I have read the open letter by Red and White Holdings and let’s not beat around the bush: it reads like a Gordon Gekko press release. For those of you who are too young to remember, Gordon Gekko is the antagonist from Oliver Stone’s 1987 smash hit Wall Street. Charlie Sheen plays a young hotshot stock broker and his dad, Martin Sheen Michael Douglas* plays vulture capitalist Gordon Gekko. In the film, Gekko creates wealth by buying controlling shares in companies which are underperforming and then gutting those companies for their assets and specifically he buys a controlling share in a company called Teldar Paper, which he intends to liquidate because the value of the assets were worth more than the stock . This mirrored a practice at the time called corporate raiding, a practice whereby a person or group of people would buy a controlling share in a company and then sometimes liquidate them but more often simply make them more efficient by downsizing and other means.
The climax of the film takes place at a shareholders meeting where Gekko give this famous speech:
Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.
I read the Usmanov letter in the Gekko voice. I’m not saying that I think he wants to liquidate Arsenal, but like Gekko, I hear an investor who is appealing to the people to get behind his plan which will give you what you want — trophies — and him what he wants — more shares of Arsenal and for his Arsenal shares’ value to increase.
The thing about trophies is that we know how elusive they really are. Even the most expensive squad ever assembled in the history of football finished 6th in the League this year. The second most expensive squad ever barely eeked out the League title over the third most expensive squad. Adding another £100m in players to Arsenal would only make Arsenal the fourth most expensive squad in England.
Though, that might be enough (with Arsene Wenger at the helm) to push us over the edge into that elite group and truly compete for a top spot. That’s why, in the end, I am ambivalent about Usmanov’s letter. Sure, cynically, I read it in the Gekko voice. But there’s another part of me that thinks he might be on to something. A point I will elaborate on in the very near future.
*Weird because I watched the YouTube video of this speech before writing this article and the video said “MICHAEL DOUGLAS GREED IS GOOD” and I still got this wrong.
Um, pretty sure Gordon Gekko was played by Michael Douglas…
Good article.
Gordon Gecko was played by Michael Douglas.
Thumbs up, Tim. But Gekko was played by Michael Douglas.
His dad played his dad, a mechanic at Blue Star Airlines.
And yes, another strong post.
Hear Hear. Well said.
Remember another line from the movies : “Show me the money”
Write us blank cheque to fund RVP’s ambition, sign it off as a gift and convince us that your intentions are truly genuine Usamov.
Sweet nothings meant to divide and conquer.
gr8 post by the way! fans of arsenal fc should be open minded. New ownership could prove important to the direction the team is going down!
More hysteria.
Why is the team going down?
We are stagnant I grant you that but stagnant in a high place.
And we are consistent in that over achievement considering the money we spend vis-a-vis the competitors.
We need a push to move up just a couple of rungs of the ladder to the top. The summit is not quite as far as it seems (Bearing in mind we gave the Manchester clubs an 8 game handicap last season)
And we are becoming copetitive in the market with our purchases.
32m for an overhyped Belgian player vs 20m+ for two strikers who are top of their respective league.
Which would you rather pay for?
There is nothing fundamentally wrong with our business model and the accusations labelled against us that we underspend (we have spent 75m+ since last summer thus far) are an excuse that squads like Montpellier and Dotrmund have proven are empty, much like Usamov’s rather foggy plan.
Look forward to reading your upcoming assessment of Usmanov’s letter. I know the parallel drawn here is more of a rhetorical than anything else, as I’m sure we agree that football clubs are quite different than “normal” companies (including the mechanism by which shareholder value is ultimately delivered). I find Usmanov’s letter to be quite persuasive, actually. You are of course correct that money does not guarantee results, but of course there is a very high correlation factor. And “top” football clubs are spending ridiculous sums of money these days. The question I guess is what does Arsenal FC want to be? If the ambition is to win trophies, then the reality is that we need to spend. If we can’t spend because of financial constraints, then either we loosen those constraints through a mechanism similar to what Usmanov proposed (or more drastic) or Arsenal needs to confront the reality that it will be increasingly unlikely to compete for trophies in the modern game. And as such, we can expect to see a further exodus of ambition-driven players from the Arsenal.
The wage structure is the issue.
It is being addressed but it does not happen overnight.
Unless we want to put the long term viability of the club at risk by being beholden to debt and a billionaire owner, there is only so much flex we can put in to compete with what the money rich clubs can offer.
But FFP is coming in and they will ahve to clean their act up.
More importantly, this does not bear total correlation to on field performance.
