A Good Prospect?
Charlton fans woke up this week to news of a leaked "investor presentation" aimed at high-value (and probably North American) individuals who might be interested in purchasing "securities" in our club.
The document was produced by a company called Football Strategies Group (FSG) which has been set up to act as an acquisition vehicle to purchase Thomas Sandgaard's company - Clear Ocean Capital Ltd - which is the sole owner of Charlton Athletic FC. FSG is Marc Spiegel’s Group who have told the local press that they hope to close the deal for the club this week
With all the expected caveats of not being investment advice, the document informs potential investors that "the current owner lacks the bandwidth to continue operating the historic club as per the expectations of its fans and is looking to sell the Club to strong stewards who will build on his legacy". It promotes the club as having "actionable growth opportunities" which "provide meaningful near-term upside" and that "minimum capital investment is needed to realise strong growth."
The presentation document is titled Project Floyd and can be read in full here:
The presentation claims that:
- FSG successfully signed an exclusive term sheet with Charlton on February 7 at a pre-money valuation of £11.6m (£10.6m cash at close + £1m deferred)
- "FSG Limited Partner funds will be used to purchase 100% of the share capital of Clear Ocean Capital Limited, fund transaction expenses, and provide cash to the Club’s balance sheet to fund operations and new player acquisitions."
- Transaction will be cash-free / debt-free.
- A £20m injection of working capital into the Club is being sought to finance operations and allow for game-changing new player acquisition to take the Club to the top of League One.
Last night the group stated that the search for new investors is not to fund the purchase of the club nor to satisfy the EFL of source and sufficiency of funds but to underpin "further acquisitions" in the future.
The presentation contains financial projections based on the assumption that the club will be promoted to The Championship after the 2024/25 season. The projections show overall losses until then in the region of £5m - £6m a year but a profit of £6.8m being realised in 2025/26.
Much of this enhanced profit comes from a jump from £2.5m to £21m in "ordinary league revenue" which we take to refer to broadcast income share. The EFL broadcast deal is currently under review and the financial distribution across the pyramid that is expected to occur because of the Fan Led Review has not occurred either. So, at this stage it is not possible to tell whether that projection is over-optimistic. Furthermore, a £4m a year increase is also expected via ticket sales. Such an improvement would require a substantial increase in matchday attendance and/or prices but the document suggests that this should not be too challenging because "600,000 Londoners call themselves Charlton supporters”.
On reading this extraordinary claim we would assume that any diligent potential investor would wish to question why, with such amazing support in London alone, Charlton can currently only attract 10,000 to games at The Valley. It would not take much research to discover that it is nonsense (we have a theory as to where the figure comes from - see below*). This significantly undermines the credibility of the whole proposal.
Of course, the document seeks to put forward the investment opportunity in the most attractive terms possible. Leaving aside factual errors such as saying that that we have spent the last few years in the EFL Championship, it includes several assumptions and propositions which will surely raise concern among Charlton fans. The fundamental proposition is that Charlton Athletic is a sleeping giant that can become an entity with "meaningful value creation opportunities" through several simple measures. With the best will in the world, we find it hard to conceal a sigh when these measures are presented as revolutionary:
- Apply technology and analytics is presented as novel, at least in League One. We know Dean Holden already values player analytics and has analysts as part of his matchday management team at The Valley today. So good if he gets more funding, but the idea is nothing new. Beyond that, Thomas Sandgaard has spoken frequently and proudly of the analytical system his son, Martin, has deployed to help identify the players that have got us to 11th in League One. So, has the consortium got a better system? If so, what is better about it and what’s its track record?
- Monetise substantial investment in Youth Academy to £2m a year. We would all agree with getting better prices when Academy graduates step up to further their careers. But fans would want assurances that "monetise" doesn’t mean sell cheap and often.
- Already identified "back-office cuts" of £0.8m - £ 1.5m. We would be concerned that would involve losing staff that understand the values of the club.
- ‘Immediately increase fan support through investment in multichannel digital solutions and strategic initiatives in fan outreach, community engagement, retail strategy’ – Whist that reads as a load of jargon to most, to an American audience it suggests that the marketing of the club can be more effective. Well, yes, the free ticket bonanza didn’t work, did it?
The presentation also seeks to compare Charlton as an investment opportunity across a range of criteria against a number of other clubs such as Millwall, Peterborough, Leeds and Milton Keynes. Charlton score well in all categories - for example:
- strong academy, lower-level teams and player development potential
- ideally located in top global city with favorable transportation infrastructure, tourism attractions, and economic position
- legitimate potential for future promotion and minimal immediate relegation risk
but perhaps most intriguingly:
- manageable, but devoted, fanbase that will not try to exert excess influence over the Club.
The final page of the document compares Charlton’s average ticket price with other League One and Championship clubs, showing us to be the cheapest of all. It highlights that we are 33% below Milton Keynes and 61% below Millwall and QPR. Obviously whoever prepared these figures should have accurate information regarding Charlton’s pricing and ticket distribution but the scale of the gap to other clubs is surprising and not evident from publicised prices. At CAST we will continue to press to ensure that football at The Valley is affordable for all who wish to attend, while recognising the importance of building revenues.
We would not wish to deter anyone with integrity from investing in our club and we hope that, if the sale goes through, Marc Spiegel and partners can make a success where Thomas Sandgaard has failed. However, we are cautious about raising our expectations based on the information that this prospectus offers us.
We have asked the club for comment regarding the information in the prospectus.
*A possible explanation of "600,000 Londoners call themselves Charlton supporters” – According to the polling and survey company, YouGov 21% of the population say they ‘like’ (NB like not support) Charlton. If you apply that percentage to the catchment area of The Valley, you get to a pool of 600,000 potential supporters, certainly not actual supporters. CAST showed those figures to Thomas Sandgaard about 18months ago as an attempt to get a more realistic and fan-friendly approach to the Fill the Valley initiatives. Coincidence? It’s a good stretch goal, but we have a lot of work to do to get there .