Stan Kroenke has bought some Arsenal shares. Specifically he’s bought 22 of them, which is not many when you consider he already had 41,721, but it is worth mentioning.
First the facts:
Just before 16:00 on January 22 three trades of Arsenal shares were posted on the NEX Exchange web page dedicated to Arsenal:
So a total of 42 shares in three different trades. At that time there was no indication who had bought or sold.
The following morning an announcement appeared on the same web page advising us that Stan Kroenke, through KSE, had bought 22 shares.
This took KSE’s shareholding in Arsenal from 41,721 shares / 67.05% to 41,743 shares / 67.09%. It’s the first purchase Kroenke has made since May 2016, when he bought 23 shares for £16,000 each. Since then the price of a share has increased to the £28,000 Kroenke paid this week, largely due to speculation of bids by Kroenke to Alisher Usmanov and vice versa. There has been no formal bid from either of them for the shares of the other, so it really is an increase based on rumours.
A few questions emerge from this:
- Why has Kroenke decided to buy shares now?
- Why is he willing to pay £28,000 per share, when the average price he paid for all his Arsenal shares is around £10,000?
- Who sold Kroenke the shares?
- Who bought the other 20 shares on Monday?
Why has Kroenke decided to buy shares now?
I think the simple answer to that is that someone offered them to him. A few Arsenal shares are traded nearly every month, but the two major shareholders own over 97 per cent of Arsenal’s 62,219 shares between them, which only leaves about 1,800 for everyone else. Those 1,800 are split between around 600 people, over half of whom have only one share each. There are only about half a dozen people who have over 20 shares, including the two billionaires – though there is a nominee account that holds around 140 shares, which could be one person with 140, 140 people with one, or anything in between. So I can’t be precise about how many people could possibly have sold a block of 22 shares. My guess is that whoever sold them decided the easiest way to sell such a block was to offer it to KSE. Kroenke has not gone out of his way to purchase shares in recent years, but when a block is available he hasn’t turned it down. Ultimately his ambition is to own 100 per cent of Arsenal, as he does with all his other sports clubs. That way he can run it without interference from the small shareholders getting agitated at the AGM about him taking ‘fees’ of £3m, and other such annoyances.
Why is he willing to pay £28,000 per share, when the average price he paid for all his Arsenal shares is around £10,000?
The price to buy an Arsenal share hit £28,000 in October 2017, and has remained there. Trades are usually reported on NEX with sales and purchases as two separate entries, so one share being bought by a broker or market maker and sold on to someone else shows as two trades with different prices, as the middleman creams off a couple of grand. So sellers have been getting around £26,000 while buyers pay £28,000.
Kroenke bought large tranches of shares at £8,000 and £8,500 from the Carr family, then others at a variety of prices up to £11,750 at the time of his takeover. If he’s now happy to pay £28,000 that seems to suggest he’s sending a couple of messages:
1 – he’s still a buyer, not a seller. He isn’t interested in getting rid of shares, he’s here for the long haul.
2 – he now values Arsenal as being worth a lot more than he paid – at £28,000 a share his stake is worth about £1.17bn (close to £750m more than he paid) and Arsenal is worth £1.74bn. So if anyone else is going to make him an offer, it’s going to have to be higher than this.
Who sold Kroenke the shares?
This is not easy to answer. As I said, there is a small pool of people with 22 or more shares, and one nominee account with enough. The only way to tell is to study the complete share register in due course, and even then you can’t match individual trades, though a block of 22 will probably be visible, given that trades of that size happen about once every two years now.
Who bought the other 20 shares on Monday?
This is an interesting question. Were there even another 20 shares traded? The way NEX displays trades makes it difficult to be sure. For example, when the Fanshare scheme closed down in 2015, Kroenke bought 44 of the shares and that showed on NEX as two identical trades of 44 shares. When I asked why, they told me this was due to the trade being through a market maker. It’s misleading, though. The day of Kroenke’s purchase of 23 shares in 2016 saw another apparent purchase of 17 shares at the same price, and now Kroenke buys 22 and there are another 20 sold on the same day? This is not really feasible when so few people have 20 and pretty much every other trade in the last five years has been for just one or two shares at a time. So it looks like a quirk of the exchange rather than another purchase.
The only possible alternative I can think of is that some crony of Kroenke’s is buying shares at the same time as him and holding the shares in a different name – presumably the one nominee account with a large enough holding. However, I can see no good reason for doing this. It’s not as though Kroenke is in danger of going over some percentage threshold that would force him into an action he didn’t want to take – the only threshold ahead of him that would mean he’d have to do something is 90 per cent, and that needs Usmanov to sell out, he’s not getting there by buying anyone else’s shares. I don’t think the figures that have changed in the register over the last few years add up to support this theory anyway, so I’m assuming it is a quirk of NEX. If you have a better theory, or work for NEX or a broker or market maker trading Arsenal shares, let me know.