Cjay wrote: ↑Wed Nov 23, 2022 2:15 pm
This was being discussed elsewhere yesterday but interesting point.
So at the moment 49ers Enterprises have paid £99million for 44% of Leeds United.
According to The Athletic Leeds United value is around £475mil including the stadium (so £20mil for the stadium that is what Radz paid) and £455mil for the club itself.
That would value LUFC at £4,550,000 a percent.
49ers got 44% for £99mil, that means they paid £2.25mil a share.
There 44% is now worth just over £200mil, that means selling that they would make £101mil profit for doing naff all.
To buy Radz out at the £4,550,000 per percent mark it would cost £254mil.
That would take there investment to £353million and then £20mil for the stadium.
If they sold us for the £475mil price almost immediately then they make £102mil profit for them and there investors and they have barely had to do anything.
That gives the instant flip merit in terms of a strategy which gives them a decent profit which is ultimately all investment funds care about.
The alternative is much more uncertain.
Run the club day to day, invest significantly to improve the stadium, cost of that is well over £100mil according to Radz so say £150mil.
That is a debt the club can't afford, we don't have the revenue at the moment and the fund would be expected to cover it initially.
And to see any stadium improvements will take 2,3,4 years from now.
So now your at 2026,2027,2028 (10 years since they first invested).
During those years the squad itself requires significant investment if the 49ers don't want to be worrying about relegation every season.
So your probably talking another £150-200mil more.
So now you are needing your investors to cough up best part of £300mil over 2,3,4 years.
There investment in LUFC would now be around £650mil so to generate a profit even similar to what they could have had instantly flipping us you need to find a buyer willing to pay £750mil.
And in those years we could easily be relegated (even with £150mil additional funding to aid squad improvements), alternatively we could simply be no better off.
No further up the table, still 20th-14th, no more successful on the pitch, no more attractive than we were before.
And then even with stadium improvements you would struggle to find a buyer willing to pay £750mil for a struggling lower end team.
So the point of this long post is simple.
Venture Capital funds don't tend to want to run day to day.
They are all about the flip and profit.
Does it make more sense for them to do an instant flip rather than taking the risk of running the club and ending up with 0 profit years later and £100s of millions more investor money wasted?
