Sports investments

Losing their shirts

Do sports and stockmarkets mix?

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WT Economist

"Salary restraints prevent free-spending owners from driving up the cost of talent."

Salary caps are what the rich men who own U.S. professional sports teams impose in a situation where labor has the upper hand in the free market.

But if you proposed to have a salary cap on executive pay, to boost dividends, you are a socialist.



It was this year, just 4 months ago, and it was not a big surprise. The majority of football fans would agree Manchester City were the best team. Many thought they had blown it with a few games to go, but they scored in the last minute of the last game to win on goal difference. The surprise was that it was such a close finish, United had an average team but nearly nicked it.


English football teams constantly find themselves in a spending war of attrition. However - I don't like rules that interfere with free trade. My remedy to prevent bankruptcies while minimising interference, and allowing those teams that can afford to to invest, would be to implement a rule that any club that borrows any money (including general purchases that are not paid for in advance) must contractually oblige the counter-party to the deal to lose all of the money in the event that the club goes into administration. At the very least, this would mean that a spell in administration would properly clear the club's debts.

Most importantly, English football must never again fall victims to people like the Glazers, who bought Manchester United with debt, parked the debt onto Manchester United's own books, increased ticket prices far more than other clubs have, and have generally treated the supporters like cows to be milked.


Manchester United fans continue to rue the day it was taken over by the American brothers.

If it was instead an Emerati sheikh or Russian oligarch, we could have won the Champions League at least once in the last few years. Instead we have been outspent in the last three years in the Premier League. Even Stoke and Villahave outspent Manchester United ( )

Shame on the Americans, who take much more out of the club than they give to it.

Gordon L in reply to WT Economist

Salary caps can be justified as a means of preserving competition for the good of all.
How many would watch baseball if the Yankees -able to spend more in salary than anyone else- won the World Series year in and year out?


A couple of comments,
(1) The NFL keeps at least one large metropolitan area without a team. If a team is not satisfied with their city's tax funded stadium they can threaten to move to one of these other cities (it has happened)
(2) Most players enter the professional ranks via the college draft. The colleges have done the basic training and the results do the sorting. The weakest team gets the first choice and then choice goes in rotation until team quotas are filled. Interestingly with a cap on the number of players in a squad there must be roughly the same number of players exiting the professional ranks as are entering that year. I have been told the average playing life is 4 years. Since this is strictly a North American sport there is nowhere else a shed player can go. Contrast that with soccer !

Soccer is a leisure pursuit and a hobby for some. It must be difficult to make money in professional soccer. The big clubs have vastly wealthy men willing to pump money in for prestige purposes. The lower clubs are on a knife edge - if the banks etc wanted to pull in their loans there would be complete collapse in league soccer (if you owe the bank 10,000 pounds that is your problem - if you owe the bank 10 million pounds that is the bank's problem )



No, debt is still the way to go.

The MU proceeds didn't go to pay down the debt.

The interest is deductable, and many leagues demand 1 person with the majority interest.

Jimmy Haslam just paid $1 Billion for the Cleveland Browns.
Al Lerner purchased the Browns from the NFL in 1998 for $530 million.



I'm not sure I have ever heard the argument that something had appreciated too greatly to find a buyer.
If the underlying value is suspect it's a bubble, otherwise when the value is there, so are buyers.
Unless the league itself has bizarre restrictions, such as the recent attempted partial sale of the Pittsburgh Steelers.

CallSaul in reply to nicolasbmeijer

What do you mean by 'distorted'?
Wasn't Ronaldo a Manchester United player, or wasn't he worth 80 million pounds?
In hindsight, that looks a great deal for Real Madrid - he is a worth a lot more than 80 mil.. And Man Utd deserve a lot of credit for the player he is now.


I think money given to sports teams should definetly be something on the chopping block especially for a city that can't afford its bills


I personally do not think that a professional sport team can be on the stock market for the one and only reason that the purpose of a team is not supposed to be "doing money". Owning a team is a privilege that the rich entrepreneur can have, not a way of doing more money.. well even though some of them are obviously doing more money with it.


The Cleveland Indians stock wasn't delisted.

The IPO was in June 1998, bought out in Nov 1999.

It was bought by Dolan when he purchased the team from Jacobs.
Some kept the certificates, to frame and keep or sell.

Dolan is paying $22.25 to $22.75 for each of the shares owned by Jacobs and other shareholders. The team went public at $15 a share last year. In trading yesterday, the stock closed at $20.625.
Usually the owners make the money when they sell the team.
I don't see Glazer selling anytime soon.



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