Football clubs seek an improvement in their financial position through stock market listing, but the latest analysis conducted by our experts shows that this operation is not always successful. Indeed, the analysis indicates that the performance of football clubs on the pitch has stagnated, if not even declined, following their IPOs.
Main results:
IPOs do not boost the performance of football clubs on the international scene, such as the UEFA Champions League; only clubs in smaller local leagues appear to benefit from the IPOs
Funds raised through share sale do not tip the balance for tier-one clubs, whose players already draw hefty salaries
Larger clubs may even be limited in the long run, due to spending and debt obligations to their shareholders.
IG’s analysis showed that football clubs that went public did not experience major sporting achievements or financial gains. Indeed, according to a study by the International Journal of Sport Finance, most clubs appear to have performed worse in their respective divisions and leagues after the initial public offering (IPO) than they did before.
It’s not just domestic performance that suffers; an IPO doesn’t even boost performance in international tournaments, such as the UEFA Champions League.
One explanation is that the funds generated by IPOs are often used by companies to restore balance sheets, rather than to add players to the squad or improve the club’s infrastructure. Larger clubs, which have to pay high salaries to their players and meet obligations to shareholders, have found that in terms of financial clout, an IPO does not tip the balance significantly.
According to the analysis, only smaller clubs seem to see an improvement, albeit modest, in their on-pitch performance after the IPO.
Football club stocks vs the general stock market
Football club stocks have consistently underperformed the stock market as a whole. By way of comparison, the 10-year return on Manchester United shares (listed on the New York Stock Exchange) as of May 2023 is 7.3, while that of the S&P 500 index is 146%.
Despite the obvious drawbacks, some of football’s biggest clubs, such as Manchester United, Juventus and Borussia Dortmund, have opted for listing over the last quarter century.
What drives football clubs to go public?
Axel Rudolph, Senior Market Analyst at IG, commented: “Football clubs can decide to go public to raise funds to acquire new players, improve stadiums or reduce debt. However, the decision is often determined by the desire to ‘take the defense’, ie reduce debt rather than invest in growth”.