United have put fairly little into their club in recent seasons and have still been competitive.
Well said, James.
As much as I dislike Kroenke and his business model, I’m not convinced about Usmanov either. Neither of them are Arsenal fans in any real sense of the word. Usmanov is an opportunist and a cunning businessman.
For instance, in his letter to Kroenke, he claimed himself to be a loyal supporter who doesn’t want to create conflict. Yet, he publicly sent a letter when he knew exactly what an open letter like that would do. There is no hope of them working together and Usmanov knows this as well as Kroenke.
In other words, I don’t see integrity with Usmanov. This is someone who can easily make positive investment but can also drive a football club to the ground.
I have a lot of doubts about Usmanov as well, but I do think it’s a bit unfair calling him out for fomenting “conflict.” The reference to “conflict” was only there as a response to comments made previously by Gazidis. I don’t know what other options he has — he has repeatedly attempted to contact the board and Kroenke directly and all of his attempts have been rebuffed. Kroenke refuses to meet with him. And Usmanov is the 2nd largest shareholder who has spent literally hundreds of millions of pounds to buy 30% of the club! He has little to no recourse, so to me, taking his views public actually makes a lot of sense. At least he is showing that he cares and has ideas, unlike Silent Stan. Yes he is a total opportunist, but that is okay by me.
I’m gutted that RvP is leaving, but I’m more gutted about what his leaving may represent and the potential knock-on effects at the club. Yet another captain leaving. Yet another world-class player leaving. There are, in my opinion, some real problems at the club that are worth discusing. I, for one, am glad that Usmanov is contributing to the discussion, and as evidenced by most of the discussion on this board, it can be a civil and informative conversation.
Yeah, I get what you’re saying that he might be onto something and I can sympathize with gooners wanting high quality squad additions. However, I’m not comfortable with the idea of letting a guy like Usmanov steering my club. His past is shady to say the least, at least if you want to believe former British Ambassador to Uzbekistan, Craig Murray. If you haven’t yet, check out what he wrote about our second largest shareholder in 2007: http://www.craigmurray.org.uk/archives/2007/09/alisher_usmanov/
Then you need to check out the history of PHW Eastern European partner who has made him a lot of money. Just as shady as Usmanov, if not even more.
Strange bedfellows do meet when greed beckons and a scoundrel easily becomes a Saint when he is lining your pocket. Remember what he said about Kroenke at first? Huge turnaround know.
Something to think about my friend.
I never said PHW was a saint (though I confess to knowing nothing about his partner that you speak of, if you care to elaborate on that you’d have my thanks), I merely stated one of my reasons for why I wouldn’t want Usmanov joining the board.
And yes, I’m aware of the turnaround by Hill-Wood regarding our American owner but you’d have to agree (well, you don’t really) that Kroenke certainly appears to be the lesser of two evils. If Arsenal are going to be owned by a billionaire I’d rather it be someone who isn’t an alleged gangster/rapist/killer.
I’m looking forward to your next post Tim.
On Usmanov, for now, the only think that i can think of if he finally have the majority of share and pump money into our club is what Hleb said in your post yesterday. We might be having a higher ground to compete the big spender, but in my mind right now, i just can only think of that. We compete, but it sure as hell won’t be as fun as we’re competing within our means.
Future conversation:
A: “Remember when we compete within our means with Kroenke and the gang?”
B: “Yeah, we desperately trying to compete but we can’t, and have an x years trophy drought. Now, we collect trophy for fun. Our history appeal more for the players, plus we have the power to offer wages as good as the other big spender.
A: “So, true.. It’s all thanks to our supreme owner Usmanov. Without him, we couldn’t have a historic quadruple and collect this many trophies.
B: “You know what, if there’s someone or something bigger then the club, he is. If he’s gone, we’re also a gooner..
A: “(Laugh)”. You know i sort of miss those feeling when we feel like we’re the only club who do the right thing.
B: “Yeah, i think we just could do it if we want. Look at Montpellier or Dortmund at the time.
A:”Yeah, what if.. Now we’re just like the rest of the club whose history are written with money. People only talk about how much trophies we won when the great Usmanov come. They don’t know that we have past history..
B:”Too true..”
Your mention of Dortmund and Montpellier are poignant.
So ample prove that you don’t exactly have to spend silly money to put one over a bottomless pit club and win a title these days.
These are all excuses to see billionaires cash in on a percieve value to a club. Nothing more.
You don’t need marquee value names to compete as MOntpellier have shown to PSG and Dortmund have to Bayern.
