| An objective view on business ownership 20:18 - Sep 5 with 19468 views | jackanuck |
OK. Here goes. I've had this user ID for years but have never posted. I used to be on JackArmy years ago. I used to read and post all of the time but for the last few years I come on to the forums a lot less because in my opinion, it's gone really down hill.
I'm a lifelong fan of the club, mid thirties, expat and never owned a season ticket at the Vetch because I couldn't afford it. I'd go to most home games - 2/3 I'd say and always sat in the East Stand with my dad or go on the North Bank with my friends or if I was on my own. I moved away the year we went in to the Liberty and have been back to watch 1-2 games a year most seasons since then. I listened to every game on the radio through PalTalk after I left, until we hit the big time. I was really devastated when we were going to get relegated because I was worried I wouldn't be able to watch the Swans anymore. As it's turned out, The Championship seems to be hitting the big time too and so far I haven't missed a single game on TV/Internet. All in all, I'm a pretty happy chappy.
Why have I come back on the forum? It really irks me that our fans are being divided by the subject of who owns our club. I know it's not something I can fix with some silly little post on the forum, but for my own therapy, I just have to get this out there for a few people to read. Everyone's entitled to their opinion, and I don't expect I'll change anyones thoughts, but theres a few things I want to get off my chest in the hope that we can bind together as a fan base. A lot of what I read (the majority) makes out that everything is black or white. Like most things in life, the situation at Swansea City is far from left or right, but aptly somewhere in the middle.
First of all, I've been hearing for years and years from every premier league broadcast (like a lot of us) the Swansea success story. THE FANS OWN THE CLUB. This is not technically true. (It's a bit like saying I own Apple Inc. because I have some shares) It would have been true to say that the Swansea Supporters Trust owns a non-majority share of the club. Regardless, I've always been really proud of this and I would let the inaccurate statements made by TV pundits slide. However, I think there is a large camp of fans on this forum that do not understand when they read things like "the board sold our club...." This isn't true, the board sold their majority shares in our club.They earned those shares with money and by dedicating a large part of their lives to the success of the club for the past 15 years. Our trust still owns their minority shares. It's as factually true as it ever was that our fans (The Swansea City Supporters Trust) still own the club. I think this is a really valuable thing and I hope that our trust never dilutes or gives away it's shares in our club. It is my hope that in the future, there will be no one entity (other than the Trust) with a greater than 50% share in our club and while a million miles away from that scenario at the moment, I'd love to see the Trust get in to the drivers seat one day.
As someone who is frustrated that are club is in the majority ownership of strangers, I ask my self this question. Why did the trust not make moves to purchase shares from the rest of the board of directors / owners so that the Fans could own the majority share? You should ask this question too because it trumps all of your other questions. If you want the fans to won the club, they need to pay for it. They can't expect it to just be handed to them in a sweet heart deal by investors (Jenkins et al) who put their money at risk all those years ago.
I realize the answer to this question could be multi-faceted. For example, maybe they wanted to but couldn't afford it. Maybe they just didn't want to because they didn't want the risk exposure. Regardless of the reasons, it is important to understand accountability and for me, if we are to ask the question about why our club is in the hands of strangers, the obvious answer is - It's because the fans did not purchase the shares required to own the majority of the club. There may be incredibly good reasons for why the trust didn't do what was necessary, but it doesn't alter the fact that the failure of the trust to acquire 51% total shares is why the club was in a position to sold to foreigners.
My second blurb is about the basics of business. I am a business owner. I have founded, raised debt and equity finances and exited businesses within the past 5 years and know my way around East Coast VC's (Venture Capitalists) I'm sure i'm not alone and am among a small minority here who understand these 'ventures'
It really pisses me off when I read one liners on here from people who are Anti Ownership, Anti Board who deem everyone with an objective opinion to have their head up the arse's of Jenkins/Levein/Kaplan etc. It's simply not true. The difference between me and many of those posters is that I have a moral (and legal) compass to not fabricate bull-shit about the owners to make it appear that they are thieves and people who are taking advantage of the club. Yes, the purpose of most businesses is to make money to pay their annual burn and in most cases, to make a profit. That doesn't automatically make all owners bad. It's my opinion that this ownership group made a few big mistakes that they've since confessed too. With the exception of Jenkins, I don't think they are more qualified than anyone else to get the club back to where it needs to be, but it's obvious to anyone who has ever been involved with buying and/or selling they aren't going to go anywhere. Why?
