Here’s something that I don’t understand which maybe some of you can help elucidate. How is it that the Arsenal board, who personally profited massively off their shares, have largely escaped criticism for taking money out of the club?
Using round numbers:
- David Dein bought 16% of Arsenal in 1983 for £300000 and sold his last tranche (14%) to Alisher Usmanov for £75m in 2007. At one point, Dein held 41% of Arsenal’s stock and between his first purchase and his last sale, he made millions more off selling various portions of what he had to other investors.
- Lady Nina Bracewell-Smith married into an Arsenal family with the Bracewell-Smith’s history at the club as charimen and board members dating back to 1948. She sold her shares to Kroenke Sports Enterprises (KSE) for more than £115m.
- Danny Fizsman was a friend of David Dein and bought his first set of shares in Arsenal back in 1991. Like Dein, his holdings fluctuated from 8% to 24% and before he sold his final tranche to KSE for £117m he had already made tens of millions from sales of his stock.
- Let’s round off their sales and say that just between those three Arsenal board members, they sold their shares in Arsenal for £300m and that of that £300m, £250m was pure profit.
Now, let’s talk about shares. Once they have been issued and bought for the first time, shares are just a division of the capital in a business. But that initial offering of shares is almost always a means to raise capital for the business. Similarly, a rights issue is a way to issue new shares in a company and generate more capital but only if the company is worth it, as Man U supporters are finding out.
You may have heard once or twice Peter Hill-Wood proudly proclaim that t he board has never taken dividends. And it’s true because they didn’t need dividends when they have £250m in their pockets. You may also have heard me say that “they (Dein, et al) took money out of the club” and I stand by that because they could have put the money back into the club. But they didn’t.
The simplest thing that any of those three could have done was just given half or even a portion of the money back to the club that they so love and to the fans who enriched them. This could have even been done as a trust that only goes to player purchases or something, which would ensure that Kroenke didn’t just hoover the money back to Delaware.
They also could have done a rights issue and there’s no telling how much money that would have generated for the club. I imagine the bidding war between Kroenke and Usmanov would have been very intense. Dein had already sold, so he would be out of the picture and would have to donate his money back into the club on his own. But those two English members of the board who sold their shares exclusively to Kroenke could have done a rights issue and generated hundreds of millions in capital for Arsenal.
I hear fans say that players are greedy when they want an salary increase of £2m a year. The argument against it is that these players are rich enough, they don’t need that extra £2m. But why isn’t the same true of Danny Fiszman who had sold his diamond business for £150m before he sold his Arsenal stock for another £117m. Or Lady Nina, who married into the Arsenal family, who was already wealthy, who has a peerage, and who paid zero pounds for her shares? She is now one of Britain’s wealthiest citizens. How much money do these people need? When do we question their love for Arsenal in the same way that we question “Robbing vain Per$ie”? When do we start using pound and dollar signs in Danny £i$zman’s name?
The answer is that for some reason we don’t. In fact, it’s kind of taboo to even mention how much money those folks took from Arsenal. Which you will see here in the comments on this post.
I have no problem with people making money off their investments, I have no problem with Arsenal being run responsibly, and I have no problem with Arsene Wenger’s statement that despite the team’s value shrinking year after year Arsenal still has a chance of winning the title.
But unlike a regular investment, Arsenal is more than just a business. People don’t have the same sentimental ties to Pepsi as they do to Arsenal. There aren’t thousands of Pepsi bloggers out there pouring millions of hours of work into various Pepblogs. So, when an Arsenal shareholder cashes out and takes £100m it feels a lot different to me than when my mutual fund made profits off shares in Pepsi.
Similarly, I think the club should be run responsibly and with an eye to the future. If Pepsi goes out of business, there would be a momentary reflection on its history and then people would go out and buy Coke. But if Arsenal go out of business it would be the loss of one of the biggest teams in Europe and a huge tragedy for millions of fans.
And lastly, Arsene is right, any team has a chance of winning the title. The question isn’t whether Arsenal have a chance or not it’s what percent chance they have and right now, without a major investment in the club in the form of quality players, Arsenal’s chance of winning the title is very small. Investment, I might add, that would have put world class players on the pitch and might have enticed Robin van Persie to stay.
But I don’t see Arsenal investing the money. Kroenke’s already put in £300m, which was then taken out of the club by the shareholders. The cash on hand is going to be saved for a rainy day. It will be a cold day in hell when Dein, Bracewell-Smith and the Fiszman family give back that money they took out. “Robbing vain Pu$$ie” is leaving Arsenal because he stands to make more money and also because he knows that he has a better chance of winning a title somewhere else. And there is no way that Kroenke will allow a rights issue which would either dilute his stock or force him to use more capital.
I’ve made my peace with those facts and now look forward to which players Arsene will bring in on a budget to help make a run at the title. Or even more realistically, a run at fourth place. And fourth place is fine by me, because that means another year of Champions League football at Arsenal and another year where I can see Arsenal play the AC Milan’s of the world.