Newcastle spent a fraction of what Liverpool and Chelsea have over recent season and finished above them. Let’s discount the pitiful Carling cup win and the fluke CL win (since league placing tells a more accurate story of your overall competitiveness)
We are in an in between position where we can afford to attract (notice not pay for but attract) quality talent, have a strong academy and still make do with more humble ones that Wenger is for most parts ussually able to extract good value from.
And our wage structure is changing to accomodate this with evidence of movementout of the club of some of our under performing/over rewarded vice presidents (players)
It would have been great to see RVP stay on as the two new strikers are in debutant year but if he leaves, we have ample resource to continueto reinforce the squad and push for the title next season.
Nothing is absolute in football, there are no guarantees that spending huge sums will win you trophies either. But we are in a strong position regardless of RVP staying. I don’t see what the furor is all about.
We have spent 55+m last season and 20+m thus far this summer on players coming in. If that is not a sign of intention to compete, I’m not sure what is.
Let’s see Montpelier compete year-after-year. The reality is that they won’t. PSG will only get stronger, and Montpelier will get weaker. They have already lost Giroud and other such as Yanga-Mbiwa and Belhanda will not be far behind. The Bundesliga has a 50+1 ownership model, which lends itself to more competitiveness. The Premier League is a different beast, where Chelsea has spent over 1bn. Man City has spent nearly that amount.
Yes but we are not Montpellier. We have far greater resources.
Seen the United teamsheet lately?
I don’t see any world class players besides maybe Nani and Rooney. They haven’t spent much either in last seasons.
The most effective forward for them last season IMO is an unkown chap from the academy whom they paid peanuts for.
Kagawa their recent purchase is no more than either of Giroud or Podoslki or for the matter lasts easons Gervinho.
Your point exactly again?
Chelsea may have won the CL title but their league position suggest that they are otherwise slipping.
Considering the money they have put in and the team depth that they have, they aren’t even able to punch above a much more frugal Newcastle.
Interesting that you point to Montpelier. It does show you can occasionally win without spending lots of money. But can you do it consistently, rather than once a couple of generations? Considering WE just bought their best player, what do you their chances of repeating that feat are?
Is anyone else crapping their pants at the moment? As much as we all might despise and/or distrust Usmanov, I do think the club need to move in the general direction he’s espousing. The value to owning a football club is prestige. If you’re investing in a football club to dividend out the 10% net income margin every year, you’re barking up the wrong tree. We don’t root for Proctor & Gamble or Pepsi-Cola on a Saturday morning and that’s why they have their profits to sleep on at night. If you own a football club, the value of that club hinges on the prestige of that club. When you buy a $10MM Picasso, your expenditures aren’t done after you turn the check over to Sotheby’s. No, you pay insurance, you pay security, you might even part with it a few months out of the year just to keep the painting relevant to the viewing public, all in the hopes, presumably, to sell that Picasso for $20MM in 10 years time. Similarly, particularly in the age we’re in, particularly in this environment the FA has allowed, if Kroenke’s going to want his $1 billion art work to be a $2 billion art work, he might have to see the club lose the occasional 10MM quid in a particular fiscal year. If you think a club can win the Premier League trophy without stars, then a) I disagree with you; and b) the club is moving closer and closer to getting to test out that theory for itself. If you’re like me and feel you can’t win without the marquee player or players, then, in addition to occasionally losing a few MM quid or breaking even, god forbid, in a particular fiscal year, we need to quickly reverse course and stop paying each and every member of the club in the tight 50K to 90K per week range. If RvP wanted to stay, you mean to tell me we couldn’t double his weekly wages when we had all this money tied up in so much that was unproductive? We don’t have to go the City route or the Chelsea route, but we also can’t go down the current path. I’ll be there supporting AFC til the end, but I’m not going to apologize for dearly wanting the club to win trophies and the imagination and admiration of the footballing world.
I’m not quite sure I get your fine art analogy.
In the case of the Dutch master in recent news, his value is only going to go down.
Why pay over when clearly your money will be needed to finance squad renewal down the line?
If you borrow money from soeone to overbid for your piece of art, you will most likely have to pay him back. The value of the art piece being depreciated (since we are talking about an aging football player) stays the same.
So you’re making a loss.
Unless your benefactor wants to be charitable (in which case I have no problem) and sign a blank cheque as a gift to you (and USamov is a business man), I find it highly unlikely that you will enjoy much dividend. (no pun)
Totally agree.