VALUATION. So I can make sure I've expressed myself and how important this is, I'm going to say it a few more times! VALUATION VALUATION VALUATION!!!!
If you know what Valuation is, feel free to check out of this thread now. If you don't, this is possibly the missing link to answer to all of your uncertainties about what is happening and what's about to happen, probably for the next 5 years.
I'll start with a basic and made up case study.
If a theme park has 10 rides and 50,000 annual visitors and generates 1 million pounds per year with a NET Profit of around $200,000 per year, you could argue it's worth (has a valuation of) about 1 million pounds as an investment to a new buyer. That buyer would make the money back on their investment in approximately 5 years. The original owner could cash out now, or he could do a lot of work and invest more capital to make his investment worth more and cash our later. He could also give away % of his ownership and a fraction of the million pound so he can keep some skin in the game.
Our owners intention (in my opinion) is to increase the overall valuation of Swansea City and then sell the club on. I am explaining this in such simple terms because there are people on the forum who say things like, "why would they be here if not to rip the beating heart out of the club and steal all of the money" NO! If they did that, the club would be completely worthless. They would never in an entire decade be able to rip out enough money to cover their original investment from this club. The only way for them to profit is to improve the club on and off the field and sell it again for a higher price. The Club's current Valuation is probably 30 pennies on the poind to where it is if we're in the premier league. When selling it in the future, all the clubs negative attributes will be attached to the due-diligence that a buyer will do including debt, bloated salaries, deal fees etc. I am absolutely sure that they do (YEs said DO!) take a salary from the club or in the very least, have an attachment to deal fees but that is absolutely normal among ownership / venture capitalists.
Right now, there's a few die hard board-haters doing calculations on players sales to prove that they've already made their money back. All I can say is, this is futile. You don't have the books. Any money they are currently taking out of the club would be trivial 'icing on the cake" deal fee amounts and wouldn't in any scale contribute to what you currently see as trying to claw back their investment in our club by "bringing down the house" They are simply bringing our clubs burn rate inline with our annual revenue forecast now that we've lost a huge amount of revenue. If this concept is lost on you, all I can ask you to do is enrol in a very basic night school or internet course on business management. No different to running your own household, your income has to be equal or greater than your outgoings, or else your fiscal value is less than zero.
It pisses me off immensely that these American's didn't understand the history and culture that has been built within our club, especially during the past 15 years. They admitted as much in that BBC article the other day. It kills me that they were ignorant, bold and naive enough to that Idiot of an American Manager, Bradley, in charge of us. I'm so frustrated that we took big gambles on player signings in the last couple of years that haven't worked out. I do believe we are on the right track, they've learned from their mistakes and have placed trust in the right people to get the playing side of the club back on track. However, I'm also smart enough to know that as fans, we are having to live with their mistakes. Overall I think they are stupid idiots and pretty typical of the east coast VC's I've interacted with in the past. However, I don't think they are doing anything dishonest and I don't think they are going to continue to purposefully ruin our club. If they are smart, they'll open up a good channel of communication with the supporters trust and see them as the future, rightful owners of a majority stockholding in Swansea City Football Club, potentially helping the trust to acquire the loans it might need to reach the clubs future valuation, if we can cement ourselves once again as a top half premier league side with a good academy.
Overall, I just want our fans to be less divided. I'm open to constructive criticism on my thoughts and most of all, I want to be optimistic for the future.
