Chester Perry wrote: ↑Sun Sep 27, 2020 3:12 am
I have been posting about these things quite a bit in the last couple of months on the MMT thread for those looking for some extra detail - a simple search or two should bring up the relevant posts - one key search phrase "vulture" within the thread will bring up a lot on Private Equity - not all but a lot
Hi CP, yes, I agree you've collected a lot of value insights in the MMT thread. I thought about adding The Times article to MMT, but decided it may be directly relevant to the ALK Capital situation - and, not just because The Times published it yesterday.
The Times mentions Billy Beane, Moneyball and Richard Scudamore. It's possible that ALK Capital has ambitions to follow a similar model - which will explain the "early morning market announcement" tease that one of our posters has suggested. On the other hand, if this is ALK's path then it is switching the order of Billy Beane's and the usual SPAC "blank cheque" approach.
I think we are a little in the "what clues do we have?" - just like the "whose home is this?" tv show.
ALK Capital - owned by Alan Pace - ex-investment banker (Citi) - previously involved with Real Salt Lake MSL soccer team - MBA in Barcelona and first experience of "soccer" at Nou Camp. Low interest rates/low returns on stocks and shares - let's keep our eye on the financial markets - lot's of people looking for better returns on their funds - previous times this would encourage IPOs, but private equity is also pursuing the "start ups" and their is imbalance in demand and supply - Special-purpose Acquisition Corporation, SPACs start to get some traction - what are they? a way of attracting investors to invest (some of) their investments in a corporation that has not yet identified how it will spend/invest your money - but, of course, it has the promise of big returns. Then we ask, where can big returns be made? US sports franchises have frequently shown multiple increases in value - the US now watches a lot of Premier League "soccer." - maybe high returns can also be achieved by investing in (English) Premier League clubs - let's call it EPL, because that's what the US high net worth individuals will call it.
What's in it for Alan Pace? The founders/sponsors of a SPAC get some "founders' shares." They make the initial, modest investment - that's their stake and if everything comes off, yes, they make bundles and bundles or cash! They need the HNW investors to put their money in - these guys will make "good returns" - but not "mega bucks" because it's only a modest investment and only a part of their portfolio of investments. A SPAC that owns an EPL football club will be their way of accessing the opportunity to make money in the EPL - and it's a SPAC, listed on an exchange, so they can trade in and out, the share price is known every day - it has a liquidity advantage that private equity doesn't have. (A SPAC is not a vulture fund - the objective to make money is the same, but it's not looking for businesses that are in financial trouble - remember however, vultures, in nature, have the purpose of cleaning up the dead and creating the opportunities for new life).
Yes, EPL is not the same as a US sports franchise - there is the risk of relegation - and that can be "priced in."
How would I pitch it (my first draft): Sports franchise investments track records - EPL, not as big as US sports, so lots of growth upside. 20 EPL teams, look at the track records of Man United (listed, US owners), Liverpool (Fenway), other "big 6" and others with wealthy backers - so, ALK Capital's opportunity is Burnley - smaller club, so smaller entry fee - club in need of investment - so our (initial) plan is, lets say $200 million - with these funds we can do X and Y and Z (X = investment in new players, Y = support higher player wages, Z = infrastructure, ground etc etc). Risks - relegation - but if a team is relegated and is kept together then there is a high(er) probability of quick return to EPL - and Burnley have done that - 3 promotions in the past 11 seasons, now 5th consecutive season in EPL, 7 in total in 11 years - and all this without any significant investment. (This club has operated a model that really works). Where's Burnley - part of the Northern Powerhouse - UK gov't promotion of NPH - near Manchester, near Liverpool - lot's of other opportunities. (Yes, it's the lower cost "side of the tracks"). Burnley have been run by Mike Garlick, Chairman, for 10 years. Mike has agreed to stay (for at least x years). We need his expertise and experience of the area and the community (US investors love the "community.)" Burnley also have a very well respected team manager/coach (the title chosen to suit US investors). Sean Dyche has successfully managed the club for 8 years. He has agreed a new contract for a minimum of y years (let's assume y = 5 years). Burnley's proud history - First Division Champions.
What have I missed? or got wrong, above?
As before, I know absolutely nothing about what is going on. For all I know ALK Capital and Mike Garlick may have ended any discussions that may, or may not have taken place.
Oh, the AIScout stuff? I don't see that dominating Burnley's scouting approach. AIScout and Player LENS just give ALK Capital extra "credibility" that they know soccer and EPL when they ask their potential investors to get their chequebooks out (or the digital equivalent).
UTC