What if that’s what Usmanov want. Base on what he promises, he seems to want to get us to City or Chelsea route. No inbetween route. Then it goes to your logic, he get us into debt (City and Chelsea always got that for these past years) to make our club more prestige. Then in 10 years time, he sold his shares. He get a lot of profit. Remember, he is a businessman.
Greed is good if you actually have a plan to execute it.
What plan does Usamov propose that can deliver unbridled funds and yet keep us in the blue without going into debt and someone’s pocket?
Don’t be so easily fooled by empty promises.
In which case what you will be getting is someone who can move the money in between his own vice presidents so to speak when he wants to.
This is shit stirring nothing more. Usamov is using you lot as a divisive measure to gain levargae in the club and ultimately more shares.
He is using it to destabilise the club for his own purpose.
Now you’ll have to ask yourself is that what you might truly want? A Russian oligarch used to getting his way without recourse to check and balance.
Already he is discrediting Gazidis to move one piece of the puzzle out of the way.
As you clearly state, we are on fir footing despite the recent RVP ‘departure’, and there seems little reason for us to go into hysteria since we are in the CL and have hedged our bets with two proven strikers from the continent at good price I might add (compare what we paid for two strikers who have scored a ton of goals last season and entering their prime years to a particular untried Belgian @32m)
Asanother famous movie line would suggest a riposte to Usamov : “Show me the money”
If he was so evidentlyconcern for the club, then let him write us a blank cheque to fund the diffrence that would convince our hitherto cpatain that we are a truly ambitious club. Make it a gift as goodwill to his intentions. Otherwise, honestly, shut it.
Silence is gold.
AFC is a business not a charity. Usmanov would be an idiot to write a “blank check” to the Club, particularly a Club run by people who don’t return his phone calls or really want anything to do with him, despite his 30% ownership. Usmanov is many things, but not an idiot.
So you know it isn’t a free lunch.;)
R&W is a side-show. The true villain in all this is Schrek Mansour. My view is that Arsenal have to become financially superior to Man U and/or Chelsea to change their role as deer in the Etihad headlights. (By the way, rearranged, Etihad spells iDeath.) And even that might not be enough, so long as their stadium is named Emirates.
To succeed, Usmanov would have to out-Roman Abramovich and out-glaze the Glazers to such an extent that those at the iDeath would look to spend to cripple one of the other two of the top four.
Funny you should mention Man U in the same sentence with words ‘financial superiority’. I know what you mean. Man U has just released an application to the NYSE that proposes to sell class A shares to gullible investors who might be interested in the ‘prestige’ of owning non-voting shares. What the Glazers will do with those investments is anybody’s guess but they do that minor matter of a 450mil debt. Invest in a club whose commercial interests are more important than the product on the field.
Financially, Man U will be just fine. Commercially they are leaving us and most other clubs in the dust. This equity offering will allow them to pay off some expensive debt, thus freeing up more cash for players. Read the Swiss Ramble’s last report on Man U; they’ve got a lot of debt, yes, but their EBITDA, or operating profit before interest, taxes and non-cash depr/amortization is massive and more than enough to both service interest and put a top 3 club on the pitch every season. If we’re to start getting more of that commercial revenue that drops right to our bottom line, we need to ensure we have stars on the pitch.
On United,
who have they bought in recent years? Smalling? Jones? Kagawa?
Whilst they may have had to pay inflated prices for home grown, none of these players are any more illustrious than Giroud or Podolski or for that matter Gervinho or Arteta.
And yet they have been succesfully competitive in last season right to the very end carrying two good for value old players in Giggs and Scholes.
Thier most valuable player in fact last season for me is the chap up front I can never remember his name who was from their academy and cost them peanuts.
So what’s with the theory about having to sign over inflated marquee names to compete in the PL again?
Why would United have to buy players during the summer after winning a trophy? I’d have loved Kagawa on our squad and he wasn’t cheap You ask who they’ve bought? Young wasn’t cheap, Valencia wasn’t cheap, De Gea wasn’t cheap, Jones wasn’t cheap.
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Every time there is conflict at the club, along comes Usmanov with another attempt to further destabilize the situation. The question I would have for Usmanov would he let RVP hold ‘his’ Arsenal for ransom? I think not. So stuff it Mr. Billionaire. In fact why don’t you take over a club with ‘ambition’ like Sp**s and turn them into world beaters you claim to want.
Interview with RVP: http://www.ft.com/cms/s/2/49f4621a-aab2-11e1-9331-00144feabdc0.html#axzz1zrm2ayTr
Also check the Beautiful Groan’s take on how the RVP pr disaster may have come about.
