Everton Shareholders given short shrift by Colin Chong

It would appear we're getting short shrift from TFG, not Chong.

Some obviously thought they would make loadsa money buying up shares at the announcement of a takeover so it's just tough shit that they guessed wrong.

I suspect that the majority of the small shareholders just own a single share and are in it for sentimental reasons, not to make money.

And the headline is a bit misleading if it was actually TFG that refused the meeting, not Colin Chong.

Buying a share off of another shareholder makes no investment into the Club at all, it just enriches the private seller who the share was bought from.

The Times article mentions that the estate of BK may have lost circa £5 million in the TFG takeover but I'd be interested to learn what the overall profit of BK was since he purchased (with others) the majority shareholding from Peter Johnson and then sold on to Moshiri?

I know for a fact what the corporate lawyers would be looking for.

Are there any tag along rights in Everton's constitution allowing the minority shareholders to trigger a sale to The Friedkin Group at the same price as Moshiri's holding? And are there any rights of first refusal (pre-emption rights) allowing the minority shareholders the right of first refusal, and what are these terms?

Failing that, they could bring unfair prejudice claims but I think this is difficult to prove and realistically should be brought against the previous board and perhaps Moshiri.

I fear that the minority shareholders are going to have to scowl and bear it.

Blame the previous board, not the new owners.

They would probably say — we don't want your shares, sell or keep them as you wish; nothing has changed vis-a-vis the number of shares available to the public.

They are hard-headed businessmen. They took away our 5% discount without even telling EFCSA. I don't expect anything from them except, hopefully, results on the field.

The market for minority shares is governed by normal economic principles. Supply is limited. Demand is robust. Prices will be high.

I feel sure the takeover could have been completed with a smaller number of shares being created. Let's say instead they had issued 77,813 new shares.

The capitalization would be for the same amount — £233M — but a share value of £3,000 could have been maintained, and the minor shareholding at least treated with some respect.

This is Trumpian in its transactional arrogance, underlined by the refusal to meet.

Bloody Yanks!

I'd assume the price of the minority shares equals what Moshiri got when he sold his?

If that's the case, then isn't that just an update on an unquoted share price?

And perhaps a reflection that the £3.4k placed was an unrealistic price on the business that was a) heavily loss making b) failing psr c) teetering on the edge of the Championship d) heavily indebted to Rights & Media, 777 Partners, Wonga, Moshiri etc?

In this case, I strongly suspect that TFG took the value of the company (which had been massively eroded by losses and increased debt over the Moshiri years) on a cash-free / debt-free basis and divided it by the shares in issue. This gives a value per share used to calculate the number of new shares required to eliminate crippling debt.

This is the calculation that minority buyers in November should have undertaken. If they had then no one would have even considered £3,400 per share.

Alternatively, perhaps they paid that amount because that's the fair value of emotional investment?

Either way, this is not the responsibility of TFG.

You may have seen that this was a two-stage transaction.

In the first stage, my understanding is that The Freidkin Group agreed to convert Moshiri's ~£451M sharehlder loans to equity via a share issue. 150,520 new shares were issued at an assigned price or value of £3,000 each, representing a sum of £450.75M.

If you add in the existing shares (127,031) on the same basis, that values the company at £855.75M — not bad for a Premier League club… but arguably well over-priced considering the dreadful years of PSR mismanagement and imminent financial ruin.

So to the second stage and it appears at this point that the value of the existing and new shares held was written down from £3k to £174.66 each, giving a total of ~£48.43M — which sounds like the kind of figure TFG could well have paid Moshiri for the company.

But the Company absolutely had to be recapitalized with an injection of funds for the repayment of other loans and to provide working capital. So the injection of ~£233.44M was secured by the creation of an additional 1,336,537 shares issued to TFG at that lower price.

Does that make sense to you?

Their issue was with how Moshiri ran the business. He squandered £100Ms+ and that wasn't factored into share price despite more loans being taken and more losses.

Willing buyers and sellers grossly overvalued the shares if the equity value was £856M.

