[FOOTBALL AFFAIRS] Investing in sports: a safe haven or a bubble?

He Chelseajust sold by 2.9 billion euros to the U.S. tycoon Todd Boehlybeat the world record for the most expensive football club in the world. He Milanjust changed hands with a rating of 1.2 billionhe did the same for the Italian league.

But perhaps most importantly, the most expensive acquisition of all world sports has been completed this week: Denver Broncosdeductible from NFL football players broke all records by qualifying $ 4.65 billion (about $ 4.3 billion) paid by the Walton-Penner group led by Rob Walton, heir to the family that controls the U.S. supermarket giant Walmart. A valuation almost $ 1 billion higher than the theoretical valuation he made of it Forbes no later than a year ago, equal to 3.7 billion. As if to say that the ratings of the American magazine were rounded down and not up.

Finally also the NBA, in the basketball league with stars and stripes, is about to place an important shot in this direction. The founder of the Nike Phil knight I’m going to buy it Portland Trail Blazersthe city’s sportswear giant’s basketball team, for $ 2 billion.

On the other hand, it is enough to look at the history of sales operations in world sport to realize that ai The top five most expensive transactions are all transactions in the last five years:

  • Denver Broncos (NFL): 4,330 million euros;
  • Brooklyn Nets (NBA): 3,080 million euros;
  • Chelsea (Premier League): 2.92 billion euros;
  • New York Mets (MLB): $ 2.24 billion;
  • Carolina Panthers (NFL): $ 2.1 billion;
  • Houston Rockets (NBA): 2,050 million euros.

In short, a monotonous trend that at least globally leaves little doubt about the increasing value of sports clubs.

The interesting thing, though, is that all of this has been going on since the beginning of the year the S&P 500 indexconsidering the index that measures the US economy, lost 18% between geopolitical tensions and the energy price crisis.

In this context, it is legitimate to ask ourselves if it is world sport is becoming a safe haven (or the Anglo-Saxon refuge), or those assets in which it invests during the dark times of the economy?

Also in light of what has emerged in the American press this week: that al 1998 to the Denver John Broncos legend Elway (former quarterback and later team manager) was offered the opportunity to buy 20% of the Broncos for $ 36 million, but turned down the offer. Now the team has been valued at 4.65 billion and that 20% would now be worth 930 million. A yield of 2480% in 20 years.

Or if, on the other hand, it is a speculative bubble designed to make those who invested in it regret it.

This week an article by Forbes explained that at least in the United States interest in the sports assets it is hotter than ever, in part because these assets are not tied to the performance of a stock or the economy. In practice, the underlying logic is this: because sport is tied to people’s passion, this will not diminish in times of crisis because there are enough fans who will not give up watching their team.

It is no coincidence that the funds of private capital they invested about $ 2 billion in sports assets in 2021 alone, and that figure will increase this year. According to an investment banker quoted by the prestigious American magazine: “It doesn’t matter if a company makes money or loses money. My clients have money and they think that having a sports asset is a safer investment than any other investment right now. “.

Pier Filippo CapelloSpecial Counsel a The cross and expert in sports law, he explained to Football and Finance: «Sports assets are limited in number, compared to thousands of financial instruments, so it is easier to get information and get an idea of ​​how the market is. In addition, even an investor who simply looks at them from the outside has access to much more detailed and detailed information on financial and industrial dynamics than an investment of similar value in other areas. For example, think of a fund that invests in a biomedical or high-tech development company: it’s hard for a fund investor to have an accurate and up-to-date idea of ​​how things really are, and even study the quarterly results in detail. , would have a very vague idea, and the information generated and filtered only by the company. It’s very different if he has invested in a sports team that is always and every day in the honors of the press “.

And in fact, statistics show that even in times of recession the value of sports equipment has increased, in contrast to many other assets. In 2009, for example, in the years following the 2008 crisis, the family Ricketts paid the record sum of 700 million dollars to buy the Chicago Baseball Cubs. Now the second Cubs Forbes worth 3.8 billion, or a yield of almost 450% en 13 years.

Last but not least, the number of searchers has grown significantly in the last five years: in 2017 they appeared in the Forbes ranking 2,043 with a heritage average of 3.75 billionin April 2022 the figure increased to 2,668 with a heritage average of 4,760 million. This obviously creates liquidity between large discharges and the possibility of investing. And if the bag gives little satisfaction, it is better to resort to sports.

THE SITUATION IN ITALY? BETWEEN COUNTRY RISK AND INVESTMENT

But if this is the situation at the United Statesthe image is also similar to Italy? Not really. First of all, European sport provides for the mechanism of descents I promotions and this can greatly affect the return on investment. Think about Parma I Genoa new U.S. properties were to have immediate declines. It is clear that not only is a year lost on the calendar but there is not even the certainty that after a decline it will immediately return to the top category, further extending the time to achieve a return on investment.

It is also useless to hide what is in country risk called Italy in sports investments. Stadiums can be built in any other European nation in a reasonable amount of time. Not in Italy and the risk of getting stuck bureaucracy it is remarkable. Just ask Bullet for example.

Despite this, however, the American propertiesperhaps driven by the favorable climate at home for such operations, they have invested heavily in our football. Football and Finance in fact it has calculated that the current shareholders come from North America they spent more 2.4 billion euros in Italian clubs in recent years, including purchase cost of companies e resources paid in the coffers of the teams.

But the question is: these investments they can be reasonably usable in the medium term? This magazine heard the main ones on this topic this week banker operating in the sector. Obviously they didn’t want to be mentioned either because some of them are working on financial transactions related to the world of football and therefore for reasons of opportunity they have preferred not to reveal themselves. But what emerged is a some skepticism about the possibility of making money. In particular, a banker who is very popular explained: “I still don’t understand how the funds can go back to football. If one analyzes the budgets rationally it is really difficult. Unless, like Elliott in the case of AC Milan, you find a buyer willing to pay a substantial price. So far no one was able to send in the perfect solution, which is not strange.

A disturbing scenario when you think about it during the week Vincent Mortier, Chief Investment Officer of Amundi Asset Management (one of the largest funds in the world), explained that the private equity industry has been transformed into a pyramid scheme that will generate losses in about three to five years. In fact, according to the manager, many operations were carried out exorbitant valuations and that private equity firms were on both sides of the transactions. “In some parts, the private equity market could be like a Ponzi scheme”said Mortier. “What we see is that the vast majority of transactions are currently between companies private capital. One privately held company will sell to another that will be happy to pay a high price as it has attracted many investors. In recent years, private equity has experienced a period of great splendor, because liquidity has abounded thanks to the possibility of borrowing at very low rates. In addition, many investors were disappointed with the returns on both the equity and bond markets, which offered poor real returns.

His was one reasoning general, but if it is forecasts they will also come true in football there will be some who will have a very bad time.

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