And always remember this, the club comes first before the player no matter who they are. In 100 yrs, the player will be dust in the wind but the club will endure unless that club’s name is Rangers.
Spot on.
Sonnet to follow.
Thoroughly disingenuous of him to say that he is trying to help the club with coming out at this point (surreptitiously in public) with criticism immediately following the RVP statement.
Lamentable.
Tim, I hear you, but that most expensive team in the world won every possible trophy during those 6 years.
City are also on their way to becoming another footballing dynasty, with or without our Captain.
Real and Barca are also in debt, but they are collecting trophies like toys from babies.
So, I can not, in any way, be convinced that money doesn’t bring you trophies.
And I also can not see a future where Arsenal spend more money than they currently have (although nobody really knows if this is true or not) and suddenly they become bankrupt, but I could imagine that the chances for trophies will be much, much higher.
So, the only thing I could connect the Greed from the title would be with the greed for a profitable business, instead of footballing success.
Spain is a two team league.
But Dortmund’s back to back wins and Montpellier’s recent success might suggest your trend is a case of what you want to believe in.
I don’t see big spending by United either in recent times and yet they have been competitive to City right up to the final whistle.
I’m afraid this whole argument that big spending guarantees success does not hold water.
City were lucky that we were out of sorts start last season and that United slipped up in the final game. Otherwise, for all the money they spent, they could have easily ended up with nought.
@teampossible…yeah it’s more a question of increasing percieved value’ in the pportfolio rather than any real science in achieving title success.
Usamov’s agenda is blatantly clear in the timing of this ‘letter’
Tim,
You never cease to surprise. I’ll wait with interest to see what you have to say next, because really, as far as I’m concerned, Usmanov is somebody I would never want in control of Arsenal.
-1 eh? It’s not like I called him a whale blubber covered, slimy, vomit-eating, creepy, nasty, fat cunt, with a nose full of boogers, who’s a burden on the planet..Or did I? Hmmmm
I’m enjoying reading the back-and-forth in the conversations above (and particularly the civility).
I can’t pretend to know anything about economics or how club finances work, but my impression is that you do need money to be successful… It sounds obvious, but then folks rightfully bring up the cases of Montpellier and Dortmund, both recent winners, and even Arsenal, who finish in the top four despite being outspent in every transfer market by clubs around and below them.
While such examples do prove the point that money is no guarantee of success, I’d say that money always puts you in with a shout, and, more often than not, a better shout than those clubs that don’t or can’t spend. Indeed, I think we should dispense with the word “guarantee.” Nothing is guaranteed, but I’m sure we’d all agree that the clubs which will be successful on a consistent basis will be City, Chelsea, United, Barcelona, Real Madrid, and soon, PSG. All those clubs have one thing in common: They throw silly money at squads. (Yes, Chelsea finished 6th this season, but they also won the Champions League…)
I’m happy to support Arsenal no matter what happens, but–with the way things are in football right now (and I’m dubious about the long-term existence and even short-term effects of FFP)–I don’t expect us to be successful until we start spending money on players and wages comparable to that of the top teams in the world. So, I’m definitely in the money:success correlation camp. An occurrence like Montpellier in Ligue 1 is an anomaly.
Maybe in ten years’ time, when the club is free of debt, will be able to compete with clubs like City or Chelsea for players and wages, and, hence, for trophies as well. That’s a big maybe, and in the meantime we should be prepared for the annual loss of our biggest players.
2006: UCL final
2007: Carling Cup final
2008: UCL-quarters (shit refereeing)
4 points behind ManU (shit refereeing & Eduardo)
lose 3/4th of midfield.
2009: Fa and UCL semi final
2010: blah
2011: in shout of 4 trophies till february where it all went to shit
2012: lose 3 best midfielders.. finish higher in the league..
The point is, we’ve always been with a shout of trophies. The perception has been created that we never challenge. That isn’t true. We challenge, but we can’t seem to get over the line. Is that down to signings? In some part yes, especially when paired with injuries. For the rest, I’m not so sure.
Money helps. Of course. But everything comes at a cost. Money too. I don;t think we’ve ever been very far. We’ve had more than our fair share of bad luck in the form of upheavals, misfortunes, injuries. shit decisions, and of course, the odd bad game under pressure. Will money make that go away? Perhaps. But what else will it take away? I honestly think we are good enough to win without some billionaire throwing money at us.
