SBD Global/May 23, 2013/FinancePrint All
The publicly traded shares of Champions League finalist Borussia Dortmund on the Frankfurt Stock Exchange are unlikely to gain a lasting boost from a potential victory in Saturday’s final. Jan Kremer, Sports Business Group Expert at Deloitte in Germany, told SBD Global, "On-field success, even if Dortmund would win this year’s Champions League title and as a result it would further increase its revenue for the current fiscal year, is supposed to have a less sustainable impact on the stock price. Since sport is a very fast-moving business and the club would have first to repeat its previous performance in the upcoming years." Kremer added that "it is simply more difficult to make long-term predictions" for a sports team than it is for a company in a different industry. Borussia Dortmund, the only publicly traded Bundesliga club, will play league rival Bayern Munich in the 2013 Champions League Final at London’s Wembley stadium. Only three years after Dortmund won its only Champions League title in '97, the club went public on Oct. 31, 2000 with an IPO price of €11. The stock price has since then been on a downward trend to its current price of €3.17 ($4.10) at the end of trading on Wednesday. Despite the club’s recent on-field success with back-to-back Bundesliga titles in '11 and '12 and a DFB-Pokal (German Cup) victory in '12 as well as off-field success with new revenue and profit records, BVB shareholders have been unable to profit from the club’s success. Kremer said that it has a lot to do with the fact that Borussia Dortmund is a sports team. Kremer said, "It is a totally different surrounding in which a football club operates than companies in most other industries. In addition, the goals of a football club’s management are not comparable with those of other businesses. When talking about professional sports teams, we generally think of utility maximization whereas the goal of other companies is profit maximization, and simply that is a huge difference." For potential investors, the financial numbers are more important than titles and victories. Kremer said, "Over the course of the last year, every time Borussia Dortmund has released its financial numbers it has had a positive impact on the stock price. Of course the on-field success is included in the investors’ expectations but first of all it’s the financial numbers on which future development predictions for a public company like Borussia Dortmund should be based on." Asked to predict the club’s stock price development, Kremer said that he wants to refrain from a prediction. However, he added, "I believe the conditions for a positive development of Borussia Dortmund have been set. The club has returned to an economically stable foundation, and on the pitch, the team almost couldn’t perform any better. I’m convinced the club has left the worst part behind, and will from here on only continue to improve."
La Liga Deportivo La Coruña has responded to criticism over misuse of finances during bankruptcy proceedings by "announcing stricter financial controls," according to FOOTBALL ESPAÑA. The club, which has "been in administration since mid-January," was cited last week by Spanish tax authorities (Hacienda) for misusing funds made available, specifically a €14.6M ($18.8M) amount previously embargoed by the Hacienda for unpaid taxes. The judge overseeing the club’s administration proceedings ordered a detailed report on the club’s costs and in receiving that on Monday criticized Deportivo "for ‘multiple invoices for expenses incurred,' calling the findings ‘disturbing.’" Deportivo has responded "by releasing a brief statement this week to announce new cuts" to minimize such unnecessary costs. These include "cutting WIFI access to media on matchdays, to reduce telephone costs, terminating Deportivo’s digital television channel, no longer buying daily sports publications and cancelling a subscription to La Voz de Galicia and also stopping meals for club officials who visit" (FOOTBALL ESPAÑA, 5/22).
Spanish Football League (LFP) President Javier Tebas has assured that "the future of La Liga Xerex depends on negotiations with the Spanish Tax Agency. If this subject is not resolved, there is no future viability," according to AS. Tebas: "Xerex is working on Plan B, as President Rafael Mateos has decided, but everything depends on the Hacienda (Spain's Tax Authority). If there's no resolution, they will have to liquidate." The club's Plan B involves a presentation to the Hacienda that would show that investments have fallen, that advertising has disappeared and that the economic situation in general is what it is. Tebas said, "The LFP will do everything possible to help Xerex with its problem with the Tax Agency. It all depends on the Tax Agency. Xerex needs an increase in capital, only this, but by mid-June it will have to have its future clear. It can't be delayed further" (AS, 5/22).