Wigan Athletic: Well, That Escalated Quickly
In the age of the meme the reflex response is to say, “Well that escalated quickly,” but the haste with which the financial collapse of Wigan Athletic has been sprung upon us may tell us a story in itself. Normally, when a football club ends up in administration, there’s plenty of notice that it’s going to happen. Indeed, at many clubs there was such a familiar story arc a few years ago that I used to joke that I could have a template article in which all that would need replacing for each publication would be the names of the clubs, the names of the owners, and the exact amount of money owed.
But Wigan Athletic is different. To say that today’s announcement came out of the blue would be something of an understatement. In a sense, Wigan Athletic do fit the exact profile of the sort of club that does end up in this sort of position – a former Premier League club believed to be propped up by the munificence of a sentimental owner which which didn’t adjust well to life back in the Football League following relegation from the Premier League, and which ended up slipping back into the third tier before partially bouncing back with the new patrician having gone, to be replaced by foreign owners.
This sequence of events did take place, but it only tells a part of the story. The Whelan family sold Wigan Athletic to the Hong Kong-based company International Entertainment Corporation for £22m after 23 years as owners in November 2018. The club had been relegated into League One in 2017, their second relegation in five seasons, but had bounced back from League One into the Championship at the first attempt as champions, and ended last season a couple of places above the relegation spots, in eighteenth.
On the pitch this time around, the return was a little better. A terrible first half of the season saw Wigan pick up just four wins before New Year’s Day, but IEC kept faith with manager Paul Cook and the team became one of the form teams of the entire EFL from the end of January on. All of the statistics are impressive. Wigan have won all three games played since the end of the lockdown. In fact, they’ve now kept seven consecutive clean sheets in the league, a run of six matches and a draw, and last night’s win against Stoke City brought up 50 points for the season, two points fewer than they managed from 46 games last season, with six games still to play.
Near the beginning of this upswing in the team’s form at the start of February, so came confirmation that IEC were looking to sell for £17.5m, stating that the that the team was under-performing on the pitch and that profitability had not “improved as expected.” They also expressed their a belief that the “impact” of Brexit would reduce fans’ ability to spend money on the club, as well as making it less attractive to investors. Four weeks ago, a further sale was confirmed to Leader Fund LP, headed by Hong Kong businessman Au Yeung Wai Kay but 51% owned by Stanley Choi, the chairman of IEC. At that point, of course, they would have had to shown the EFL proof of funding for the remainder of this season and for the whole of next season.
The appointed administrators are a familiar name to long-time readers of these pages: Begbies Traynor LLC, and in particular Gerald Krasner, who was briefly the leader of the consortium that sold Leeds United to Ken Bates and who was the administrator in insolvencies at both Bournemouth and Port Vale. Krasner is one of three joint administrators along side Paul Stanley and Dean Watson, but the early signs were of a degree of confusion on the part of the administrators over the actual reason for the club finding itself in this position in the first place.
On the one hand, Krasner stated that the suspension of the season because of Covid-19 has had a “significant impact on the recent fortunes of the club.” But when asked by BBC Radio Manchester about this impact, Stanley said, “I don’t think it’s played a massive part in terms of the way the club’s been run, because the club’s been run very well”, and that, “The funding that was due to come in from the owners didn’t come in. I’ve had no contact with the owners and I don’t know why the funding didn’t come in. It might be coronavirus-related, I just don’t know.”
There’s no doubt that the current global pandemic has had a deleterious effect on the finances of all football clubs, but this was also a known quantity four weeks ago, when the purchase went through. So what is the truth of what has been going on behind the scenes at the club over the last few weeks? If what Stanley said is true, why was funding that evidently was not place accepted by the EFL at a time when clubs have literally no other guaranteed income? Why was this all accepted, it would appear on a wing and a prayer, at a time when so many people and businesses are under such financial duress?
Either way, it’s a grim canary in the coalmine for the clubs of the EFL. On the one hand, if Covid-19 in and of itself has had such a terrible effect upon the finances of this club, how many others might be set to follow Wigan Athletic into insolvency? The collapse of ITV Digital towards the end of the 2001/02 season was the last time clubs had such a calamitous shock wave pass through them. That time around, thirteen clubs went into administration in the three years afterwards. It seems inconceivable that the effects of Covid-19 won’t be a financial shock to EFL clubs of at least similar proportions, so the question then becomes how well-prepared clubs were for it. There’s little reason to optimistic that they were.
On the other hand, though, any circumstances in which a club finds itself insolvent within weeks of coming under new ownership can only be considered a failure of governance, and all the points deductions in the world – it’s twelve, in this case – won’t change that. The EFL was quick to issue a statement this afternoon confirming that:
If in the event the Club is relegated by virtue of their final position following the conclusion of the Championship season, then the deduction will apply in League One in 2020/21. However, if the Club is not in the relegation places following the final game of season, the sanction will be then be applied to their season 2019/20 total and final league standings amended as appropriate.
Following a 3-0 win against Stoke City last night, Wigan were on fifty points this season, in fourteenth place in the Championship table. The application of a twelve point deduction now would put them bottom of the table, five points adrift of safety and with six games left to play. Wigan’s form this year may have convinced all concerned that this is a risk worth taking, and perhaps for those who consider football clubs to be no more than commodities to be bought or sold that risk makes sense. Players and other staff, who earn their livelihoods from it, suppliers, often small businesses who are on the breadline themselves at the moment, and supporters, who invest so much into their clubs both financially and emotionally, are likely to consider it all somewhat differently, though.
There’s no suggestion of a new buyer waiting in the wings, and we can only speculate at this early stage what has been going on over the last few weeks. But the very little that we do already know has raised questions that need to be answered.
- Is this the first tremor of an earthquake, or are Wigan Athletic’s circumstances a weird outlier?
- What proof of funds did the EFL actually see from Leader Fund LP which allowed them to sign-off on this sale?
- Why is administration the best or only route out of whatever mess the club has found itself in?
- Are those made that decision to take this drastic action acting in their own best interests, or in the best interests of the company itself?
- Would anybody care to elaborate on the fact that Stanley Choi, the chairman of IEC, owns 51% of Leader Fund LP?
- If Leader Fund LP found themselves unable to run the club, why didn’t they publicly put it up for sale?
- Might this even be a pre-pack administration, in which a buyer is lined up for a struggling business before it actually goes into administration, wiping its other unsecured debts in the process? To do so isn’t illegal, but pre pack administrations have long been considered ethically contentious. Begbies Traynor are, coincidentally, the first commercial Google search return (excluding adverts) for “pre pack administration.”
So many questions and so few answers, then. Perhaps the involvement of the administrators will flush out what, exactly, is going on at Wigan Athletic. Or perhaps it won’t.