An article by Ilyas Mohd Ismail
Manchester United, Juventus, AC Milan have a certain thing in common. Aside from the fact these 3 clubs have all won the champions league in the past 25 years, they’re all listed on a Stock Exchange. Their names trade not based on on-pitch performance but on the performance of the merchandise, ticket sales and exclusive broadcasting deals (heard of MUTV?).
Of course, before they were even listed for the mainstream investors, they were privately owned by not just one person but a slew of private investors. And many clubs in the EPL are still majority-owned by private investors. Investors bring mostly positive changes to a club, financing new pitches, training facilities and even providing financial liquidity during transfer windows. In return, as the quality and wealth of the club rise, so do the valuations of the club and some of the profits will be distributed as dividends.
Locally we’ve seen investors such as SwissAsia investing in European football financing. This is how their model works: Investors’ money is pooled to form loans to soccer clubs for operating expenses or to fund signing players. The financing matures at different stages from six months to three years. But, of course, with football financing being an “exotic” asset class, banks have started to largely stay away due to restrictions related to capital ratio requirements. This has left a gap for private investors to fill all over the world.
OK, so what’s in it for the clubs? Give me the numbers.
For this, let’s take a look closer to home, at our neighbour Malaysia and the privatization of Liga Super. Under the old FAM regime of State-run clubs, revenue distributed to the clubs from Liga super only amounted to a measly RM 250,000. However, in 2019 the revenue distributed to Clubs increased 12x to RM3,000,000. This increase has also reportedly trickled down to the second tier Liga Premier clubs.
This could work similarly well for Singapore. Investors have a vested interest in seeing the league as a whole becoming profitable. As a result, clubs will be more vocal and more involved in securing optimal broadcasting and sponsorship deals.
Also, bringing in investors into the fray could help avoid some unsavoury incidents, such as late payments of players that happened with Warriors FC in 2019. Short term loans to pay players salaries are nothing new for leagues in England and Europe.
Is Singapore ready for a privatized SPL?
Never a better time than now to open up the gates for private investors. The markets, be it public or private, are flush with cash. The number of single-family offices in the city-state has doubled since the end of 2019 to about 400 and points to Singapore being the main wealth hub of the region. Moreover, with low interest rates persisting globally, many investors are looking at alternative asset classes for more attractive yields and financing football could be the way forward for them.
For the clubs, finding the right owners and investors are crucial. Building a successful privatized league requires long term investors. State of the art training facilities will not pay for themselves overnight especially not at the scale that the SPL is at currently. It is important for both clubs and investors to understand that getting in now at the ground level will be an arduous undertaking however it would be highly rewarding. 15 years ago the expansion fee into MLS would cost approximately USD$10,000,000, today, MLS franchises are valued publicly at up to USD$500,000,000. Clubs should also note that they must have a pathway to profit and a solid recurring revenue generator aside from just gate collections to get investors interested.
It is estimated that SPL could become sustainable if Singapore’s football economic footprint increases to at least SGD 82,000,00, roughly 4X the level it is at as of March 2020. Even with grants, the FAS is currently running at a loss, hampering its ability to further develop the national team and the grassroots scene. Should more privatization occur, this could also alleviate the pressures on FAS and allow them to focus more on the areas in which have been neglected in the past.
Disclaimer: This article represents the opinion of Ilyas Mohd Ismail. None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument or to make any investment. Ilyas Mohd Ismail has no position on the MSL, MPL, SPL or any Clubs mentioned above.
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