Thu, Nov 23, 2017 page16

• Soccer clubs start to dabble in crowdfunding

  • Reuters, FRANKFURT, Germany
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  A minnow of English soccer, Stevenage, is an unlikely candidate to be at the forefront of financial innovation in the game.

  However, it has become the first soccer club in the world to sell bonds directly to its fans online via crowdfunding, deal organizers said.

  Stevenage, in England’s fourth division, raised ￡600,000 (US$794,814) in September via a five-year bond to rebuild a stand in its stadium. It is set to be followed by Frosinone of Italy’s Serie B second division which on Monday unveiled a bond worth up to 1.5 million euros (US$1.76 million).

  Tifosy, the crowdfunding platform behind the deals, was founded by former Italy, Juventus and Chelsea striker Gianluca Vialli, along with a former Goldman Sachs banker and two other investors. The company’s name is a play on the Italian word tifosi meaning fans.

  The figures at stake might be small so far, but Vialli said he and his partners were aiming higher.

  “We’re close to finalizing something with a big club in Serie A and an [English] Premiership club as well,” he said in an interview. “We’re also talking to many other clubs in football, rugby and cricket.”

  Tifosy takes a 4 to 6 percent cut of all funds raised, he said.

  Such fundraising offers a source of funding to sports clubs that do not have the access to international capital markets, typically to fund their sports infrastructure. It can also give fans another way of supporting their team.

  However, it comes with risks for investors.

  The Stevenage and Frosinone bonds cannot be traded and their holders would only be repaid after senior creditors such as banks in the event of a default.

  There are also perils if the team performs poorly. In Stevenage’s case, if the club is relegated in the last year of the bond, the repayment is delayed by one year.

  If a club sees its revenue slump due to poor performance, it might not be able to repay bondholders.

  “The risk is high for fans investing in their clubs ... that they will lose all their money or that they are not compensated for the risks they bear,” said Luca Enriques, a law professor at the University of Oxford who has researched crowdfunding.

  Stevenage bondholders can choose to either get a 4 percent gross annual interest in cash or 8 percent in credit that they can spend on the club’s products, such as merchandise, food and drink.

  Frosinone’s bond comes with a 5 percent cash coupon plus 3 percent in credit. Proceeds will be used to build a restaurant, a health center and some shops around the club’s new stadium.

  Finbarr O’Connell of the accountancy firm Smith & Williamson, who helped now-dissolved Formula 1 team Caterham raise donations in 2014, said selling subordinated debt to fans took crowdfunding too far.

  “These people are fans and put their money in, but their liability may be somewhere in the balance sheet where they have little or no hope they’ll ever receive it,” he said.

  Fausto Zanetton, the former banker at Goldman Sachs and Morgan Stanley who cofounded Tifosy, said clubs are vetted carefully.

  Frosinone chairman Maurizio Stirpe said that the club could have borrowed more cheaply from a bank, but opted for crowdfunding instead.

  “Our main objective is to foster fan loyalty,” he said.
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