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| An objective view on business ownership on 21:04 - Sep 5 with 10093 views | Shaky |
VALUATION:The club is to all intents and purposes currently worthless. |  |
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| An objective view on business ownership (n/t) on 21:08 - Sep 5 with 10071 views | jackanuck |
| An objective view on business ownership on 21:04 - Sep 5 by Shaky |
VALUATION:The club is to all intents and purposes currently worthless. |
This is factually incorrect. [Post edited 5 Sep 2018 21:08]
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| An objective view on business ownership (n/t) on 21:37 - Sep 5 with 10012 views | Shaky |
| An objective view on business ownership (n/t) on 21:08 - Sep 5 by jackanuck |
This is factually incorrect. [Post edited 5 Sep 2018 21:08]
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Alright champ. | |
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| An objective view on business ownership on 21:40 - Sep 5 with 9997 views | leighton1318 |
If you’re going to stay on the forum, why not add a post explaining the difference between enterprise value and equity value. There’s a few readers who could use that help. | | | |
| An objective view on business ownership on 21:48 - Sep 5 with 9952 views | jackanuck |
| An objective view on business ownership on 21:40 - Sep 5 by leighton1318 |
If you’re going to stay on the forum, why not add a post explaining the difference between enterprise value and equity value. There’s a few readers who could use that help. |
Fair point.
So what Leighton would like me to do is explain the difference between the value on our financial report vs our market value.
It's a bit like calculating the value of your house by adding up the cost of the land, bricks, and fittings vs the market value for your home. The material costs might be $85,000 but it might be worth $150,000 because there aren't a lot of houses available in the area, it's only 15 min drive from work, and it has a sea view.
ie. It's a successful football club with a large catchment area, a recent long stay in the richest football league in the world, with a potential to a return in the near future and an academy which ticks all/some of the boxes.
(Feel free to alter this pitch to your comedic delight / mood)
Essentially, I believe he wants me to draw attention to our owners needing to keep the lights on and the wages paid while working toward restoring our market value.
Leighton feel free to expand on this. [Post edited 5 Sep 2018 21:53]
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| An objective view on business ownership on 21:51 - Sep 5 with 9926 views | _ |
Superb post mate. Top marks. |  |
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| An objective view on business ownership (n/t) on 21:53 - Sep 5 with 9904 views | _ |
| An objective view on business ownership (n/t) on 21:37 - Sep 5 by Shaky |
Alright champ. |
Please ignore this fraud. Earlier he was stating because of the fire sale not bringing in the expected figures the Club had to borrow 2 seasons worth of central payments. Embarrassing stuff from the self important one. | |
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| An objective view on business ownership on 21:54 - Sep 5 with 9884 views | Shaky |
| An objective view on business ownership on 21:48 - Sep 5 by jackanuck |
Fair point.
So what Leighton would like me to do is explain the difference between the value on our financial report vs our market value.
It's a bit like calculating the value of your house by adding up the cost of the land, bricks, and fittings vs the market value for your home. The material costs might be $85,000 but it might be worth $150,000 because there aren't a lot of houses available in the area, it's only 15 min drive from work, and it has a sea view.
ie. It's a successful football club with a large catchment area, a recent long stay in the richest football league in the world, with a potential to a return in the near future and an academy which ticks all/some of the boxes.
(Feel free to alter this pitch to your comedic delight / mood)
Essentially, I believe he wants me to draw attention to our owners needing to keep the lights on and the wages paid while working toward restoring our market value.
Leighton feel free to expand on this. [Post edited 5 Sep 2018 21:53]
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I can't speak for Leighton, but clearly you don't understand the rather basic concepts of Enterprise and Equity value.
Unfortunately that makes your essay on valuation a little silly. Sorry. | |
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| An objective view on business ownership on 21:58 - Sep 5 with 9865 views | SoberBaker |
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| An objective view on business ownership on 22:01 - Sep 5 with 9854 views | _ |
| An objective view on business ownership on 21:54 - Sep 5 by Shaky |
I can't speak for Leighton, but clearly you don't understand the rather basic concepts of Enterprise and Equity value.