No, I get that. I do. Moreover, I appreciate that there is a real sense that we should consider Arsenal a highly successful club. But I guess I’m one of those that believe that money would put us over that edge. I think of the 07/08 season, for example, when we were only 4 points from winning the title. People often speculate what might have been had Van Persie been fit for that season–would he have scored in those two or three draws that made it impossible for us to win the title? We can’t say, but my view is that had we another top quality striker at the club that year (a luxury for us that we can’t afford, but a commonplace at clubs like City or Chelsea), we’d have crossed the line (or a top quality defender, or whatever suits, etc.).
We may consistently challenge, but we also consistently fail. When I talk about a money:success correlation, I’m talking about consistency here, not guaranteed trophies.
We are consistent.. Strangely enough despite consistently having to suffer the earlier said bad luck, or just upheavals. I guess money would counter the upheavals at least. But how much money? Do we really want to get into a battle of the wallet with the rulers of a nation? We offer our players 150k, they’ll offer 250.. Someone else will come along if they so desire and make it an ever increasing spiral until the bubble bursts. It’s not a doomsday scenario, it’s just not worth it.
The money is coming. A few more years down the line, with some new (hopefully) bumper deals, we’ll be in a far better position. But yes..If ManCIty want, they can keep buying our best players every year. They can also do that to Chelsea and United by the way. It’ll just be more expensive for them. But they CAN. Maybe once they’re satisfied Arsenal has been damaged enough to stop being a threat to them, they will. I don’t think there’s need for massive upheaval. Change yes. Not a revolution.
I agree with you that an “arms race” with the ruling family of Abu Dhabi is a losing proposition. But I can’t help but feel that there is some kind of alternative to doing absolutely nothing in terms of additional investment (which is of course the status quo). For example, I don’t think that a rights offering, but example, would be such a bad thing. If we did a 100m GBP rights offering, it would represent ~10% dilution. Even if Usmanov took up the whole offering, he would still be a minority shareholder, and the Club would be able to use those funds to either pay down some stadium debt (which I understand would not run afoul of pending FFP regs) or other purposes, including being able to at least try and retain our top talent. I think we can all agree losing our best players every year is indicative of a problem.
I also can’t help but feel (admittedly without relying upon any “facts”) that there is a “window” here to do some significant spending . Yes, I know that this spending that we do now will be taken into account for the FFP calculations, but I can’t imagine that we will be in any worse shape than many of our rivals, who are already deeply in the red. And considering that we will be negotiating our big commercial deals soon, it is essential that we try to be as successful as possible in the next few years. I’m cynical, as are many, about the ultimate impact of FFP, but I do feel that now is the time to do some spending, just in case there is a subseqent clampdown.
Would a rights offering be enough for us to compete for trophies? Maybe not. I guess it would be just a temporary remedy, but I still think it’s worth a shot and better than nothing.
“but” example = for example
Paying off the stadium debt comes with heavy penalties. I don’t know how much those penalties are, but perhaps, with about a 100m pound debt remaining on the stadium loan, it might prove too much of an additional burden to pay off the 100mil, and the penalties in one go. An equity sale is an option, but a decision that I would trust the board with. Usmanov quite clearly stands to gain from it, and that’s why he keeps proposing it. Arsenal’s gain, is less obvious. Usmanov wouldn;t dilute his stake if he were in charge either.
And I agree with Santori here. If Usmanov only wants to help the club pay its debts, spend in the market, and he promises he’ll do it when in charge, there really isn’t anything stopping him from doing it now. Unless he wants to be in charge, take us off the stock market, and do what he will with the accounts behind the scenes, to take money out of the club. By the way, it’s been less than 10 years since Abramovich started this craziness. We have no idea how things will turn out with this model. Maybe the billionaires are here to stay and operate clubs like franchises in US sports. But for that, football has to be a profitable business. Which at this moment, it doesn’t seem to be. Tax breaks, money laundering, advertising, gaining legitimacy and prestige are what they are doing now I think. The opportunity and need for those sort of things eventually goes away.
Prepayment penalties are typical in credit agreements. I don’t actually know what the prepayment penalties would be in this case, so I guess it’s possible that it’s not worthwhile to pay down the debt early. In any case, the amount of debt the club has now and its current amortization schedule seem totally manageable, so I agree that paying off the debt early may not be the best use of proceeds from a rights issue.
And I disagree that there is something more that Usmanov can do now that actually makes sense from a corporate finance perspective. A rights issue is the most sensible way for Usmanov to put in capital. And from the club’s perspective, they have a lot to gain, as they would take in almost all of the capital and be able to utilize it. From a governance perspective, very little would necessarily have to change, as Kroenke would still be the majority owner (by far), even if he didn’t put in any money in the rights issue.
