Cryptocurrencies carry risks for fans

A good general principle is that if you don't understand an investment, you shouldn't buy it. However, what appear to be 'get rich quick' schemes can always attract subscribers, although if the returns appear to be too good to true, they often are.

Levels of financial education are not generally high. However, if a brand you trust offers something, you may be tempted. That is particularly the case when it is something you identify with as strongly as a football club. 18 to 45 year old individuals that are affluent or emerging affluent and attend matches at top clubs are attracted by novel forms of investment.

Football clubs themselves are often attracted to risky products because they offer an apparent means of boosting financial returns. Although one shouldn't make too much of one week's trading markets are currently in a volatile state, enhanced by geopolitical tensions, not least those between the United States and China.

In recent years, a number of football clubs have agreed sponsorship deals with spread betting companies and foreign exchange brokers that offer risky products that can result in steep losses for customers, even as European regulators intervened. With new restrictions operating, some clubs have turned to the cryptocurrency market.

It should be noted that many see cryptocurrencies as a wave of the future, a means of exchange outside the deadening control of central banks and governments. However, they also offer opportunities for organised crime. Individuals investing in them may not understand what they are getting into. Against that, if market capitalism is to flourish, it does involve taking risks.

In August, seven Premier League clubs - including Leicester City, Newcastle United and Tottenham Hotspur - signed one year partnerships with eToro, a website that offers cryptocurrency trading. As part of the partnerships, the clubs received payment in bitcoin. Clubs see it as a way of developing a closer relationship with their fan base which these days is global for leading clubs.

Wolves have agreed a partnership with Coindeal, a Cyprus-based cryptocurrency exchange and Arsenal has signed a deal with CashBet of the US. Individual football players such as Lionel Messi have become 'brand ambassadors', lending their reputations and followings.

Paris Saint-Germain is creating its own cryptocurrency in partnership with Malta-based group, Socios.com. They will develop a 'fan token offering' that fans will be able to buy for special 'privileges' such as voting for man of the match awards. Socios hopes to generate between $15m and $20m for the French champions.

Many people bought into cryptocurrencies when their value rocketed last December. Generally the wrong time to buy an asset is when it is at or near peak. One leading English football club has been approached several times about cryptocurrency endorsements over the past year, but has refused because of concerns about the lack of regulation and the potential for reputational damage.

A senior executive at the club told the Financial Times 'The danger is that [a football club] endorses an [Initial Coin Offering, ICO], investors lose a lot of money when it dies and the only reason people have invested in that is because their sports team have promoted it.'

Anyone contemplating a substantial investment of any kind should seek independent financial advice.

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...

Gold standard ground boosts Tottenham's income

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000. The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts. Money brought in from football has gone up too. Match day ...

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to ...

The Political Economy of Football V2

Search This Blog