Stock Sale Not a Goal of Italian Soccer Clubs for Now
Italian soccer clubs, which now can finally become public companies, aren’t likely to rush to sell shares on the stock market any time soon.
That’s the message coming out of annual meetings this week of the country’s major clubs, which now are more concerned about learning how to make money rather than asking investors and fans to kick in theirs.
“There are very few Italian clubs that can start to think of a stock-market listing,” said Stefano Tanzi, an investment banker at KPMG Peat Marwick. “Most need some time to mature.”
Major Italian teams, such as AC Milan and Juventus of Turin, which can easily pull in a million dollars in ticket sales for a big game, have said they eventually plan to sell shares. But first, they said, they need to become profitable, something they haven’t been in the habit of doing after being barred for so long.
“There is going to be a change in the culture in how clubs will be managed now,” said Adriano Galliani, Milan’s vice chairman. “A stock market listing is in our plans, but it’s not something for this year.”
Italy’s government in September passed new laws allowing teams to distribute dividends. Before, under laws left over from an era of gentlemanly sports, teams had to be nonprofit organizations--or at least couldn’t distribute dividends even if they did make money.
With soccer by far the continent’s top sport, and with hundreds of millions of dollars now at stake in television contracts, player salaries and ticket sales, such amateur rules made little sense.
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Years of not being allowed to make money produced a culture that put prestige above profits and left most teams as heavy money losers.
On Monday, Milan reported a 44.4-billion-lire loss ($29.6 million) for the fiscal year ended in June, compared with a 4.4-billion-lira loss the year before. Milan had 101 billion lire in revenue last season, down from 104 billion a year earlier.
Juventus said it lost 14 billion lire last year, even though it won last year’s European championship.
“For the moment there is no project for a stock market listing,” said Umberto Agnelli, head of the family holding company that controls Juventus. “If we have to go to market, I think one of the companies that has the best possibility of a good result is Juventus.”
Italian soccer teams have fiscal years ending in June to mirror the August-to-May season.
KPMG’s Tanzi said Italian clubs could quickly boost revenue by selling more clothing, caps and other fan merchandise that cashes in on their names.
Stock market listings would help teams raise money to expand those sorts of businesses.
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Soccer teams could be volatile investments. Being knocked out of a prestigious European championship can mean kissing goodbye to millions of dollars of revenue. And winning the domestic championship can mean paying out heavy bonuses.
The combination of both is what pushed Milan into such a loss last year.
Milan’s Galliani said winning the European championship means extra revenue of 30 billion lire, even before counting television and sponsor revenue.
“One penalty miss could crash a stock,” said KPMG’s Tanzi.
The sports industry in Europe is more volatile than in the U.S. because it doesn’t have a franchise system. The teams finishing in the bottom four slots in Italy’s 18-team major league are relegated to the minors each year and are replaced by four up-and-comers.
In addition, the lucrative European championships are knock-out competitions, and many teams have had to sell star players to raise cash after an unexpected early exit.
Club fans, who may be less concerned about price earnings ratios and dividend yields, are also likely to be investors. Milan still has a handful of minority investors left over from when before Silvio Berlusconi’s media company Fininvest SpA bought the club in 1986.
Milan’s small shareholders saw their entire capital wiped out this year by the losses, and at Monday’s annual meeting had to subscribe to a capital increase to remain shareholders.
Some did grumble, but most of them came up after the meeting to shake Galliani’s hands, collect his autograph for their sons, ask for tickets for their nephews, and offer him advise on what formation to play and how to deal with star attacker Roberto Baggio.
Most companies would love shareholders like that.
Even if Italian soccer clubs are in the black this year, they still face Italian stock exchange regulations that require companies planning initial offerings to have three consecutive years of profits.
Milan’s Galliani said after one year of profit he might ask Italian stock market regulator Consob for a waiver. If not, he said the team could go to the New York Stock Exchange.
“We will consider whatever exchange gives us quicker access to the stock market,” he said.
Milan has hired bankers Lehman Brothers Inc. and Rothschild Italia to value the company.
On the field, Milan was Europe’s top team in the late 1980s and early 1990s, winning three European Championships, and it won the Italian championship again last year.
Milan’s success was a major part of Berlusconi’s successful campaign to become Italy’s prime minister in 1994, a symbol of how football clubs have been run more with the prestige of the owner in mind rather than profits.
Juventus, meantime, is owned by car maker Fiat SpA and the Agnelli family that controls Fiat.
Among other major Italian teams, dairy company Parmalat SpA owns Parma. Food and commodity trader Sergio Cragnotti owns Rome’s Lazio, the ERG SpA oil company owns Genoa’s Sampdoria, the Moratti oil refining family owns Milan’s Internazionale, and television and movie producer Vittorio Cecchi Gori owns Florence’s Fiorentina.
None of them make money regularly.