The minority shareholders can't expect to be non-diluted by the cash injection made at fair market value to save a business that could have gone under.

Shares go up, shares go down - thems the breaks... mumble mumble something about not crying for Argentina, I get knocked down, I get up again, never bet more than you can afford to lose.

I still think my plan (on here about 3 months ago) about converting these 1500... and more?? into 'Legacy Shares' could work, maybe in conjunction with EitC or The Women's team.

Or is it just a whinge about the money?

I'm not familiar with the terms of the acquisition, precise capitalisations or the total debt with which the company was saddled. Whilst you advise components of this, I suspect that no-one (other than the buying and selling parties) will know the full picture.

However, thoughts on the possible scenario you map out are:

1. Conversion of debt to equity for the Moshiri loans could only have been effected by Moshiri, not TFG. Although I believe that this was done immediately prior to and in contemplation of the deal completing.

2. I am unfamiliar with the value of debt so converted and the equity issued. If this occurred at the c. £3k per share you suggest, then it would seem that this number was chosen to match historical share prices. This would make no difference to either Moshiri or TFG (or indeed to minority shareholders) because the consideration payable by TFG would be based on fair value – not historical share prices.

3. In a transaction, the total shares in issue (both the new shares and existing shares) would be valued by reference to the value of the company – not by reference to historical share transaction values. I have never seen a company valuation performed in any other way.

4. As I alluded to, the corporate value would be calculated on a cash-free / debt-free basis. In effect, surplus cash would increase the valuation and debt would reduce it. I can't imagine there was any surplus cash but I have no doubt that there was significant debt. Such debt would include, but not be limited to, any shareholder debt not capitalised, external debt of which there was an abundance, outstanding transfer fees due, liabilities outside of normal trading terms, debt baked into the system until the next tranche of TV and Commercial money comes in, remaining portion of season ticket money to the end of the season that had already been spent etc etc.

5. All of this would have been disclosed / assessed during Due Diligence.

6. Once the valuation has been computed, it is divided by the total shares in issue at the date of the transaction (after the Moshiri debt for equity swap) to arrive at a fair value per share.

7. Again, without have detailed knowledge, it would appear that the value per share was assessed at £174.66. This doesn't constitute a 'write-down' from £3k but instead would represent a fair value using a fresh pair of eyes.

8. As you indicate, a valuation of the company of £855M with all the financial problems that it faced would make no sense. So it is easy to see why TFG didn't recapitalise at anything like £3,400 per share.

Using your numbers, the value of the company post acquisition but before elimination of all the debt stood at £281m (£48m + £233m). Only full disclosure of the financial position would indicate whether this was fair.

Hope this helps.

If Bill Kenwright was alive at the time, I am sure he would have attempted to "ringfence" his shareholding or insert a clause for purchase at a more preferable rate. (One wonders if a side deal was still done as she did object prior to purchase, hence a delay?)

Irrespective of that possibility, to be honest, Bill Kenwright made a considerable amount already out of the club and it was as a direct result of his and Moshiri's management that the small shareholders lost so much value.

There is also a significant difference between the "moms and pops" type of investment of sentiment and the larger investor of whom I have no sentiment for, they could have divested whilst the shares where higher in price but held on hoping for a windfall (which they may eventually get) but the "company" was bankrupt to all intents and purposes due to its major shareholders.

Any "rescue" deal, usually devalues small investors to oblivion... (well almost). Right now, if I had a couple of thousand to spare, I would buy as many I could and enjoy the ride with pride.

So you're saying that a company that has supposedly spent £750m on a shiny new asset (yes, I know the paid price may not be the true value) not counting other assets (players?) is only worth £281m? Was the debt so great (excluding Moshiri's who could not realistically expect to recover his money?) that the valuation is wiped out by so much?

Or am I being too simplistic?

Presumably he had to pay interest on that loan to Mrs. Gregg, and whoever took over the debt when her and her husband parted ways with the Club.

If the value of the remaining shares in the estate has also fallen to the £175 quoted then their value is now around £300k, down from around £5.5m

Net outlay in real terms; not one brass wazoo...allegedly.

