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The Arsenal take-over looks like being a long way from the toxic take-overs of The Glazers and Gillett & Hicks. But, as SJ Maskell writes, custodianship is about doing more than saying and doing the right things and the real power in the game lies in the majority ownership of shares.
I have a friend who is an Arsenal Fan. He is also an Arsenal shareholder. Not as a member of the Arsenal Trust or of the Fanshare Scheme but in his own right. I move in elevated circles, as you can see. The history of these particular shares is interesting. It is well known that in 1913 Sir Henry Norris moved Arsenal to Highbury in a bold move to rescue a club that was struggling financially. During the close season the pitch, terraces and turnstiles were built and the grandstand started. Sir Henry raised what was then a vast sum, £125,000, to build the ground. What doesn’t seem to appear anywhere in the history of Arsenal online is that extra money was raised by supporters ‘chucking money into a hat in return for shares,’ as my friend puts it. Five shares for £5 was the deal. My friend’s grandfather donated his £5 to help the club. The share issue was seen as largely irrelevant at the time – a curio which allowed you to have tea and biscuits with the board at the Annual General meeting. They passed from grandfather to father with a later six-for-one scrip issue multiplying the holding to twenty-four shares. Father gave six shares to a friend and left the rest to his son – an avid Arsenal fan, as were the whole family.
The shares were still considered to be valueless, a token of fan loyalty rather than anything of monetary value, until my friend wanted to pass some of the shares on to his sister. In registering the change of ownership in 1995 he discovered the shares were worth £3,000 each. Some trading was done, but my friend retained ten shares which he holds today. He is awaiting a letter from Stan Kroenke as I write. In case you missed it in the news, the current price is in the region of £11,750 per share. My friend’s situation is intriguing in the light of Arsenal Supporters’ Trust’s recent vote to retain their shares and Fanshare scheme on the basis that ‘Arsenal is too important to be owned by one person.’ Indeed the culture secretary, Jeremy Hunt, felt motivated to intervene by ‘urging’ Kroenke ‘to retain and strengthen fans’ involvement in the club’s ownership structure.’ It is a debate that the government feels it right to take part in, given the current football governance enquiry.
Kroenke has a fine line in fan-pleasing rhetoric that many see as making him a suitable custodian of Arsenal FC. The Arsenal Trust is willing to work with him and those that have sold their shares to him have nothing but praise for his understanding of the club’s rich heritage, rooted in those Henry Norris days of 1913. In those days, football clubs were regulated as the FA stated in 1909, in a way that, ‘does not allow the private proprietorship of clubs for speculation and profit,’ having to be ‘a genuine club, formed by the voluntary effort of a number of people resident in the locality.’ This philosophy would indeed have made the shares given in exchange for fans’ donations irrelevant to their intentions. Maybe its just as well they got some return though. Norris had quite a reputation for dodgy, if unproven, dealings, as Spurs fans will verify. It was Norris’s lobbying of the Football League that got Arsenal promoted from Division Two instead of Spurs in 1919 despite finishing behind them in the competition. Bribery has never been completely ruled out. Plus ça change there, then, with regard to money talking.
Money is definitely talking at Arsenal at the moment. Much like fans everywhere, Arsenal fans are tempted by the talk of a takeover to start thinking of spending on players and actually winning something befitting their status and solid worth in the near future. It’s a long time since 2005. Other club’s fans have already made a choice on far more pragmatic grounds. At Sheffield Wednesday last November the Trust, Wednesdayite, gave up their 10 % shareholding in response to a 97.9% vote in favour from those responding to a members poll. That Mandaric saved their club from the brink of administration when all anyone else could offer was more strife, made theirs a non-decision. At least ‘Mad Mandy’ was a known phenomenon and they can be reasonably sure he won’t build houses on Hillsborough in the very near future. But what were Notts County’s Supporters’ Trust thinking in selling their club on the strength of a worthless guarantee drawn on an unknown Finance Company? Being offered the face of Sven-Goran Eriksson was enough to fuel the dreams of making the Premier League. The club, now in Ray Trew’s hands, ended up £7m in debt as a result.
All of which goes to argue against the case of fan ownership. My friend, in his ruminations on to sell or not to sell is of the opinion that there is no power in being a minority shareholder. As he puts it, ‘the small share holder just gets pissed around’ by the majority holders. At Arsenal the faith lies with the blocking power of Usimov’s shareholding to restrain Kroenke. That and the faith in Kroenke expressed by the people who sold to him, that he will value the Arsenal ‘ethos and spirit.’
