It seems like every other blog post I’ve written in the last 12 months has been about a new record price for Arsenal shares. Stan Kroenke must have blisters from rubbing his hands together in glee so often.
The latest development was a share being traded for £31,000 on March 2nd. The lucky buyer, and possibly even luckier seller, are not known. However, we can assume it’s not Kroenke himself, as an announcement should have been forthcoming by now – company directors such as he must declare all sales and purchases of shares in their own companies.
I’m sure you know this already, but there are 62,219 issued shares in Arsenal Holdings PLC. Multiply 62,219 by 31,000 and you get £1,928,729,000 – or £1.93bn in round figures. Why am I saying £2bn in the headline then? Only because the market makers who set the price for the NEX exchange (where Arsenal shares are traded) have decided that the mid-price as of today, March 6th, is £32,500 per share. They have a ‘bid’ price of £30,000 and an ‘ask’ price of £35,000, which means that if dealing through a broker, sellers can expect to receive around £30,000 while buyers pay £35,000 – and the broker creams off a tasty £5,000 per share. Nice work if you can get it.
At a price of £32,500 per share Arsenal would be worth £2.022bn. This is hypothetical of course, because no one has paid that for a share yet, and even if (when?) one or a few shares reach that price it’s a stretch to say that the club is worth an exact multiple of that, given the small volumes traded. Still, £2bn is a good headline.
The share price has now gone up 30 per cent since September 2017. Since March 2017 the record price paid has been broken seven times and risen from £17,750 to £31,000.
What is going on? To update an earlier post, it’s speculation. Arsenal have two billionaire shareholders (and about 600 other shareholders). Stan Kroenke owns 41,743 shares (67.09%) and Alisher Usmanov owns 18,695 shares (30.04%). In May 2017, Usmanov was rumoured to have made an unofficial offer for Kroenke’s shares, believed to be at a price of around £22,000 per share. The offer – if it existed – was rebuffed, but the news lifted the price on the open market to over £20,000 for the first time.
In October 2017 it was again rumoured – only rumoured, mind; neither party ever confirmed it – that Stan Kroenke had made an offer for Alisher Usmanov’s shares, and the offer price was said to be £28,000 a share. The market took notice, and the price being quoted on the NEX Exchange rose to £26,500, though at that time no share had been traded for anywhere near that amount.
Clearly the logic here is that if either of the major shareholders thinks that shares are worth paying say £28,000 for, then the market price should be around that level. And if the offer was turned down, then one billionaire thinks that Arsenal shares must be worth even more, otherwise the sensible thing to do would be to accept. This assumes, of course that there actually was an offer, which as I said neither party has confirmed. (Post your evidence to the usual address.)
There are still around 600 small shareholders, so although the volume of shares traded has dropped considerably since the rival billionaires hoovered up 97 per cent of the total, there are still enough holders that some get traded. Many sales are from people who have two, three or four shares and want to retain some shareholding, but also cash in on the fact their shares are now deemed worth several times – perhaps even hundreds of times – what they paid. The buyers are either fanatical Arsenal supporters with a lot of spare cash who really don’t care how much it costs them to own a tiny piece of Arsenal, or – more likely – they’re speculators who believe that sometime soon one of the billionaires will accept the other’s offer, and then the remaining three per cent of the shares will be compulsorily purchased and give them a quick profit. I think the speculators are probably wrong and the stalemate between Kroenke and Usmanov could continue for quite a while. Neither wants to be ‘beaten’ by the other and neither has a need to sell. We’ll see.
If nothing happens and rumours subside then the price may well drop back nearer to £20,000 for a while. A similar drop happened between 2013 and 2016 once the big two had stopped buying – no record price was set between 2012 and 2017. However, in the last 12 months the only direction has been up.
What does all this mean for Arsenal? To be honest, not much at present. As long as Kroenke is in charge it matters little what the share price is. It won’t affect how the team plays, and it won’t persuade him to put any of his own money in to the club. All it does is reduce the number of people who can realistically think about making a bid. There is a consortium of businessmen who have been interested in taking over and saving the rest of us from Kroenke for some time. The price they’d now need to pay to buy out Kroenke at a 20 per cent premium to the prevailing rate has gone up from about £850m at the start of 2017 to about £1.6bn now. And they didn’t have £850m. It almost looks like a cunning plan by Kroenke to put people off so they don’t hassle him…
Here’s how the maximum Arsenal share price rose between 2007 and October 2017. Since then it has jumped to £30,000 in January and now £31,000 in March.