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Fans Comment

Your Everton Share
Guy McEvoy illustrates a probable scenario for the proposed rights issue of new Everton shares...

13 January 2004

Think of it like this:

There are 35,000 shares in Everton Football Club.  Suppose an Everton Shares are valued on the private market (for the sake of argument) at 1,400 each.  This would give the club a theoretical market value of 35,000 x 1,400.  Which is 49 million.  Each share represents one 35,000th of the value of the club.

The problem is that none of that 49 million that the share capital represents is 'liquid' money.  We need dosh.  Let's say we do a rights issue of 15,000 shares, at a sale price of say 1,000 each.  That would put 15 million in David Moyes's coffers.  Fine and dandy.  It would also mean there are now 50,000 EFC shares in circulation.  Are you keeping up?

The shareholders' resistance may be this: Each share you own currently represents one 35,000th of Everton FC; after the issue, it will be worth only one 50,000th.

Presuming the market had priced Everton fairly in the first place (which it may or may not markets are fickle things) the club would be worth the 49M it was before the rights issue + the 15M cash it received during the rights issue.  Therefore, the club would be worth 63M.

But there are now 50,000 shares in circulation.  So divide 64 million by 50,000 total shares and you see that, other things being equal, the shares are now 1,280 each.   All existing shares therefore drop in value 120 quid over night.  A big 'ouch' if you are carrying 5 or 6 thousand of them.  (This is obviously softened if you took part in the rights issue as each 'new' share 'made' 280 over night).

The gamble for the shareholders is that the 15 million raised is spent wisely.  If it is, and the club uses it to advance Everton past where we can get with current funds, then everyone is a winner.  If we got Champions League qualification on the back of the three Nicky Butts the cash injection could get us, and that added 25M extra in the market's opinion of our worth, then the maths would look like this: Current worth = 64M + 25M = 89M.

89M divided by 50,000 would value each share at 1,780.  A nice increase of 380 per share for those who held the original shares, and a whopping nice increase of 780 a share for those who took up the rights issue.  Everyone is a winner.

The only thing that worries me is the assumption that the 15M is spent 'wisely'.  Let's face it, it is not actually a mammoth sum in modern terms even in the new depressed market.  Indeed, it is less than the cash injection the securitisation a few years ago gave us.  In modern football 15M quid can oh, so easily, count for nothing whatsoever.  Ask Mark Gold thingy from Crystal Palace.  This is a one shot thing.  And it could easily add nothing whatsoever in a year's time.

If I was a shareholder (hang on I am!)  I would be cautious:  That is, I would be if I had invested in Everton for financial reasons.  I didn't.  I invested in Everton cos I love them.  And I love the idea of one day the club being owned by 100,000 individual fan-shareholders rather than a select few major shareholders looking ot make a quick buck.  That would put the 'Club' back into Everton Football Club.  Handled properly this proposed rights issue could be a step towards that.

Guy McEvoy

2003 ToffeeWeb


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