secured on obligation on the buyer to consult and/or require approval before taking certain actions. The long-term benefit of selling the operating company only, for example, or of retaining a ‘golden share’, are obvious. Whether a deal along these lines might have been achievable I don’t know, but my sense is the board didn’t try.
The corporate strategy seems to have gone from one extreme to the other and the curious resolution on the audit seems to symbolise that.
Just my perspective. |
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Reply | Fans' Forum Tomorrow
at 14:40 29 Feb 2024
With respect RAFCBLUE I’m not confused, just very disappointed. You quoted me recently and while I’m not sure where you got that quote from it was accurate and you probably know, therefore, that since the summer of 2021 I’ve consistently held two views. First, that fan ownership simply wasn’t viable. And second that given the inevitable need to find an owner/funder/operator it was important to seek ways to protect the future of the club from a “bad” (nefarious) or reckless owner.
There are a number of ways in which that might be done, but as far as I can tell, once it became clear that any credible investor would want control, there has been no attempt to put in place the structures needed to do so.
It may well be that the issue of audit fees is a relatively minor matter and more symbolic than real, but it strikes me as being gratuitous and unnecessary.
I guess we are where we are. |
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Reply | Fans' Forum Tomorrow
at 11:58 29 Feb 2024
Thanks for your reply RAFCBLUE That’s all very clear and it makes sense, but I don’t believe it answers the question.
If the club was continuing as a fan owned entity, and struggling for cash, then if may make sense to make a saving on the audit fees. However, that’s not what is happening. It will be a new owner who will benefit from the saving. If Plan A is approved and a buyer found there will be circa £2m in the club’s back account with which to pay audit fees. The cost of the audit won’t be the current board’s problem, but a lack of transparency might be a concern for minority shareholders and the club’s fans.
I said the thinking was muddled, not because saving money on the audit is necessarily wrong in principle, but because it’s a bizarre thing to change immediately prior to ceding control. |
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Reply | Fans' Forum Tomorrow
at 09:37 29 Feb 2024
You’re absolutely right D Alien. Resolution 5 is absolutely bonkers in the circumstances. Why on earth would you want to give away control and then immediately undermine the rigour and reliability of financial information? If anything, existing shareholders should be trying to move in the opposite direction. It is at best muddled thinking and it certainly doesn’t inspire confidence. Is it a precondition for a sale?!! [Post edited 29 Feb 9:38]
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Reply | Trust statement
at 12:53 24 Feb 2024
While caveat emptor applies, the statement from the Trust is obviously very positive and reassuring. It certainly tips the balance in favour of a vote in favour of the forthcoming resolution.
I would like to make a few observations though. These may or may not help with any discussion about what to do, but I thought I’d post on the grounds that in the current situation the more perspectives there are the better. Others are obviously welcome to agree or disagree.
1. It is misleading to say that the Football Club is worth £4-6m. Conceptually, the business being sold comprises two distinct entities which are joined at the hip, a Football Club (the operating company), which is worth nothing because it is structurally loss making (indeed it might even have negative value), and a real estate company that is worth something. However, that something can only be realised if the real estate company can be separated from the operating company. Since, both as fans and as shareholders, we don’t want that separation to take place (i.e. we want Rochdale football club to continue playing its matches at the Crown Oil Arena) it follows that the company we own shares in has no real value except in a scenario we don’t want to contemplate. This is not simply an academic distinction. It is fundamental to how any investor will think about what they might be buying and to how they would value it.
2. We obviously want any buyer of the Football Club to be entirely focused on the football team, i.e. to view the stadium and the land it sits on to be no more than a means to and end where that end is a competitive team that, eventually, returns to the EFL and has ambitions to progress once that status has been regained. Paradoxically, such an owner is buying a business they expect will lose money, because they’ll need to continue to fund operating losses, and where the notional asset value cannot be realised. Hence, they probably believe the company they are buying has no real value, whatever the balance sheet might imply.
3. It’s perhaps good news then that the headline which says a prospective owner would be paying £2m to buy the club is also misleading. They’re not. If a transaction is completed after the sale of £2m of new A shares the notional value of the club would increase from £4-6m to £6-8m because it would have £2m sat in its bank account. If the club was liquidated the day after it is sold the investor would get back 90% of that £2m, plus 90% of the value of the real estate once any debts have been repaid. In the meantime, there would be nothing to stop the investor lending some or all of the £2m back to itself. To be clear, I’m not suggesting for one moment this is remotely likely, I’m just trying to understand what’s really going on. £2m is not the price being paid for the club (that’s close to nothing). It is, in effect, a pre funding of future operating losses and/or of any capital expenditure. It would be helpful to understand how the money might be spent and over what time period.
4. We’ve arrived where it has always seemed likely to me that we’d get to; selling the club at a nominal price to an investor/funder/operator who we hope will take the club forward, with the alternative to that being a continuing struggle for cash, a slide dowh the pyramid and a risk of liquidation. The question has always been whether the right investor could be found and on what terms they took control.