Oh and about FFP.. I’m cynical about it too. At best I see it as a weak attempt at showing that they are aware of a problem and fixing it. AT worst, it’s a way to keep the elite a closed house. But you know what.. I don’t see Uefa kicking out the likes of Madrid, Barca, Chelsea, maybe even City from teh CL.. Though, they MIGHT decide they want to make a show of their seriousness and punish City. City don’t have a large fan base just yet.. But even if that doesn’t happen, I don;t think the money gang will be allowed to roam freely. They will be forced to get more and more creative with their accounts. Because as much as Uefa are cowards when it comes to big money, if the likes of Arsenal, Liverpool, ManU, along with some Spanish and German clubs start to get upset about the rules being flouted, Uefa will feel the heat.
Tim, how could you fall for it?
Companies (Jersey) Law 1991
Article 69
Damn it, I will cut and paste
69 Company’s name to appear in its correspondence, etc.
(1) The name of a company shall appear in legible characters in all its –
(a) business letters, statements of account, invoices and order forms;
(b) notices and other official publications; and
(c) negotiable instruments and letters of credit purporting to be signed
by or on behalf of the company.
(2) If a company fails to comply with paragraph (1) it is guilty of an offence.
70 Particulars in correspondence, etc.
(1) The address of the registered office of a company shall appear in legible
characters in all its business letters and order forms.
(2) If there is on the stationery used for any such letters, or on the company’s
order forms, a reference to the amount of share capital, the reference shall
be to paid up share capital.
(3) If a company fails to comply with paragraph (1) or (2) it is guilty of an
offence.
Revised edition – 1 January 2012.
Notoverthehill, I love you dearly, and you’re an incredible gooner, but you have to be the most cryptic poster I’ve ever seen. Please, and in all sincerity, elaborate on this a bit, ’cause I know you know what you’re on about, and I know that it’s going to be pretty solid, but I haven’t the faintest, I’m afraid.
To everyone else, thank you. I know of no other blog where such an explosive issue could be discussed with such intelligence and decorum.
I don’t really understand the frustration with Kroenke. He doesn’t own the club, he is a majority shareholder so it seems obvious he won’t ‘run’ Arsenal the way ManC and Chelsea are run. In fact, when I think of Kroenke, I recall a statement made by Tim, ‘Meet your new boss, same as your old boss.’ Kroenke hasn’t actually changed the way the Arsenal is run. The decision to build Emirates is ultimately what changed how Arsenal spend money, so maybe the fans should raze the stadium instead.
One of the more sensible things a British journalist has said about the so-called crisis at Arsenal:
http://www.dailymail.co.uk/sport/article-2169935/Arsenal-trust-Arsene-Wenger-Robin-van-Persie–Des-Kelly.html
..and it’s from the Daily Fail!!!
…and one of the most nonsensical things a British journalist has said:
http://www.mirror.co.uk/sport/football/news/brian-reade-arsene-wenger-looking-1134934
In this case, the Mirror living up to its shit reputation.
Nasri won nothing. He joined a team that won it for him, and came within a Man U choke of being the butt of all the jokes this offseason. Cesc won nothing. He was carried on the coat-tails of an established Barca side, which ultimately came up short. RVP has won nothing, and is quitting to join the likes of Cesc and Nasri to let other players win him a trophy. Congratulations, you pathetic weaklings.
I will never respect them. I will never slander Arsenal because of their hollow “triumphs”. As they said when Lebron joined the Heat… Michael never would have joined those guys, he wanted to beat those guys. It’s one thing to be a skilled player, and all these guys clearly are. It’s another to be a winner, to earn your trophy, and Cesc, Nasri, and now RVP have shown that none of them have it in them. I love Arsenal in large part because they do it the right way, in the face of the cheating refs, the disgusting shaykhs and oil billionaires, and the ridiculous English popular opinion about what Football should be (fouling, cheating, and going after the most money). If RVP chooses to go to Man City, or Juventus, it merely shows him to be less a man than I thought him to be. It changes nothing about Arsenal, Wenger, or my support for the team.
been reading so many thoughtful comments here and everywhere concerning Arsenal and RVP and all the rest, words keep repeating, like love, trophy, ambition, money, history, fans, future plans etc. etc., has it occurred to anyone that there’s just one tiny word, NO not F… HONOUR my friends, honour. What’s such big deal with winning trophy with glory. I’ll give my nonstop standing ovation to the one player who would put honour before everything else on the pitch, be it win or loose.
sorry, ‘loss’
I don’t think it’s a binary proposition, despite the media’s efforts to caste it as such. I don’t particularly like Usmanov, but I think he’s actually proposing a more middle of the road solution with a one-off rights issue to raise £100m in equity (not debt). Further, a bit of scenario analysis suggests that it’s the most logical, and perhaps inevitable approach.