1. Any related debt will be applied against whatever value is attributed to the stadium thereby significantly reducing its value from its cost.
2. Ordinarily goodwill may be attributable given the club's Premier League status and all the revenue that goes with it. But as the club has been teetering on the edge of relegation for the last three seasons and, at the time of acquisition, that status was looking decidedly iffy, I suspect that there would be no Goodwill value. It could even be argued that the risks created some Badwill.
3. Given the 9 / 10 (?) players out of contract at the end of the season, I suspect that the carrying value of the squad was significantly diminished. Even the value of those still in contract will be significantly amortised as their contracts wind down.
4. To protect the club's Premier League income, TFG will be required to pump in significant funds to replace those players so I wouldn't be surprised if TFG factored this into the cost of the transaction.
5. Transactions normally take place between a willing buyer and a willing seller. Regarding buyers, there appeared to be a dearth of buyers who were ready and able to make the investment. Regarding Moshiri, he wasn't so much of a willing seller but more likely, a desperate one. It was clear that he was unable to fund the Club.
Together this makes a perfect storm to drive down value.

Unfortunately, it seems highly unlikely that the minority shareholders will get anything better in terms of an explanation. Yes, it is what it is… and we just have to swallow it. But the bad blood created by the club over this is just unnecessary.

That's why I take a pop at Colin Chong in the OP. He is the link between fans and the new owners. What exactly is the Fan Advisory Board for if it isn't to see better communication between the club and this small but traditionally very significant portion of the fanbase over such an issue?

If TFG didn't want to meet, it was beholden upon Chong to persuade them to do so, in the interests of the club and its fans. Although being Americans, and from Texas, and therefore most likely Trumpian Republicans, they are no doubt emboldened to believe they can do whatever they hell they like without needing to explain themselves or to pacify anyone, no matter how aggrieved they may be.

But is it really 'value' that is being driven down or merely the purchase price?

It would seem obvious that TFG would not want the 'true' value of the Club to be diminished but to get the best deal on a distressed asset that is worth much more in reality than they paid for it.

But as Ian at #29 says, the share value will depend on what someone is willing to pay. So minority shareholders with the one share may well get their money back in sales to another sentimental purchaser, but I doubt the bloke with 200 shares will.

Also I doubt that if TFG were to put the Club up for sale in a quick flip they would be asking for £175 for each one. If it is now debt free as I've read it's immediately worth more than that. Isn't it?

In reality, as full details will never be in the public domain, we're all to varying degrees just guessing.

I suppose the way for the minorities to view this is it's the price of an emotional investment in something we all love to bits.

Debate over Value v Price and your feeling that the former was greater than the latter is really interesting.

As discussed, regrettably none of us have full information so it isn't possible to prove / disprove with absolute certainty. However, if Value was materially different (greater) than price then:

a) there would have been a steady stream of interested parties capable of completing a deal beating a path to Moshiri's door, and

b) Moshiri would have held out for a better deal.

In reality, there wasn't and he didn't (or maybe TFG deal was the best around?).

Therefore in this instance, I'm minded to conclude that Price did equate to Value.

Regarding TFG wishing to buy at the best price, that's not really news. There isn't a buyer of anything out there that doesn't want the best price, but that doesn't mean that the Price under-valued the asset.

I believe that TFG saw value not in the present, but in the future. But that future value could be realised only with significant further investment in the hundreds of millions. As that is what will be required to eliminate crippling debt, complete the stadium build and provide funds to rebuild the team. That will have effectively cost TFG another say, £400m on top of the c. £300m they've spent on acquisition. That would value the Club at £700+ which is probably about right. Again Price would equate to Value. Whilst the value of the Club would be increased, the value per share would be unchanged as that additional investment will be in either like for like shareholder debt or by a further issue of shares.