Unfortunately that makes your essay on valuation a little silly. Sorry. |
He's broadly right he just didn't cover the debt aspect of enterprise value
FRAUD | |
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| An objective view on business ownership on 22:02 - Sep 5 with 9847 views | Shaky |
| An objective view on business ownership on 22:01 - Sep 5 by _ |
He's broadly right he just didn't cover the debt aspect of enterprise value
FRAUD |
Nice Googling work, eBoy. | |
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| An objective view on business ownership on 22:03 - Sep 5 with 9844 views | jackanuck |
| An objective view on business ownership on 21:54 - Sep 5 by Shaky |
I can't speak for Leighton, but clearly you don't understand the rather basic concepts of Enterprise and Equity value.
Unfortunately that makes your essay on valuation a little silly. Sorry. |
You're just a google away from figuring it out for yourself. The challenge will be interpreting it in a way that applies to SCFC's current situation so that you can objectively understand the transfer dealings. My response was to boil it down to layman's terms. I think I did a pretty good job but of course, you're entitled to your opinion.
It's difficult to reason with someone who stated the club is "worthless" less than an hour ago, on this thread. | | | |
| An objective view on business ownership on 22:04 - Sep 5 with 9835 views | Shaky |
| An objective view on business ownership on 22:03 - Sep 5 by jackanuck |
You're just a google away from figuring it out for yourself. The challenge will be interpreting it in a way that applies to SCFC's current situation so that you can objectively understand the transfer dealings. My response was to boil it down to layman's terms. I think I did a pretty good job but of course, you're entitled to your opinion.
It's difficult to reason with someone who stated the club is "worthless" less than an hour ago, on this thread. |
What a load of fcuking bollocks.
Good nite. | |
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| An objective view on business ownership on 22:04 - Sep 5 with 9836 views | leighton1318 |
Thanks for your reply 
I wanted to make a slightly different point, the way the debt in the business (the enterprise) affects the value of the equity. So your house may be worth £500k (the business) but if you have a mortgage of £400k the equity is onl6 worth £100k. If there’s no mortgage the equity would be worth £500k.
My thought stemmed from the other thread about an equity issue. I think the Americans bought in at £100m amd that we were debt free at the time, so both enterprise and equity value were £100m.
Now - the business is worth less (an 7navoidable consequence of relegation) and there’s undoubtedly debt in the business (eg see the interview reference to the shareholders lending money because the bank won’t).
So the points I wanted to draw out are (a) that the equity will be worth a heck of a lot less than £100m and so our new owners are sitting on a massive paper loss; and (b) the owners could really set the cat among the pigeons by launching a rights issue to dilute the Trust (as someone did pick up).
The point you’ve made, I agree with - even to get their money back, never mind the desired hedge fund return of 2.5x money/ 25% IRR - the Americans have a very long way to go. Asset stripping alone (even ignoring or assuming the duck the restrictions on what they can do) will never do it.
Hope that may be helpful to some readers. | | | |
| An objective view on business ownership on 22:05 - Sep 5 with 9831 views | longlostjack |
I wouldn’t describe the consortium managed by hedge fund managers as venture capitalists for a start. SCFC is hardly a start up or fledgling business. Hardly acorns - more Oaktree if you get my gist. |  |
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| An objective view on business ownership on 22:06 - Sep 5 with 9823 views | jackanuck |
| An objective view on business ownership on 22:01 - Sep 5 by _ |
He's broadly right he just didn't cover the debt aspect of enterprise value
FRAUD |
fair point. I forgot to mention the house might have a mortgage on it and that needs be be deducted from the value. | | | |
| An objective view on business ownership on 22:09 - Sep 5 with 9814 views | Shaky |
| An objective view on business ownership on 22:04 - Sep 5 by leighton1318 |
Thanks for your reply
I wanted to make a slightly different point, the way the debt in the business (the enterprise) affects the value of the equity. So your house may be worth £500k (the business) but if you have a mortgage of £400k the equity is onl6 worth £100k. If there’s no mortgage the equity would be worth £500k.
