Don’t ever, EVER invest in football clubs

We are heading into the final phase of the 2021/22 European football season and on Sunday, Manchester City and Liverpool FC will face off. It will likely be the key game to decide who is going to win the Premiership in England. More generally, the next couple of weeks will decide which clubs will play in the Champions League and other lucrative events. For many clubs their financial fortunes are directly linked to the outcome of these games.

Football clubs, or sports clubs in general have become the playground of billionaires everywhere. More and more clubs are owned by investors from the United States, the Middle East or Russia (well, at least until recently…). And fans in general despise these corporate owners. The Glazer family owns Manchester United but probably will find a friendlier welcome in the Etihad Stadium than in Old Trafford. Or consider Josh Kroenke, director of Arsenal FC, who recently said he finds it hard to truly relate to the club’s fan base. I guess that went down well with the fans…

The reaction of some clubs is to be entirely fan owned and cash in on the passion fans have for their club. Clearly, the fans don’t really care about the performance of these investments of passion, but they truly are terrible investments. I used to say that airlines and football clubs never make a profit over a cycle. What they gain in the upturn, they lose in the downturn.

It turns out that when it comes to publicly listed football clubs, I was too optimistic. Below is the performance of four prominent European football clubs that are publicly listed: Juventus in Italy, Ajax in the Netherlands, Borussia Dortmund in Germany and Benfica in Portugal. Since Benfica listed in 2007, the shares have barely moved at all and since Ajax listed in 1998 its shares had appreciated 20% by the end of 2021 but lost most of that the first two months of this year. Compare this to the 54% return (without dividends) of the European stock markets over the same time frame since Ajax’ IPO.

And these are the winners! Borussia Dortmund shares are down 55% since its IPO in 2000 and Juve shares are down 73% since its IPO in 2001. Investing in stocks of football clubs has been truly bad.

Shares of European football clubs since IPO

Source: Bloomberg

But clearly, there is a market for clubs trying to get money out of their fans’ pockets beyond the exorbitant ticket prices to their stadiums (note that a ticket to a ballet in the elitist Royal Opera House costs about the same as a ticket to a match between Arsenal and Watford). Since 2020, football fan tokens have been launched by a number of football clubs around the world. These are essentially cryptocurrencies issued by the football club and they should be compared to the performance of other cryptocurrencies like Bitcoin. Well, the average performance of football fan tokens (FFT) was zero between Aril 2020 and January 2022, while Bitcoin had a return of some 600%.

Performance of football fan tokens (FFT) vs. Bitcoin

Source: Mazur and Vega (2022)

In short, if you are a fan of football, by all means go to the matches and enjoy the games or watch them on TV. But please don’t let your club rip you off by selling you shares or fan tokens as an investment that participates in the club’s success. Because you’ll be better off saving that money and spending it on stadium tickets. At least then you get something back for your money.