1) To get the big sponsorship deals that we covet in the near future, we’ll need a degree of success. Not only is success highly correlated to spend, but so too, is the amount a sponsor is willing to pay with a club’s success. Brands pay to a) gain exposure to a large audience & b) be associated with a favorable trait (winning). Essentially, it takes money to make money. This doesn’t mean £100m invested every year, particularly as we have a solid core, but a significant investment now might produce good returns in a couple of years.
2) Betting the farm on FFP, which Kroenke/Gazidis seem to have done, is a big risk. Sure if they’re right, the payout is huge, as only Arsenal and the German clubs can currently achieve a high level of success while balancing the books. But UEFA has 6 punishments to chose from, and can you see them handing transfer bans or kicking teams out of the UCL when they’re the Spanish & English champions (and possibly 2nd & 3rd as well)? They’re more likely to chose a ‘slap on the wrist’ punishment and let those clubs slide, leaving Arsenal languishing on the cusp of qualification every year. Yes, Rangers & Man U are a warning, but good management to this point means we’re not even close that issue.
Thus, finally, look at the outcomes: a) The Montpellier – we can win trophies in the near term, and line up decent deals to fund future success (if the club re-invests that money) – Low probability (particularly as clubs like Sp*rs may invest up to £100m in new players this summer, and the league is increasingly more competitive). b) The status quo – continue to qualify in 3rd/4th, only working capital investment, moderate sponsorship deals. Likely, so long as someone as capable as Wenger is at the helm. c) The Liverpool – Fail to qualify for UCL in a year, necessitates income from elsewhere to balance the books: possible by player sales, or alternatively via an injection of cash from the ownership; decreased value of commercial deals. Growing probability, especially post-Wenger. We’re flipping coins lately to see whether or not we qualify, and history tells us good managers are rare.
Ultimately, a cash investment in the club seems a likelihood, so why not do it now, invest in the squad with the hope that it creates a virtuous circle by generating more profitable commercial deals, and an increased ability to attract top talent? Rather than wait until it all goes south – a situation which is harder to recover from, and may require a Man City size investment to return the club to the top echelon.
like you said its really high time the club (the board) comes up with some sort of decisive action to remedy the current situation before it becomes too nasty and unmanageable. We don’t want to hear any boos and jeers towards the players like what happened last season.
Empty words is the last thing the fans want to hear. In this regard Arsenal needs a new PR guy.
An equity sale is not something companies normally undertake. But in any case, Usmanov proposes this, only because he knows Kroenke will not accept spending more money to own what he already does. It is a move designed to make Kroenke look bad. If Usmanov was in charge, and on the board, he wouldn’t agree to that proposal either.
Equity sales are totally normal for companies to undertake. They are never decisions to be taken lightly of course as they have the potential to cause significant shareholder dilution. I don’t disagree that one of the reasons that Usmanov is proposing this is to make Kroenke look bad — Kroenke will almost certainly not invest, whereas Usmanov has the potential to underwrite and potentially take up the whole thing. Club will get a lot more cash, Usmanov will get more shares, but perhaps most beneficially for Usmanov he will be perceived as the shareholder who is actually willing to put his money where his mouth is. And that may not be such a bad thing for AFC.
I’m wondering the merits and demerits of a RvP vs David Villa+cash swap deal. Yes I know Villa has been injured for a while & that he is 30 but before his injury he was every bit as good as RvP, imo.
If Barca really want to offload him & put in a bid for Robin then this might suit all parties.
Tim
What puzzles me is the sarcastic comment made about Gazidis cold calling MegaFon (Russia) regarding sponsorship etc. If Usmanov owns over 50% of that company and is truly interested in helping advance the Arsenal’s finances surely he would have already put this proposition to Gazidis and presumeably offer to use his influence to get a satisfactory deal. It is well known that the Arsenal’s commercial revenue is woeful compared to other leading clubs and you would have thought that with Usmanov’s various global interests there would be any number of commercial opportunities that he (Usmanov) could facilitate to the benifit of the Arsenal. Am I missing something ?