During the time before the Icelandic banks and Northern Rock went bang, it was obvious to a number of people who were watching from the wings that things could not go on as they were. I remember a colleague saying to me one day, “either we’ve totally misunderstood how finance works, or they have.”
I thought of this today, while reflecting on the issue of KGB Athletico Fulham with their latest announcements. Apparently they aim to be self-sustaining from next season – means no more money from the owner Absent Abramovich. Given that he pumped in another load of dosh this past year (mostly to pay for the managers he got rid of) this is going to be quite a bumpy ride.
Their aim is to set to one side the £750m that Absent Abramovich has put into the club so far (half of which is now in newly created shares, and half in loans which are repayable with 18 months notice). That situation remains – what is new is that there will be no more money after the end of this season. So, for example, if Mr A N Other (the manager of KGB next season) wants to buy Hardly Anyone from Venezuela then he has to sell someone else first.
Assuming that the KGB team is not really spot on at the moment, (and it isn’t – look at their ages) that is going to be tough. All the clubs near the top of the league except Arsenal operate in the buy now pay later market, and since KGB have this year sacked their head of youth development, and all their scouts who were supposed to emulate Arsenal’s world-wide scouting system, it is hard to see how this is going to happen.
Which brings me back to Northern Rock and Iceland. One looks at KGB as one looked at Northern Rock and Iceland and says, “no – I just don’t see how this works” but meanwhile these organisations carry on and people throw money at them, and anyone who says “actually this cannot work” is called a doom-monger, or is accused of lacking imagination.
The key question is, what was the idea of converting half of the loan from Absent Abramovich into stock? The only implication I can see is that he wants to sell up to half the club, and selling stock of course is the way forward.
Selling stock won’t release any money for players – it is just someone else’s money going to Absent Abramovich in return for part ownership. It is not quite the same as Leeds, but the fall could be similar.
Now finally compare this with Arsenal. As Arsenal have had a few board room changes and Mr Usmanov has increased his share holding there has been article after article in the press about chaos at Arsenal. Yet in effect nothing has changed, because the club is self-sustaining financially. Even a year out of the top 4 won’t hurt the club, since it is not budgeting for 60,000 crowds and the Champs League every year.
Yet here is Chelsea on the brink, and no one really notices too much.
Funny ol game.
(c) Tony Attwood 2009
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