Stan Kroenke was the first ever majority owner in Arsenal’s history, and now he is the first ever sole owner. Since his compulsory purchase of the remaining few hundred shares on September 25, 2018, he has had 100 per cent control of the club.
A well-known fact is that Kroenke has never sold a single share in any of his sports franchises. However, if he does decide at any point to sell Arsenal, how much profit will he make? We can never be completely precise about this because:
a) we don’t know exactly how much Kroenke paid for every Arsenal share he’s bought; for a couple of years he bought small numbers on the open market in numerous transactions at a variety of prices, and
b) we don’t know how much someone will offer him, and with no shares now being traded the market doesn’t even give us an indicative price.
But what we can do is make a very good estimate of his total purchase cost, and then see what the profit looks like if he ever sells.
So, how did he get from no shares to 100 per cent of the 62,219 in issue?
His first purchase was to pay ITV £65m for 9.99 per cent of Arsenal plus half of Arsenal Broadband. The split announced for this was £42.3m for the shares and £22.7m for half of Arsenal Broadband, which is slightly odd when you consider these facts:
- Arsenal Broadband had never (and still hasn’t) made a profit – so why was it apparently worth £45m?
- 9.99 per cent of Arsenal is about 6,220 shares; £42.3m for 6,220 shares is about £6,800 per share; the going market rate for an Arsenal share at the time was about £8,500.
Is that the smell of dodgy accounting? Can’t be, can it?
As an aside, ITV had 9.9 per cent because as long as they stayed under 10 per cent they could invest in other clubs too. Under League rules, a holding of 10 per cent or more is considered significant enough to have influence, while below that figure is not.
So officially that was £42.3m spent, but on market rate it’s about £53m.
After that Stan bought many smallish blocks of shares, anything up to a couple of hundred at a time, at prices ranging from £6,750 to £9,000 each. I can’t account for all of these individually, but I know from various points what his total was at the time and I know the prevailing market price at any time, so I can make reasonable estimates of his expenditure. The ones I can’t easily trace come to only about three per cent of the total.
On the big blocks, he bought 5,000 shares from Danny Fiszman at £8,500, then 2,720 from the Carr family at the same price and a further 2,119 from the Carrs at £10,500.
He then made a deal with his fellow Board members to take majority ownership of the club, which resulted in the largest amount purchased at one time. In April 2011 he bought Danny Fiszman’s remaining shares, Lady Nina’s shares and others from small shareholders. These totalled around 22,900 shares at £11,750 each, taking his shareholding from just under 30 per cent to 66.8 per cent. After that the price rose further and he added a few more at prevailing prices, probably an average of £14,000 per share.
To all intents and purposes it was now Kroenke’s club, as he held 67 per cent of the shares – to be precise, once the dust had settled at the end of 2011, Kroenke owned 41,579 shares, which was 66.82 per cent of the total of 62,219 available.
Adding up all the Kroenke purchases to this point of majority ownership, my estimate of Stan’s total expenditure on Arsenal shares is £424 million.
Or £435 million if you add in the extra roughly eleven million that he would have paid for the shares he got when he got his 50 per cent of Arsenal Broadband, if he’d bought them for market price. I’ll stick with the dodgy official valuation of Arsenal Broadband for the rest of this, though.
Things then remained relatively steady for several years – broadly speaking Kroenke had 67 per cent, Usmanov had 30 per cent, everyone else (a few hundred people) had 3 per cent between them. Occasionally Kroenke bought a few shares when a small shareholder decided to cash in. His purchases between 2012 and 2018 were:
- March 2012 – 2 shares at £15k each
- August 2013 – 2 shares at £15k each
- December 2013 – 13 shares at £15k each
- October 2014 – 7 shares at £14.5k and 36 shares at £15k each
- December 2014 – 13 shares at £15.5k each
- March 2015 – 44 shares at £15.4k each
- April 2015 – 2 shares at £15.5k each
- May 2016 – 23 shares at £16k each
- January 2018 – 22 shares at £28k each
Most of these were listed on the ISDX/NEX exchange, so the prices are confirmed; where they weren’t listed I’ve taken the prevailing market price at the time.
Adding those up gives additional expenditure of £2.8m (I’ll call it £3m) and took Kroenke to 41,743 shares, 67.1 per cent. Total expenditure now £427 million.
Then in summer 2018 Usmanov decided to sell his 18,695 shares to Kroenke. The price agreed was £550m, giving a price per share of £29,419.63092. This was generously rounded up to £29,419.64 for other shareholders. Kroenke has taken out a two-year loan to fund this purchase, and is paying interest of £17m a year, but I’m only going to include the actual share purchase price, because for all I know he could have taken loans to purchase every share he’s ever owned.
Having got Usmanov’s shares, Kroenke then purchased the remaining 1,781 shares from everyone else – those who didn’t surrender had their shares compulsorily purchased on 25 September 2018. That was another £52,396,378.84 – I’ll round down to £52 million.
This brings Stan Kroenke’s total spending on Arsenal shares to £1.029 billion. And as he’s got them all, that’s not going to change.
By my calculations, the average price per share that Kroenke paid was just over £16.5k.
So how much would Stan make if he sold up? Well the multi-million dollar question is, how much is someone going to give him? (The other multi-million dollar question is would he sell at all?)
Following the KSE takeover in 2011 the price of Arsenal shares continued to rise, hitting a high of £17,500 in late 2012. It then dropped for a while when both Kroenke and Alisher Usmanov stopped actively buying. The volume of shares traded between 2014 and 2018 was generally very low, which might normally lead to stagnation of the price, but the increased income of Premier League football clubs from TV deals has pushed the value of all clubs higher, and the scarcity of Arsenal shares meant individual transactions could be negotiated between buyer and seller. Because of these factors, and then also because of speculation that Kroenke might sell at some point, the price had been pushed to a new high of £18,250 by April 2017. From summer 2017 to summer 2018 there was more speculation on and off, with both Kroenke and Usmanov rumoured to be bidding for each other’s shares. By the time the offer from Usmanov became public in August 2018, the market price had hit a record of £37,000, suggesting an overall club value of £2.3 billion. But of course that price for individual shares was not what the two billionaires were relying on when they made their deal. It was indicative of the overall club value, but driven higher by speculation. The price agreed by Kroenke and Usmanov is a better indicator of the overall worth of the club.
So we can assume that with a price of £550m for 30 per cent, they valued the whole club at £1.83 billion.
On paper Kroenke therefore has an immediate profit of just over £800 million.
Valuing football clubs accurately is not easy as it’s an extremely volatile business, with success dependent on a huge number of factors that are hard to control. In the end clubs are worth what someone will pay. Forbes valued Arsenal at $2.017 billion in May 2016, about £1.392 billion at the exchange rate then. In 2017 they raised this to about £1.6 billion and currently (as at 31 March 2019) it’s $2.238 billion, which is about £1.72 billion.
Converting from dollars adds uncertainty, given the volatility of exchange rates, and what I’ve talked about all along is Kroenke’s expenditure and potential profit in pounds sterling, but the dollar/pound exchange rate will also concern him. From when he started buying Arsenal shares to mid-2016 it had varied from about $1.39 and $2.06 to the pound. It then fell lower than $1.25 to the pound and as I write is currently around $1.30. This will certainly affect the price Kroenke would be prepared to accept to sell Arsenal, if indeed he was ever considering such a move.