5. Broadly speaking there are two ways to sell the club and to give an investor/funder/operator the control they will inevitably demand. The first is via a no strings attached, lock, stock and barrel sale based on an assessment that the prospective buyer is a ‘good actor’ and can be trusted to do what’s in the interests of the club and who, as result, has interests which are aligned with those of fans; Rochdale’s Ryan Reynolds (Wrexham) or the Reedtz brothers (Notts County), for example. Based on the Trust’s feedback this might just be the type of investor interested in securing ownership.
6. The second, is a deal structure which leaves the existing shareholders (the club’s fans) with some residual control. Such a deal might involve the sale of the operating company only (i.e. not the real estate) and, perhaps, with some conditions in the SPA which commit the the owner to certain actions and/or prevent certain actions without prior consultation with, or even the agreement of, the Trust. It is important to note here that a “good actor” would not necessarily object to being bound by “reasonable” commitments.
7. Where does this leave us? Giving the club away for a notional sum (and as noted that is,in effect, what’s happening), involves a significant element of trust and it’s not unreasonable to ask some probing questions. Asking any prospective owner whether they’d be willing to buy the football club only (not the real estate) might be revealing. If the answer is no, why not? Is the answer still no if the nominal value of the new A shares is £0.11 rather than £0.22 so that a pre funding of £1m rather than £2m secures circa 90% of the outstanding share capital?
8. If the reason that the owner wants the asset backing is in case something goes wrong that’s a red flag. A good actor who understands what they’re investing in would recognise and accept the risk, not insist on recourse to asset backing to create what becomes a free hit. If the answer is that ownership of the real estate is essential because there is a capital investment plan this needs to be exposed and tested. How is it going to help the club return to the EFL? What is the plan for the football side of the business? Likely annual wage budget and operating loss? Will there be a Sporting Director (even Barrow have one), an explicit player trading strategy etc?
I am very happy to support the Trust’s eventual conclusion on the dilemma we now face and will be happy to vote my own shares accordingly. However, I would like to suggest that it’s very important to understand what’s really going on here and to explore possibilities and options. Even if the outcome is a simple lock, stock and barrel sale, I have no doubt that exploring other options would still be insightful and might tease out information and intentions that might otherwise be hidden. My apologies if that’s obvious.
Fingers crossed this all works out.
Up the Dale!! |
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Reply | EGM + statement
at 12:16 22 Feb 2024
“There is an investor waiting in the wings who will invest £2m providing they have 90% of the shares”.
I’d be surprised if it’s anywhere near as clear cut as that, but even if it is and even if Gauge is bound by a confidentiality agreement he must be capable of being a lot more transparent than he’s been so far.
In his interview on The Price of Football podcast his comments are a combination of statements of the obvious, cryptic clues and obfuscation. For example, he implies that one option is to build a hotel on the land and use the income from it to subsidise the club so that it becomes sustainable. Really?
Is that a serious suggestion or just idle speculation? Is the idea to find an investor whose primary objective is to develop the football club or one whose primary objective will be to make capital investments which will help to create a sustainable “business” of which a football club is a more or less important part? The distinction is fundamental.
What are shareholders being asked to agree to? It would be madness to vote in favour of the resolutions without a lot more information and there is no excuse for not providing it. |
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Reply | EGM + statement
at 22:39 21 Feb 2024
Thanks RAFCBLUE. I can’t recall what I said back in mid 2021, but it was probably that I felt Dale would struggle to compete sustainably without access to some form of owner funding, even if that was simply to help manage the inevitable cycle of operating losses. I certainly felt strongly that the golden age of the 2010’s was not a useful benchmark when thinking about the future because the club benefited from windfall revenues from transfer fees and cup runs and the team significantly outperformed its wage bill on the field of play. I haven’t changed my mind about any of this and, unfortunately, I’m not surprised by where we’ve found ourselves.
The question, of course, was and is what to do about this. The answer, in my view, was not fan ownership, per se, but some form of owner funding. As Simon Gauge has discovered though this is only likely to work if the funder has control. It’s not realistic to expect someone to pay the bills and develop the club while being unable to steer the ship. The challenge then is how to arrange this without putting the club’s future at risk. How can we avoid a bad actor or reckless owner?
We might get lucky, like Wrexham and Notts County (or even Stockport), but there’s no guarantee of that and caution is understandable. A model where the current shareholders (fans) own the real estate and rent the infrastructure to an owner/funder/operator has always seemed a reasonable compromise to me. Not only does it protect the real estate, but it means a third party owner can only make money by progressing the club on the field of play, aligning interests and significantly reducing the risk of a bad actor acquiring the club.
I haven’t changed my view about any of this. The club needs to find that owner funder though and that would have been much easier in League One or League Two than in the National League or, god forbid, in National League North.
I really do believe there wouid be value in the Board and the Trust having a blank sheet of paper discussion about options. It’s hard to have any confidence in the current leadership. [Post edited 21 Feb 23:04]
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Reply | EGM + statement
at 21:02 21 Feb 2024
I'm a shareholder and I'd be delighted if you can forward the option above for discussion. There may well be good reasons why it wouldn't work, but any objections should be articulated and tested. A genuinely open brainstorm about options can lead to much better outcomes, even if the idea that initially prompted the discussion is rejected.
