Moshiri’s financial commitment, stadium financing & minority investors

The value projection of 𧹜M assuming all this goes ahead... I think it was on your podcast that you said this does not and would not reflect the value of the new Everton Stadium, at least until it was successfully completed.

At some point, the construction cost of the stadium must transition into a tangible fixed asset of considerable value that should radically change the financial status of EFC – especially considering its total cost could represent around two times the current valuation of the club. It may be too early to ask but does this get fully or only partially recognized as real asset value in future accounts?

This depends on ownership and completion of the new stadium, of course, and I'd like to get your view on the changes in the status of the Stadium Development Company that was hived off from direct EFC control in 2021 but put under the Stadium Development Holding Company that itself remains under full EFC control as a 100% wholly owned subsidiary.

It just reinforces how badly we have been run on and off the pitch for so many years.

On the one hand, I'm thinking Moshiri really has put his money where his mouth is, and yet his mouth must therefore be a garbage disposal unit!

It seems incredible to me that someone has been that successful in one sphere of business only to be so incompetent in running our club.

Baffling, frustrating, scary and a really, really bad joke.

Reading it again, it's clear that getting the stadium built, is the only way he's got a chance of recouping most of his money, so hopefully it continues to be built on time.

The Russian invasion of Ukraine, which brought about massive sanctions towards the Oligarch's, has definitely impeded Moshiri, but because he didn't want Everton, to take up to much of his time anyway, then hopefully soon, he will take a much smaller loss, and depart?

Certainly once completed, the stadium will add to shareholder value as an asset that will generate future income for the business. The degree of additional income will depend on ticket pricing and the financing costs of the debt.

Currently I'd argue that's not reflected in the value of the club because the stadium is not yet fully funded. The capex required deflates the current value of the club.

Re the company structure, it is obviously sensible to place the stadium and its current liabilities into a seperate company. Funders and future lenders will also certainly want their funding, the asset and the income it will generate placed in a separate company (albeit wholly owned by the football club)

My understanding of the current subsidiary companies is as follows: Everton Investments is a dormant company wholly owned by The Everton Football Club Company Limited. Everton Stadium Development Limited is wholly owned by Everton Stadium Holding Company Limited, in turn wholly owned by the Everton Football Club Company Limited.

So stupid question: if the stadium and all related instruments are in a separate company, but that company remains a wholly owned subsidiary of the parent company, how does that differ from it all being in the parent company anyway, as it all still gets wrapped up in the 'Group' accounts of the parent company, does it not?

It protects a lender in that the income generated by the stadium is contained in the company that will be encumbered with a legal charge and, if an owner ever wanted to sell the stadium, it is much easier to sell the stadium company than sell the asset itself. Other reasons too, relating to the lease, insurance for example.

As an aside, I'm grateful to have been relieved of the mantle of Kenwright-tormentor-in-chief, and doff my cap to Tony A, my appointed-by-Michael successor. He's a great bloke too!

I've endured years of complaint on here for speaking what I and learned others have always identified as the tumour in the heart of our club, but I'm very happy that at last there's significant public protest to spell it out to the world how badly we've been run.

We need a new everything, except the manager.

Okay, thanks for that – it makes sense from that perspective.

Don,

And there was me thinking that your diminished role was a classic case of "Absence makes the heart grow fonder"...!!!

As always, a very detailed explanation of not only our financial position but also the likely scenario that the new stadium could be sold as a separate entity. But, although it could be sold separately, as I understand it, the club would get the money from the sale.

I would be seriously worried if the stadium was owned by anyone other than the club. This would then allow them to use the stadium for numerous events that may not be conducive to taking care of the playing area.

Also, it would leave the club exposed to huge rises in renting the ground from the owners, which could impact the money the club would have for transfers.

Maybe I haven't fully grasped how the stadium is still owned by the club but can be separately funded and owned by a 3rd party?

Add to that the dynamics of a complete asset in a few years versus an 'asset under construction' as it is now (ie, the new stadium) and it's clear that there's no way Moshiri, MSP or anyone else would value the club for 𧹜m as quoted here.

I'm no expert but it does seem to be somewhere in line with other estimates I've seen recently.

Forbes did a 'Team Value' table which had us at $940M (as of May 2022). If you factor in the exchange rate, and an inflationary factor when comparing their Team Value to recent prices paid or being quoted for Chelsea, Man Utd and Liverpool, somewhere between 𧹈M and 𧺬M seems reasonable.

I've also looked at it another way: share price. Current Everton Share Price is reputed to be around ١,125. Multiply that by 135,000 and you get just over 𧹜M.

So is it really that unreasonable? Bearing in mind of course, Bob Cratshit's old adage: "A club is only worth what someone is willing to pay for it."

Also as regards the shares, they will have a value on his balance sheet. At the moment, they are going to be showing a loss at today's valuation but, in a couple of years, with a new stadium and hopefully an improvement in the playing side, they could be showing a profit.

Basically what I am saying is that, whilst he has provided the club with 𧽬M, at the end of the day, the actual cost to him is likely to be much less.

Moshiri has been seeking buyers of the club at around $450m with no serious takers. One group offered less than $400m. That reflects where we are, loss-making, still large capex to find, relegation-threatened.