Without definitive evidence to the contrary, it would appear that in this instance Price equated to Value. This doesn't help the minorities but they should be looking at Moshiri instead of TFG. Buyers in November, however, should only be looking at themselves as it was clear that Value was nowhere near £3,400. I considered buying at that time but in purely investment terms couldn't justify much more than £250 a share and as that was clearly insufficient to persuade an existing minority to sell, I backed off.

Nice stereotype but actually Texans are some of the nicest people you'll ever meet.

As for your "do whatever the hell they want..." comment, that was the last administration. I'm sure you were paying close attention.

Just wanted to set the record straight.

Texans can be brash, but they often reminded me of Scousers and Scots. Fiercely proud and independent of view. I've travelled across a lot of the States, taking in 30 of them to date. I have a lot of friends out there in the Lone Star State, where you see more Texas flags than Stars and Stripes.

Just like I refer to Bavrians as Germany's Scots, Texans are similar. There were both after all at one point in history, an independent Kingdom and Republic respectively.

For example you cite the amortised value of the playing squad, but we wouldn't sell any players for their book value would we, a receiver would be looking for the best price possible so their 'value' would be greater.

And of course, like buying a house, TFG are looking at the asking price and discounting it by the value of the work they're going to have to put into it to fix it up.

I just think, with no evidence to support it, that the shares are worth more than the new £175 each.

Like you I'd thought of buying 10 shares last November, but then I couldn't really justify spending the greater part of my daughter's yearly university fees on them. I reconsidered buying just one but then as I didn't really understand how the auction process worked I decided to wait until the next auction, but maybe now there won't be one.

That doesn't include Michael #31, who thinks that a very temporary CEO (shortly headed back to the construction industry) is obligated to get the new owners to talk to individual shareholders and has failed his job if they won't. Uh-huh. Well, I haven't seen Chong's portfolio, but a strongly doubt it includes telling the new owners what to do, so blaming Chong for their lack of response is simply ridiculous.

And for the record, the Friedkins CAN do whatever the hell they like within the bounds of the law and PL regulations, which do not require them to sit down with their smallest shareholders and explain themselves. That's what being an owner means.

Also, it's highly unlikely that the Friedkins are Trumpies. While Dan Friedkin is certainly a Republican, by far his largest political donations are to the Automotive Free International Trade PAC, a Republican group devoted to fighting tariffs. And tariffs are Trump's pet tactic to wreck the US economy, most specifically targeting the auto industry -- where Friedkin's family has made most of their money, and where Trump's tariffs have already caused automakers' stocks to plummet.

This tends to happen on TW now and then. I remember a particularly heated debate over Covid during the Pandemic. Michael and Lyndon let it flow, until someone brought in the Nazis and Hitler, then tore it down!!

Last one on Texan politics, I learned over my 7 years experience, that they are not too dissimilar to The traditional UK Conservative / Labour split. Broadly speaking the cities sway towards Democrat, the rural areas to Republican, with the state as a whole almost always going "Red".

I have no idea how shares work, but I doubt they would need to consult every single shareholder on everything. Maybe this is where the AGM should be resurrected and with the Advent of Zoom and Teams, no reason it can't be part in person, part virtual. It would give a much broader audience the opportunity to attend. I too feel that the FAB should be conveying this and such concerns to the club. Anyway, I've reached my limit of exploitation on shares and finances.

At least we've got a match to look forward to this coming weekend.

The fact TFG just wave away any requests for a conversation just adds a little more friction into the situation (irrespective of what they're legally entitled to do).

I've held season tickets since 1976 till 2009 when I fell out with Robert Elstone over season tickets and shareholders only getting one ticket for the Wembley showdown with Man Utd; I don't get season tickets since that date.

However, with the new ground on the horizon, I wanted to get a season ticket to sit with my grandchildren but I can't unless I pay £35 per year to an exclusive membership scheme — that's not going to happen as I paid £1,700-2,000 per share 28 years ago.

I protested this to the Shareholders Association committee, they held talks with Everton (Chong); he wouldn't budge relentlessly… so well done, Mr Chong. 3 generation of Evertonians could be lost.

As George Mahon said, the people of Liverpool support Everton. Chong: read up on the history of Everton — you may learn something.