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 62,219 shares in issue (of which 62,217 can be traded because the other two are subsriber shares held by the club), 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 July 17, 2017, 4 shares were traded for £21,000 each, then on August 1 (the next trade) a single share was traded for £19,200. Using the simple multiplication technique would mean that in 15 days the value of Arsenal went down from £1,306,599,000 to £1,194,604,800 – a loss of almost £112m, about nine per cent, at a time when Arsenal weren’t even in competitive action and the transfer window was going along quite merrily, so there was no bad news on or 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. He would have had to pay somewhat less for total control, as he’d built up a sizeable stake at around £8,500 per share before launching his takeover bid. No doubt Stan took many factors into account when settling on his offer 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’s only directly extracted two lots of £3m for unspecified services, but given the chance I’m sure he’d be back on that track with renewed vigour. Rumours and speculation also abound that he’s using the value of Arsenal (which he may be) and its cash balances (less likely on its own) as collateral for loans to do with his expensive Rams’ stadium project in LA. Either way he will be happy that Arsenal shares are now worth more than double the average of about £10,000 that he paid.
The public trading of shares in Arsenal has always been fairly small scale, and given that over 97 per cent of the shares are now owned by two entities, Kroenke Sports & Entertainment and Red & White Holdings, the volume has dwindled almost to nothing – which makes it even harder to be sure that the price paid for single shares is in any way related to the overall value of the club.
Alisher Usmanov, now sole owner of R&W since Farhad Moshiri departed to Merseyside, and holder of just over 30 per cent of the shares, 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. After Kroenke made his grab for the whole club in 2011, Usmanov was reduced to seeking out individual shareholders, often of only one share, and offering them a quick and easy sale. For a while he stopped buying and appeared happy to sit on 29.99 per cent, with just one share fewer than he needed to breach the 30 per cent threshold, but on October 17, 2013 he announced he’d bought six more shares, taking him to 30.009 per cent. He’s since bought just a few more, but none since 2014 (at least, not that he’s owned up to).
For reasons I’ve explained before, 30 per cent is usually an important milestone. Not in this case, though. So we have the unusual situation of 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 £21,000 a share it would cost £392m, 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 an ardent Arsenal fan who is already stinking rich and also quite likes Kroenke, which seems a limited pool. Other than that, only someone so rich that they have billions burning a hole in their pocket, like a Qatari sheikh, who might want a foot in the door with a view to buying out Kroenke as well. That might be the best option if Usmanov did want to get his money back without having to sell to Kroenke.
But suppose Kroenke decides to sell: Usmanov will be first in the queue, as he has already shown this summer. 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 Usmanov really wants to own Arsenal and how high Kroenke thinks Usmanov will go. There may be some thought of what Arsenal’s value will be in future and how much revenue each man thinks Arsenal can generate, as well as potential profit for Kroenke and a large measure of pride and ego for both. Kroenke might also be influenced by the need to generate some cash to fund his other sporting plans in the States. It’s impossible to predict how much they’d agree on as a final price, but there’s no doubt it would be substantially higher than the prevailing market price (currently around £21,000 a share as at September 2017).
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. Leeds were an extreme example, and though that wasn’t too many years ago, the wealth of the Premier League now makes anything similar most unlikely, but it does show what’s possible.
Success in football is precarious at the best of times. Arsenal (and Kroenke) have always been very keen on FFP, because it helps cement the current rich clubs places at the top table. 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. These increase the club’s value too.
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. Kroenke has made it plain he doesn’t want to sell, which will only drive the share price higher, but how high is anyone’s guess. Three or four years ago there was speculation that £20k a share might be enough to tempt him to sell; he’s turned down £23.5k and I doubt he’d sell for £30k.
Forbes publish an annual list of ‘world’s most valuable football clubs’, no doubt based on sound business principles of revenues, expected growth and cost/income ratios. For 2017 this has Arsenal in fifth place, valued at $1.932 billion / £1.511 billion – which would give a share price of £24,285. Until the first week of October 2017 no one had been prepared to pay anywhere near that for a share; on the 4th of October the record price jumped to £27,500, leaping straight over the Forbes valuation. So the usefulness of the Forbes calculation is extremely debatable.
So how much is Arsenal worth? Easy:
- no one really knows, but it’s:
- whatever someone will pay for it