SHARE ISSUE DEBATE
(Friday 2nd July 2004)
Business Plan The Wanderers Board, in conjunction with their legal advisors, are set to formally launch an appeal for shareholders in the new company they are proposing to take over control from the current Limited by Guarantee structure. The Board hope such an issue will generate 1million of new cash and ease the immediate cash problems at the Club. The 500 existing Club members will be given the chance to participate from a minimum investment level of 500, but it will be the addition of two or three major outside investors that the Board suggest will raise the figure close to the 1m barrier. However, an alleged 500,000 cash short-fall before the start of the 2004/5 season will eat into any share issue and some observers remain sceptical that the 1m target can be reached - a situation that would leave the vast majority of shares in the hands of those connected to the present Board.
Despite these concerns, the Board remain convinced they will be able to attract significant new money to the Club. In a statement issued during the consultation process, they commented "Investors would get a shareholding and they would want to make sure the business in which they are investing is in good shape, well run and will have adopted a good, sensible, achievable business plan. They are unlikely to be expecting a return on their investment, at least in the short term. Members would still retain a stake in the ownership of the Club but their influence would reduce as a result of the involvement of new shareholders."
However, the Wanderers Board will know that recent share issues at Football Club's, particularly at Football League level, are fraught with potential risk. Port Vale's attempts at a 1m share issue resulted in an under subscription in the region of 350,000 while at Brentford a survey of their Supporters' Trust membership saw the share issue idea dismissed out of hand.
The Bees United Supporters' Trust, which effectively run Brentford FC, ran a questionnaire past their members in May 2004. The results showed just 4 from 275 responses voting a 'share issue' option as a preferred choice. Instead, the vast majority opted for a plan to move to new stadium, which at the same time would pay off the club's 4.5m overdraft through the sale of Griffin Park.
Bees United, who were formed in 2001, have recently made loans of over 330,000 to Brentford FC to help keep the club out of administration. They commented through their website "Some supporters have indicated a preference for a share issue. In looking at the experience of other clubs this does not appear at first glance to be a viable avenue for Brentford at present." The statement goes on to warn of other disappointing attempts to raise new cash at other Football League clubs, saying "Ipswich with 18,000 season ticket holders recently attempted to raise 5m and achieved just over 1m at a cost of 285,000 in legal and professional fees. Norwich with a similar supporter base raised 500,000 just before Christmas while sitting at the top of the first division. Watford when faced with administration raised 600,000 from their share issue and were forced into a 6m sale and leaseback of their stadium. AFC Wimbledon were able to raise just over 1million with virtually every fan a member of the trust and on the back of a first year profit of 200,000." The BeesUnited statement concludes "A share issue is likely to cost 100,000 to 150,000 to get off the ground and could only be reasonably undertaken with under-writing of the costs by one or more wealthy benefactors, with no guarantee of success."
Port Vale is another case where a share issue had not been met with the success expected. Vale's share issue venture came in 2002 when 1m of shares were offered but only 650,000 were sold. A limit of 15% holding for any one individual and the fact that an individual supporter had to buy shares in multiples of 100 with a minimum investment of 500 were blamed as limiting factors at both ends of the financial scale. Despite the disappointing response to the take up of shares new Vale Chairman David Bratt remains optimistic after recently securing 375,000 of additional loans from the bank and brewery. He commented to their local press "We have set a budget to make a small profit (in 2004/5) with an average home crowd of 5,000. If we do make money from the cups it will be used for team strengthening and investment. We are looking to sell the remaining 350,000 in share capital and have plans to expand commercial activities. We have now been in charge for a year. We knew the first 12 months were going to be tough, but we can now look to the future with optimism."
The Wanderers Board see a share issue as the only way out of the current predicament, commenting "The hill is too steep to climb and we would run out of cash well before we reaped any real success from a potentialty good start to next season. We have to face reality and grasp the nettle now." Critics of the proposals claim the financial situation is being exaggerated to help promote the change and a sensible business plan under the present set-up would be the preferred long-term solution. The cash short fall has yet to justified and advanced season-ticket sales for the 2004/5 season have already brought in close to 500,000 of cash to boost the Club's finances during a low expense period.
Worrying too for Wanderers followers is the fact that the The Board are raking up legal costs of close to 100,000 in the hope they will get approval and want the changes in place before the start of the 2004/5 season. The Board's plans rely on 75% of Club members voting in favour of the reconstrution changes before any share issue can take place. During the consultion exercise they commented "We will not attract new investment unless we can demonstrate that new money will not simply be used to finance continuing losses. Our business plan will have to reflect considerable change in the way we do things. You will see it and have an opportunity to challenge it."

Further reading.
www.beesunited.org.uk
www.port-vale.co.uk (official site)

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