Investment Question

[Red Chilli]

By investing in Liverpool and improving us they are increasing the value of the club and also their investment. It's not a short term investment, but will be profitable in the long run.

The major reason for the purchase is always prestige though. The more succesful the club the more prestige for the owner. If profit is the only motive then a football club is a Bad investment. There are much better options available

That's what I thought wich is why I cannot see why DIC are investing in us. But, if they buy Moores's shares, fund the new stadium, improve the team, then the shares will increase dramatically in value and if they sold at the right time they'd probably make a profit. But selling the club will be very difficult as we have found out in the last few years hence the reason for listing us.
Am I on the wrong track here?

[Rocket]

But selling the club will be very difficult as we have found out in the last few years hence the reason for listing us.
Am I on the wrong track here?

selling the club is easy, we've had plenty of people keen, they are just looking for the club to be sold to safe hands.

[Red Chilli]

not really, imagine our current situation, we could be listed, and moores could still own 51 percent of the shares. we wouldn't be in that different a position

No, but I'm suggesting DIC do the ground work (stadium, invest in team, make us successful etc) and then list us when the time is right, to make a return.

[Red Chilli]

selling the club is easy, we've had plenty of people keen, they are just looking for the club to be sold to safe hands.

Fair enough, you seem to know more about it than me. I thought the stumbling block was over price, percentage of ownership and places on the board.

[SouthAfricaRed]

That's what I thought wich is why I cannot see why DIC are investing in us. But, if they buy Moores's shares, fund the new stadium, improve the team, then the shares will increase dramatically in value and if they sold at the right time they'd probably make a profit. But selling the club will be very difficult as we have found out in the last few years hence the reason for listing us.
Am I on the wrong track here?

Once you list the club, there is always the risk of losing control. You need to have elected board members that can influence the running of the club. It's not worth the risk unless you need the money. DIC doesnt seem to be in that position. They would do better by improving the club and thereby raising their profile. Once the club is the Best, it will be easier to sell it as a unit.

[Rosco]

Thanks lads, it's the only way I could see them getting any return on their investment, I can't see anyone coming in and buying DIC out but I suppose anything could happen. If we were listed publically then investors would come in and buy differing amounts of shares.
If it does happen then I think it makes the clubs future less certian.

Weren't you arguing against me when I made similar points before Christmas ?

[Red Chilli]

I think I was arguing more about Morgan's comments and his knowledge about the deal than the future under DIC.
It was more a case of Morgan attacking the deal which he knows little about rather than speculating between us on what the future might be.
Before I thought about listing us publically I couldn't see any way in which DIC could hope to make a profit which is why I thought they were buying us for the prestige. The potential to put the club on the stock exchange seems to my uninformed eye as a way in which they could make a profit.

[Rosco]

to be honest, are they really going to make alot of cash from us?

i'm not sure its possible to make a huge profit from buying a club

It is possible.

They buy the company, turn into a private company. Then increase it's efficiency and profitability and finally float it on the stock exchange.

[Rosco]

I think I was arguing more about Morgan's comments and his knowledge about the deal than the future under DIC.
It was more a case of Morgan attacking the deal which he knows little about rather than speculating between us on what the future might be.
Before I thought about listing us publically I couldn't see any way in which DIC could hope to make a profit which is why I thought they were buying us for the prestige. The potential to put the club on the stock exchange seems to my uninformed eye as a way in which they could make a profit.

Exactly.

It's the bigger picture that needs to looked at here. That is the only way they'll make serious returns on their investment.

Anyone who thinks they aren't in it for the money will be severely disappointed when things pan out in the future.

I still think Morgans comments make a lot of sense by the way. Even more so now in light of recent news reports.

[Red Chilli]

Sorry Rosco, I honestly never thought that you were suggesting floating us on the stock exchange the last time we discussed this.
Were you? It didn't come across that way to me at all.

Apologies if you were, I was distracted by the Morgan comments.

[Red Chilli]

I looked into DIC a bit recently. My uninformed impression of them is that they are looking at ways of investing all of Dubai's current wealth to secure the future for that emirate for when the oil runs out.
If that is the case, I can't see them blowing hundreds of millions on a premiership football club for the prestige and the publicity it gets them.

[Rosco]

Sorry Rosco, I honestly never thought that you were suggesting floating us on the stock exchange the last time we discussed this.
Were you? It didn't come across that way to me at all.

Apologies if you were, I was distracted by the Morgan comments.

I don't know what I said that time to be honest (and I can't be arsed looking), but it was fairly clear to me that there was really only one way to make a big return on investment in the club and that was it.

I've mainly spent my time trying to argue against people who think we're going to be debt free, we can buy anyone we like for any amount and that we'll be funded by a rich Sheik who was going to personally pay for a stadium.

All pie in the sky stuff.

We'll still be constrained by the revenues we earn and the club will be borrowing to fund the stadium IMO.

The only thing I'm not certain of is whether the offer is just for Moores' shares and the unissued shares or for all the issued shares in the company.

[Rosco]

I looked into DIC a bit recently. My uninformed impression of them is that they are looking at ways of investing all of Dubai's current wealth to secure the future for that emirate for when the oil runs out.
If that is the case, I can't see them blowing hundreds of millions on a premiership football club for the prestige and the publicity it gets them.

There's plenty of oil, but diversification is the name of the game when it comes to investment. The UAE has the fifth largest proven oil reserves in the world (but that doesn't include "heavy oil") and the reserves in the world have doubled over the past 20 years or so, funny how you still hear about shortages isn't it ? That is of course what OPEC wants people to think.

Portfolio theory basically says the more industries and types of investments you're involved in the lower your risk is. In that sense your opinion is perfectly logical.

[Red Chilli]

I don't know about the debt stuff and the way they will fund the stadium, I think it's possible they may fund all this as a way of providing the resources for the club to reach it's potential. Then when we have reached our potential, the could float the club. The starting share price would surely be a lot higher if the stadium is paid for and the debt is settled, wouldn't it?

[Rosco]

I don't know about the debt stuff and the way they will fund the stadium, I think it's possible they may fund all this as a way of providing the resources for the club to reach it's potential. Then when we have reached our potential, the could float the club. The starting share price would surely be a lot higher if the stadium is paid for and the debt is settled, wouldn't it?

They say themselves they specialise in "leveraged buy outs", which automatically means they'll happily take on debt.

Share price and debt don't really have a huge negative correlation. Share price is more a reflection of the performance of a company. Profits and earnings per share etc. The thing is both profit and EPS can be improved by taking on debt, which is why investment companies will do it.


The first thing is that from an takeover candidates point of view debt isn't a bad thing as long as you can repay it. If you can make money by risking someone else's money why would you risk your own ? You should always do it. An investor is looking for the maximum return at the minimum risk.

When deciding on the level of debt for a company though an investor will be looking at the business risk of a company, you need to get the right blend of debt and equity to maximise a companies profits.