Fans’ dreams of spending on players may be in vain, though. One of the strengths of the Arsenal business model is its sustainability. It is sustainable because of its success – measured by the team’s ability to maintain Champions League football at the Emirates without the financial doping so favoured in other places. No silverware, but solid, high level football every season. Kroenke has pledged to keep the club running on the same lines. So the good news is no leveraged debt, no soft director loans. It means, given the club has maximised it’s TV and match day revenue potential, that there will have to be a greater global emphasis on ‘brand Arsenal’ to increase revenue streams in order to maintain team success which will in turn further improve the global standing of the brand. First step – a Far Eastern close-season tour for the team. This makes the revenue from supporters perhaps less important. Good news for ticket prices maybe, bad news for supporter influence on club decisions and hence on the ethos of the club, lessening the power of their pounds. Currently there isn’t much weight behind the Culture Secretary’s ‘urging’ to encourage Mr Kroenke to keep the fans involved. But at least Mr Kroenke has discussed matters with fans with some degree of transparency. Arsenal have, ironically, built their whole ‘brand image’ on the back of fan involvement and inclusion. It remains to be seen if that is a strong enough anchor against a majority shareholder.
There is another takeover hovering under the radar at the moment. Portsmouth FC are undergoing yet another period of due diligence, this time from Convers Sports Initiative. News of this was broken by Keith Harris and Balram Chainrai just about a fortnight ago – promising completion in an impossible time frame that has already passed. The deal is shadowy at the moment, the buyers keeping quiet and the Football League only going so far as to admit they have received some details. Given the opacity of dealing at PFC over the last two years, Pompey fans are wary of what the deal means for the club. Portsmouth Football Club (2010) is a privately owned limited company held by Sports Holdings (Asia) Ltd, which is in turn held by Horizon Eclipse Inc. The latter two are registered in the British Virgin Islands and Horizon is declared to be owned by Balram Chainrai (44.5%), Levi Kushnir (44.5%) and Deepak Chainrai (10%) (No, I don’t know who owns the other 1% either). Obviously, stakeholders have no right to have questions answered under this ownership structure, and the current owners have made it quite clear that they have no intention of speaking to fan groups, despite the tact and diplomacy of the Pompey Supporters’ Trust. At Pompey the commitment of fans is all that remains to represent the philosophy of the 1909 FA regulation. They are part of what is being sold, yet here have no power or say in who becomes the next custodian of their club or what values and traditions they will uphold.
Convers are a new company to the UK and the most positive interpretation of their interest lies in the same direction as Mr Kroenke’s at Arsenal. Being owned by Russians Antonov and Dubov, they may be investing in the ‘cross border potential’ of football and seeing PFC as a possible flagship in this respect for their sporting ventures. ‘Brand Pompey’ in effect. Could be exciting, could move the club even further away from the fans. But they aren’t telling, and as Pompey’s last Russian venture ended in tears it would be nice to have some safeguards before they take over. Pompey fans have not had any in the past, and they have no say in the present because no one is asking them.
Fans will go to great lengths to preserve their clubs. My friend’s grandfather waded in to help the Arsenal when the club nearly went under. This is the foundation of the “values and… the history and traditions of this very special club that we cherish,” as Peter Hill-Wood puts it. That for my friend has translated into a nice tidy sum of hard cash. Herein lies the incongruity of the whole situation. Accepting that cash removes his last vestige of influence and right to be consulted on the direction of his club. A direction directly influenced by his grandfather’s input as part of a collective gesture.
But as he says, a minority shareholding does nothing, as Wednesdayite also had to concede. The power lies in the majority ownership of shares (and not selling them to scam merchants). If fans are to maintain their influence in their clubs, in the very special kind of business that football has become, then they need the power of owning the majority of shares whilst limiting the potential for debt, as in the 50 + 1 German model. Meanwhile, with so many clubs turning to fans again to help them out of financial trouble, there is the potential for change. Maybe Wrexham Supporters’ Trust could consider that in their vexed negotiations with the club and the fragrant Ms Booth. In the spirit of my friend’s Grandfather, fans need to hold out for a controlling share in return for any club-saving loans, for the good of their clubs and all supporters – at least until a proper regulator steps in.
Follow SJ Maskell on Twitter here.
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