- Exclusive from Adam Williams
When you’re looking at Tottenham Hotspur’s overall financial picture, you have to consider them A) as a football club and B) as a business.
Daniel Levy has always said that, as Spurs actually have about 30,000 institutional shareholders who own around 13 per cent, they run the club like it’s a public business.
That means they have an obligation to transparently deliver value to their shareholders. It’s hard to dispute that they have done exactly that in the ENIC era.
ENIC paid about £50m in total to take control of the club over two decades ago. They are now valuing the club at £3.75bn.
I don’t think there is stock index in the world that would have given you the same returns if you’d invested that amount at the same time.
Many analysts believe that £3.75bn figure is an overreach, but even if you take a more conservative appraisal, the point still stands.
The downside for supporters is that the very reasons that the club is so valuable are also those that have imposed something of a ceiling on their ambitions on the pitch in recent years.
Spurs’ cost control has been excellent. They have the lowest wages-to-turnover ratio in the Premier League. Their amortisation – which is how a club accounts for transfer fees over a period of time – is also the lowest of the so-called Big Six.
Only Manchester United, meanwhile, are less dependent on broadcast revenue than Spurs. And their commercial income is also more diversified than any other club besides Liverpool.
Yes, they have high debt because of the stadium. But that is fully costed and has been agreed at fixed interest rates. They agreed that rate at a great time for borrowing. You wouldn’t get anywhere near as good a deal as that today.
The stadium is a phenomenal asset that guarantees at least £110m in matchday income per year, plus perhaps about the same amount in other commercial income all things considered.
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Why Tottenham could be seeking investment
But the owners want the club to self-fund. Compared to other owners in the Premier League, they are actually among the poorest.
That means any cash they spend, they have to generate themselves. That’s why we maybe don’t see the same lavish spending as we might do at other clubs.
This also appears to be the reason that ENIC are seeking investment. They want someone with huge capital reserves to buy a minority stake in the club to help them compete on the pitch without spending their own money.
If they sell a 15 per cent stake, you might get as much as £500m in equity.
Whether someone is prepared to spend that much on a minority stake when they are unlikely to be granted much operational control is up for debate.
I think it’s a challenging environment for seeking investment in a Premier League club at present.
For one, it’s a saturated market. Everton are looking at a full takeover, while West Ham, Wolves and a couple of others are looking for minority investment.
Then you have to account for high interest rates. Private equity firms were very keen on Premier League clubs at one stage. But because they often use debt to finance acquisitions, the pool is more limited than it once was.
There is also concern about declining profitability in the Premier League, as well as the flatlining of the value of the domestic TV deal.
Clubs are losing more money than they were a few years ago and costs are out of control, partly because of the likes of Todd Boehly distorting the market.
In order for it to be a worthwhile investment, you need to be confident that there is some sort of big bang moment where vast new revenues can be unlocked.
For Spurs, that big bang moment is probably likely to be something unpopular for fans – a breakaway competition, Premier League matches played in the US, or some high-tech way to monetise their overseas fanbase.
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