As the Daily Telegraph are now reporting, the Premier League have tightened up their rules to make it clear that a shareholder with a 30% stake in a club is not entitled to any privileges, and conversely does not have any special responsibilities, provided there is already a majority owner. The League held their annual end of season review meeting last week to confirm rule changes for the new season. All the PL rules are published in the League’s annual handbook; the new one will be out in another month or so, ahead of the opening day of the season. When it does get published you will find it here: http://www.premierleague.com/en-gb/news/publications.html

I have held off blogging this for a few days because the Telegraph got hold of the story and I received it via them, so was not going to jump in ahead of them. They informed R&W, who wanted time to consider a response.

Arsenal are not the only Premier League club currently affected by these particular rules, as QPR’s rather complicated ownership structure in recent years has also put them in the frame, though peace seems to have broken out since Tony Fernandes bought two thirds of the club. In Arsenal’s case the rule changes are a blow for Alisher Usmanov in his quest to put pressure on Stan Kroenke.

As things stand, Usmanov (through Red & White Holdings) officially owns 18,495 shares, about 29.7%, of Arsenal. I say officially, because I am informed he is in effective control of further shares that would bring his holding to approximately 18,600; he would need 18,666 to reach the long-sought figure of 30%.

I’ve written previously about the number of shares Usmanov has, and the reasons for him wanting 30% – in summary because the previous version of the Premier League rules classified a 30% shareholder as an owner and de facto director, and also insisted on directors signing off most financial transactions; this meant a director must have access to all relevant financial information in order to sign off.

It would have been a tough job for his lawyers to persuade the Premier League or a court to grant him access to information based on the old Premier League rules, but it’s now been made harder. The rules were originally written to stop major shareholders ducking responsibility rather than to allow ‘outsiders’ access to privileged information; the new version formalises that.

However, I don’t think this will be the end of the story. I understand that Alisher Usmanov is not going to take this lying down and will continue to press for the right for more access to Arsenal, with legal recourse if necessary. At the recent supporters’ Q&A, Ivan Gazidis said fairly firmly that Usmanov would not be welcome on the Board and the club could not afford a Board without unity, but this is not going to deter Usmanov.

What does this all mean for Arsenal?

Primarily the rule changes strengthen Stan Kroenke’s position. As I’ve explained before (links above), there is no reason to expect a takeover bid if and when Usmanov reaches 30%, no reason to think he will be given a seat on the Board on hitting that milestone, and no reason to think it would cause Kroenke to sell. However, if it meant access to detailed financial information it would allow R&W to apply pressure – for change, for further investment from Kroenke, for a seat on the Board, or anything else they were looking for. Now it appears that as far as the Premier League are concerned there will be no effect whatsoever. Unless Usmanov can mount a successful challenge to the PL, Kroenke can continue to run Arsenal as and how he likes. He doesn’t want to spend more money or sell up now, and I don’t see any reason to think that will change.

What does it mean for the Arsenal share price?

The share price has recently levelled off, with the few shares being traded going for anything between £14k and £16k each, after a high of £16.8k. Although the price has been driven up by Usmanov’s purchases, some think this is still low when potential earnings are considered – the newly announced TV deal makes it clear that the boom years are far from over for the Premier League. In the short term, given the scarcity of shares anyway, I’d be surprised if there is much movement. Things could change if Plus Markets closes, or if Usmanov makes it plain he is now a seller rather than a buyer. If he’s going to continue the drive towards 30% (as seems very likely), then clearly the share price will remain in its current ballpark for the time being.

What is Usmanov likely to do?

The billion dollar question. His three options are continue buying until he gets to 30% anyway, stick where he is, or sell.

Buying – I believe that he still wants to get to 30% because regardless of anything else that milestone buys at least a small amount of moral high ground. And of course the amounts we’re talking about are peanuts for Mr Usmanov: a few million quid here and there for several hundred more shares makes no odds. But getting to 30% also allows a more credible challenge to Kroenke, and I think Usmanov is too far along the road to want to turn back now.

Selling – Kroenke doesn’t want to buy Usmanov’s shares, so if Usmanov does want to sell he’ll need another buyer to stump up £300m or so. He claims he’s a supporter and in it for the long haul, and even if that isn’t true I can’t see him walking away at the first sign of a setback. He won’t want to be defeated by someone with far less money than he’s got.

Sticking – Usmanov could just stick on the number of shares he currently has – but in the long term where is the sense in that? He has no say and makes no money from his investment in Arsenal. And of course anyone buying from him would be in the same position, so buyers may not be immediately plentiful – another reason to keep buying now rather than either stick or try to sell.

I still think that despite the new Premier league rules, there will be some repercussions when Usmanov reaches 30%, as he almost inevitably will. Although the League appear to have cemented Stan Kroenke’s position and given him every card in the Arsenal deck, there’s no logic in Usmanov giving up now. However, it won’t be easy for Usmanov to force his way in and I can’t see Kroenke wanting to just take the quick profit, so unless he does changes his mind on that I think we’d better get used to him.

What does this mean for supporter shareholders?

The percentage of shares held by supporters and small shareholders has dropped from around 12% when Kroenke came on the scene to 3% now. Between them the two billionaires have squeezed most of the others out. I know some supporters think this isn’t important, but in my opinion it’s bad news for Arsenal in the long term if supporters don’t have a say. If Usmanov stops buying that’s probably good news for supporters in general and the AST’s Fanshare scheme in particular, but on the other hand I want to see Kroenke challenged and made accountable – so there may actually be greater advantages in Usmanov reaching 30%. He has no reason to continue buying once he hits that milestone.

See also my Usmanov Q&A, here.

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