There are a few answers to this question, and depending on your angle or how you feel, you can choose the one you like most.
a) There are 62,217 shares in issue, so multiplying the last price a share was traded at by this number gives the total value.
b) It’s worth whatever someone will pay for it.
c) Nobody really knows.
All those answers are correct, but a) is probably a bit less correct than the others.
The problem with a) is that the number of shares traded isn’t big enough to give a proper indication. For example on September 6 a share was traded for £16,200, then on September 17 another share was traded for £15,000. Using the simple multiplication technique would mean that in 12 days the value of Arsenal went down from £1,007,915,400 to £933,255,000 – a loss of £74m, about seven per cent, at a time when Arsenal won every game they played and there was no bad news off the pitch.
That clearly doesn’t really work. There is of course some correlation between the recent prices paid on the public exchange and the overall value of the club, but you have to average things out and look at a much longer term trend.
In 2011 Stan Kroenke made an offer for all shares at £11,750 per share. From that it’s easy to see that he valued Arsenal at about £731m – or at least he was prepared to pay that much for total control (actually a bit less, because he’d already built up a stake by paying around £8,000 a share). No doubt Stan took many factors into account when settling on that price, but mainly how much it would take for the other large shareholders on the Board at that time to sell to him, balanced by how much he believed the value of the club would increase and/or the level of income he could extract from it. So far he hasn’t extracted anything, but as shares now trade for at least 25 per cent higher than his highest purchase price, he’s doing okay.
The public trading of shares in Arsenal has always been fairly small scale, and given that almost 97 per cent of the shares are now owned by two entities, Kroenke Sports Enterprises and Red & White Holdings, the volume has dwindled almost to nothing – which makes it even harder to be sure that the price of one share is in any way related to the overall value of the club.
Alisher Usmanov, aka R&W, holder of 30 per cent of the shares, has stated several times that he hasn’t paid more than £14k for an Arsenal share, though as I explained here I think that’s untrue. Since Kroenke made his grab for the whole club in 2011, Usmanov has been reduced to seeking out individual shareholders, often of only one share, and offering them a quick and easy sale. In May he stopped buying and appeared happy to sit on 29.99 per cent, just one share fewer than he needed to breach the 30 per cent threshold, but on October 17 he announced he’d bought six more shares, taking him to 30.009 per cent.
For reasons I’ve explained before, 30 per cent is usually an important milestone. Not in this case, though. So, unusually, there is a 30 per cent shareholder who has no say whatsoever in how the club is run. This in itself has an effect on the value, as buyers for Usmanov’s 30 per cent may be few, given that at £15,000 a share it would cost £280m, and for that you get no say in how the club is run and no return on your money by way of a dividend. So who will be prepared to pay that? Presumably only an ardent Arsenal fan who is already stinking rich and also quite likes Kroenke. That seems a limited pool. So at the moment I think Usmanov would struggle to get his money back.
But suppose Kroenke does decide to sell. Usmanov will no doubt be first in the queue. In this case the value of Arsenal will then depend on how much Kroenke will sell for and how much Usmanov is willing to pay. Neither of those figures will have very much to do with the prevailing market price. They will have a lot more to do with how much revenue each man thinks Arsenal can generate in the future, as well as potential profit for Kroenke, and no doubt some measure of pride or ego for both. Kroenke might also be influenced by the need to generate some cash to fund another purchase elsewhere, if his interest in transatlantic travel wanes. It’s impossible to predict how much they’d agree on as a final price.
Of course there is some mileage in using conventional business valuations and a multiplier of the revenues generated to come up with a value. The problem is that ‘business conditions’ in football can change very fast. One minute you’re in the Champions League semi-final, next minute Ken Bates is buying you lock, stock and barrel for a pound.
It’s true that most clubs don’t fall as spectacularly as Leeds did a decade ago, but success is precarious at the best of times. Some owners are doing their best to cement their places at the top table with FFP – it’s easy to see why Arsenal (ie Kroenke) back the idea. If competition from outside money is reduced, then the current rich clubs are far more likely to remain the current rich clubs.
And the rich clubs grow ever richer, with increased TV deals benefitting everyone, but benefitting the richest the most. There are likely to be further increases in revenue for the big clubs over the next few years, and Arsenal in particular are pushing the benefits of their commercial deals. Will these increase the club’s value? In theory yes, but perhaps that increase in income, which has been known about for several years, has already been built in to the share price.
Ultimately clubs are rather like players when it comes to valuations: they’re worth what someone will pay at a particular moment in time. No more, no less. This doesn’t stop Forbes coming out with an annual ‘rich list’ of clubs, though their list has about as much science behind it at astrology and homeopathy. It’s done purely to promote their brand and would be better entitled a ‘bullshit list’.
So how much is Arsenal worth? Easy:
- no one really knows, but it’s:
- whatever someone will pay for it