The balance sheet reflects the money put in by Moshiri, including called-up share capital, share premium account and other reserves (shareholder loans).

The 𧽬m is the amount of cash that has gone into the club from Bluesky Capital in loans and share purchases or conversions (assuming all the drawdown was used).

One day, the club may be worth more than that but currently, it is worth nowhere near that, IMO.

If this transaction goes ahead, as you believe, there were other shareholders who held 6.12% of the shares, do they maintain 6.12% of the total shares and do you think it will increase or decrease the value of shares in Everton FC?

Not sure where your figure of 6.12% comes from. There are 6,219 shares held by small shareholders out of a total of 135,000, ie, 4.6%.

I've heard there's interested people who have moved things on to their solicitors, but also been told that nothing will be happening before May. Who knows?

They were from the last figures that I had noted with the totals of Blue Holdings having 93,698 or 92.16% and Kenwright having 1,750 or 1.72% and others having 6,219 or 6.12%.

If your figures are correct then it answered what I was asking, in that more shares have been added. Blue Holdings who now hold 127,031 shares or 94.1% and that dilutes the percentage of shares owned by others. I note that Kenwright's have gone down to 1.3% and others to 4.6%.

Blue Heaven Holdings Limited* 127,031 94.1%
W Kenwright CBE (Chairman) 1,750 1.3%
Other Shareholders 6,219 4.6%
Total 135,000 100%

I own one share for sentimental reasons. I'm told current trades are ١k/١.5k. As others have said, small shareholdings are not very valuable as they have no influence on how the club is run. In my opinion, however, a large block of shares could be worth considerably more per unit.

Whoever chips in that £105+Million, be it MSP or others, will not allow Kenwright & his entourage to flush their investment down through River Mersey to the Irish Sea. That would be exactly what we need in terms of moving the needle towards ousting the current board.

As you point out, the minority investment from MSP would improve the balance sheet, the quality of the board (especially if both Najafi and Moorad take directors' seats) and the opportunity in debt markets due to increased credibility.

But it would also be a strong endorsement of the overall future of Everton. These two guys are smart, disciplined and expert in all aspects of sports management and marketing, and they do not make mistakes with their investments. If they buy into this club, it's because they see tremendous potential.

As a bit of background, Najafi remains minority owner of the NBA Phoenix Suns, whose ownership change was approved by the league last week. When the new majority owner bought out his the scandal-destroyed predecessor, some of the minority owners were asked to sell him their shares as well. Najafi was not. The new owner wanted him to remain part of the structure.

(And two days after the changeover, the Suns stunningly traded for Kevin Durant, probably the most highly valued superstar in the game.)

I know I have mentioned this before (and may be apt with our new Burnley revolution).

In the early seventies, veteran Burnley Chairman Bob Lord was interviewed on a Sportsnight about his opposition to live televised football would ruin football.

He then made a comment to the effect of how very successful business people buy out football clubs and at the the exact moment of dotting of the i's, ignore all their business skills and make a**** of themselves.

We need to lever him and his pals OUT.

KEEP UP WITH THE PROTESTS UNTIL HE IS GONE.

Key for me is something you said in the comments section:

"The stadium will add to shareholder value as an asset that will generate future income for the business.
The degree of additional income will depend on ticket pricing and the financing costs of the debt."

I don't have accountancy skills, nor have I studied the numbers in the detail that you have, Paul, but I would suggest that we cannot assume the "additional income" will exceed the "financing costs of the debt".

Although, by the "financing costs of the debt", are you referring to just the interest payments, or to the interest payments PLUS actual debt?

The point about Moshiri being offered "under $400m" for the club is that he rejected it - if it's even true - so it is clearly NOT the established value of the entire club. If I considered a Forbes valuation (and why wouldn't I over, say, fan conjecture) then they valued us at about £740m in May last year. Don't get me wrong, at this very moment, that's clearly not a number that's going to happen. But then we're not likely to be sold right now at all with our status in doubt and THE significant asset still under construction.

You're right Michael, we're only worth what someone will pay. The converse is also true: as a private company our 'price' for a controlling stake is whatever it takes to make Moshiri sell. And we need to face the fact that right now it looks like he is not going anywhere, there is nothing we can do about it, and a new minority stakeholder bringing new equity capital and the promise of some external expertise is about as much as we dare hope for.

Paul your analysis of the published figures is superb, but when you stray into comments below the line like 'Moshiri is looking to sell for $450m and was offered less than $400m' - where does that come from? What is the evidence? It is known that Moshiri has sought minority investment - possibly even at a discounted price equivalent to the quoted figure pro rata for that minority stake - but it's quite a leap to then say 'he wants to sell the lot for $450m' at a significant loss and at possibly the worst possible time to realise the value of his 'investments'.

So 𧶀m of debt may cost 㾺m min pa to service. Difficult to say what the increase in matchday revenues will be but I have estimated perhaps close to 㿞m a 㿌m gross uplift on expected Goodison receipts. Add in naming rights (?) and other sponsorship, assuming we stay in the PL then the new stadium will generate maybe 㿀-25m pa more than Goodison after financing costs. All very rough figures as there are so many variable. Hope it helps though

I am privy to information from people who have or who are currently working on Moshiri's ownership options relating to Everton. I can't give any more detail.

You continue to highlight important matters that affect the club we love.