With all due respect to Simon Gauge, it does appear that he's been playing catch up since day one and his thinking still appears to be very narrow. There must be a better alternative to his my way or goodbye way position.
PS Thanks. [Post edited 21 Feb 21:04]
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Reply | EGM + statement
at 20:10 21 Feb 2024
That BBC Radio Manchester interview is so depressing. Unfortunately, Gauge is desperate and apparently desperately confused. He ought to recuse himself from any discussion about new capital because he’s hopelessly conflicted.
The club doesn’t need anything like £2m. What’s needed is an immediate cash injection sufficient to cover current operating losses and, ideally, clear evidence that an investor has the secure funding available to cover losses for next season and the following season.
Gauge is only talking about £2m - and the complexity of issuing a new share class - because of the ownership structure paradigm he’s unable to escape from and, perhaps, because he’s desperate to recoup the monies he’s ‘invested’.
But Gauge’s structure simply isn’t necessary. The option I noted above is much cleaner and simpler and might be easier to sell to prospective investors than the fantasy Gauge has been peddling. It’s also likely to be less risky from a fans perspective. In summary,
“The club's existing shareholders retain ownership of the real estate assets (securing the future of the club) while selling the Football Club (the operating company) to an investor/operator for a nominal price.
This arrangement would include an arms length lease between the two legal entities and, ideally, an arrangement which would enable the Trust, acting on behalf of the shareholders, to have the ability to limit the freedoms of the new owner in a way similar to the deal Brentford's Trust agreed when Matthew Benham took majority ownership. This could prevent a move of stadium, change of club colours, name etc.”
The main downside of this is that Gauge would be left high and dry, perhaps with a loan to the real estate business (the one that would be owned by the club’s existing shareholders) which may never be repaid.
Gauge needs to step aside and let someone else deal with the mess he’s been unable to resolve and which he’s now entangled in. |
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Reply | EGM + statement
at 17:33 21 Feb 2024
When Simon Gauge became Chairman he was hopelessly naive, firm in his belief that running a 'fan owned' club would be relatively straightforward, but without having given any serious thought to what it might actually mean. He was, of course, egged on by the Trust and many of the club's fans who were equally delusional. Apologies for being so direct, but it needs saying.
When it became clear to him that the club was inherently loss making (having relied on windfall transfer income and income from cup runs to cover operating losses in the 'golden years'), that there was no easy way to increase revenues or cut costs and that Tracey Crouch wasn't going to ride to the rescue with immediate solutions, he sobered up and smelt the coffee.
Unfortunately, finding himself completely out of his depth and with no clear idea what to do, he chased the fantasy that an "investor" could be found who'd be willing to pay good money for a minority stake, and no control, in a business going nowhere without significant ongoing cash injections .... from the investor.
Once he'd understood that the only way forward was to cede control to a lead investor who would only want to 'invest' cash directly into the club (i.e. nobody sensible and without nefarious intent (eyes on the real estate) was ever going to pay a penny simply to buy out somebody's else's ownership stake) the reality dawned on him that almost everyone who invests in a club below Championship level loses every penny they've staked. Our shares have never been worth anything. This created a huge dilemma for him. How to keep the club afloat while also getting back some of the money he'd invested? He's not been able to solve that dilemma because there isn't a solution. The risk is that as result he's become ever more desperate.
I have every sympathy for the position Gauge has found himself in, "between a rock and a hard place" doesn't even come close. Nevertheless, sympathy doesn't translate to trust. Gauge has now lost all objectivity and even if he once had good judgement (and that's debatable) his latest proposal cannot be taken at face value. Shareholders (of which I am but one) should not even consider approving it without a lot more information. The proposal before the EGM could potentially be the worst of all possible worlds - the ceding of control to a completely unknown third party who, via liquidation of the Football Club, would have access to the real estate assets.
Unfortunately, there are now only bad options available but there is perhaps one that might be worth considering. In this option the club's existing shareholders retain ownership of the real estate assets (securing the future of the club) while selling the Football Club (the operating company) to an investor/operator for a nominal price.
This arrangement would include an arms length lease between the two legal entities and, ideally, an arrangement which would enable the Trust, acting on behalf of the shareholders, to have the ability to limit the freedoms of the new owner in a way similar to the deal Brentford's Trust agreed when Matthew Benham took majority ownership. This could prevent a move of stadium, change of club colours, name etc.
This might now be hard to organise, but I can't see how an arrangement of this kind could be worse than what is being proposed by Gauge, though it might reduce his own chances of ever getting any money back.
As noted, I have some sympathy with Gauge, but the fact that he's seriously conflicted means he shouldn't be making this decision. What happens next needs to be in the interests of the majority of shareholders and of the club and its fans, not of Simon Gauge and his family.
Once again, apologies for being so direct but desperate times demand honest communication and I wanted to share this perspective. Fair enough if people don't agree.
PS I am aware that shares in Rochdale FC have changed hands for significant sums in recent years, but these transactions are very much outliers in the football industry. Others will know much more than I do about the background to those sales/purchases, but they should be seen very much as exceptions and not likely to be repeated. |
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