My thought stemmed from the other thread about an equity issue. I think the Americans bought in at £100m amd that we were debt free at the time, so both enterprise and equity value were £100m.
Now - the business is worth less (an 7navoidable consequence of relegation) and there’s undoubtedly debt in the business (eg see the interview reference to the shareholders lending money because the bank won’t).
So the points I wanted to draw out are (a) that the equity will be worth a heck of a lot less than £100m and so our new owners are sitting on a massive paper loss; and (b) the owners could really set the cat among the pigeons by launching a rights issue to dilute the Trust (as someone did pick up).
The point you’ve made, I agree with - even to get their money back, never mind the desired hedge fund return of 2.5x money/ 25% IRR - the Americans have a very long way to go. Asset stripping alone (even ignoring or assuming the duck the restrictions on what they can do) will never do it.
Hope that may be helpful to some readers. |
Debt was already in evidence on the audited 2015 balance sheet available prior to the takeover, to the tune of £41 million.
Which would make EV = £150m.
And the trailing EV/PBIT acquisition multiple exactly 100x! | |
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| An objective view on business ownership on 22:10 - Sep 5 with 9804 views | jackanuck |
| An objective view on business ownership on 22:04 - Sep 5 by leighton1318 |
Thanks for your reply
I wanted to make a slightly different point, the way the debt in the business (the enterprise) affects the value of the equity. So your house may be worth £500k (the business) but if you have a mortgage of £400k the equity is onl6 worth £100k. If there’s no mortgage the equity would be worth £500k.
My thought stemmed from the other thread about an equity issue. I think the Americans bought in at £100m amd that we were debt free at the time, so both enterprise and equity value were £100m.
Now - the business is worth less (an 7navoidable consequence of relegation) and there’s undoubtedly debt in the business (eg see the interview reference to the shareholders lending money because the bank won’t).
So the points I wanted to draw out are (a) that the equity will be worth a heck of a lot less than £100m and so our new owners are sitting on a massive paper loss; and (b) the owners could really set the cat among the pigeons by launching a rights issue to dilute the Trust (as someone did pick up).
The point you’ve made, I agree with - even to get their money back, never mind the desired hedge fund return of 2.5x money/ 25% IRR - the Americans have a very long way to go. Asset stripping alone (even ignoring or assuming the duck the restrictions on what they can do) will never do it.
Hope that may be helpful to some readers. |
Agree with all of this. my gut is that the debt from transfers is all on the cashflow schedule for the next 3 years (thats the meaning of taking our hard medicine now)
Their stance will be to get the valuation up and the debt gone within 3 years. It's 5 years from the start of their investment which is a very common landmark for VC's to exit. | | | |
| An objective view on business ownership on 22:13 - Sep 5 with 9790 views | jackanuck |
| An objective view on business ownership on 22:05 - Sep 5 by longlostjack |
I wouldn’t describe the consortium managed by hedge fund managers as venture capitalists for a start. SCFC is hardly a start up or fledgling business. Hardly acorns - more Oaktree if you get my gist. |
yes I get your gist. | | | |
| An objective view on business ownership on 22:14 - Sep 5 with 9787 views | londonlisa2001 |
| An objective view on business ownership on 22:06 - Sep 5 by jackanuck |
fair point. I forgot to mention the house might have a mortgage on it and that needs be be deducted from the value. |
Added to equity value. Not deducted from it. | | | |
| An objective view on business ownership on 22:17 - Sep 5 with 9759 views | jack2jack |
Welcome Jackanuck.
Can I ask a simple question, everyone keeps banging on about majority shareholder s this, minority shareholders that.But I'm under the impression that share percentages don't mean that much, depending on what's written into the SHA. |  | | |
| An objective view on business ownership on 22:22 - Sep 5 with 9739 views | ExiledJack |
| An objective view on business ownership on 22:04 - Sep 5 by leighton1318 |
Thanks for your reply
I wanted to make a slightly different point, the way the debt in the business (the enterprise) affects the value of the equity. So your house may be worth £500k (the business) but if you have a mortgage of £400k the equity is onl6 worth £100k. If there’s no mortgage the equity would be worth £500k.
My thought stemmed from the other thread about an equity issue. I think the Americans bought in at £100m amd that we were debt free at the time, so both enterprise and equity value were £100m.
Now - the business is worth less (an 7navoidable consequence of relegation) and there’s undoubtedly debt in the business (eg see the interview reference to the shareholders lending money because the bank won’t).
So the points I wanted to draw out are (a) that the equity will be worth a heck of a lot less than £100m and so our new owners are sitting on a massive paper loss; and (b) the owners could really set the cat among the pigeons by launching a rights issue to dilute the Trust (as someone did pick up).
The point you’ve made, I agree with - even to get their money back, never mind the desired hedge fund return of 2.5x money/ 25% IRR - the Americans have a very long way to go. Asset stripping alone (even ignoring or assuming the duck the restrictions on what they can do) will never do it.
Hope that may be helpful to some readers. |
Thanks for this post Leighton.
What are your thoughts on the typical hedge fund desired returns applied to football club ownership? Would you say expectations of such a IRR puts the club at a competitive advantage or disadvantage?
Lastly, if the hedge fund owners decided they needed to "close their position" for scratch, is this not possible with a share issuance dilution followed by a firesale of all senior players? £67m was it? Alternatively, how many years can they wait for promotion?
Hoping for another helpful response :) | | | |
| An objective view on business ownership on 22:25 - Sep 5 with 9716 views | jackanuck |
| An objective view on business ownership on 22:14 - Sep 5 by londonlisa2001 |
Added to equity value. Not deducted from it. |
HI Lisa,
Forgive my ignorance if what I'm about to say is stupid. But If my house is worth 500k and I have a 360k mortgage added to it's value, that would make my house worth 860k. Hence why I chose different language in my post. Please feel fee to correct me if I'm off. | | | |
| An objective view on business ownership on 22:29 - Sep 5 with 9701 views | jackanuck |
| An objective view on business ownership on 22:17 - Sep 5 by jack2jack |
Welcome Jackanuck.
Can I ask a simple question, everyone keeps banging on about majority shareholder s this, minority shareholders that.But I'm under the impression that share percentages don't mean that much, depending on what's written into the SHA. |
Technically anything can be agreed but think about how motions are brought up and passed. They are passed by the majority. The entire rule book can be re-written by the majority given enough board meetings.
Also, it's quite typical that in the event that any shareholders have injected debt (which the Americans have) that voting rights can be changed until such debt is paid back. This is fairly routine if any portion of a debt is not being recalled on-time.
I've had first had experience with minority ownership VC's who had dominant shareholder rights temporarily, until monies are re-paid. | | | |
| An objective view on business ownership on 22:30 - Sep 5 with 9693 views | leighton1318 |
| An objective view on business ownership on 22:22 - Sep 5 by ExiledJack |
Thanks for this post Leighton.
What are your thoughts on the typical hedge fund desired returns applied to football club ownership? Would you say expectations of such a IRR puts the club at a competitive advantage or disadvantage?
Lastly, if the hedge fund owners decided they needed to "close their position" for scratch, is this not possible with a share issuance dilution followed by a firesale of all senior players? £67m was it? Alternatively, how many years can they wait for promotion?
Hoping for another helpful response :) |
I would say they took a flat out punt on staying in the top division and cashing in on the apparent magical money tree of ever growing TV revenues. They may have deluded themselves, or been kidded, as to how easy that would be.
From here ... they are in a hole, they have £68m of dead money. Their options IMO were to spend in the hope of going quickly back up, or to take the deep breath and work through it for the long term - it looks like the latter. It is not the hedge fund style to throw good money after bad.
To be clear it is not hedge fund money that’s invested (I believe), more a rich man’s plaything. £68m between 27 people averages less than £3m each and for most of them (again, I assume) it was not a high % of their net worth. So they can probably afford it, as opposed to being under pressure to ‘satisfy the bank manager’. | | | |
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