Author Topic: Here's how the Forbes guys royally screwed up their $822M Valuation (£515M)  (Read 35230 times)

Offline Aitken Drum

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Offline Fromozbleau

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So according to calculations if G & H bought club for 219 and sold for 300, then the value went up.
Whatever G & H's don't make on the deal belongs to their mismanagement of their money.
Time to smoke a big cigar over that one. 8)

Offline Aitken Drum

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Valuation of sports is difficult.  Good will, the favourable attitude of the public towards a product, is as much an asset as a stadium.  H&G has debased Liverpool FC's reputation as much as they have plunged it into debt. The team they have put on the field is, at this early stage of the season, underperforming recent Liverpool teams. Huge debt, bad will towards the owners, a faltering team, an aged stadium and the possibility of relegation are negative assets. The positive assets are faithful supporters, a relatively steady income from tickets, television, merchandise etc., a  proud reputation and history, and a stadium which possibly can be renovated, or, in case that isn't possible, land set aside for a new stadium. It's hard to believe that Liverpool FC is now worth more than what H&G paid for it, even adding a factor for inflation. 

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Offline dzaek

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Johnny, I'm no corporate guy, but your analysis looks awesome!
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Offline jooneyisdagod

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Johnny, does the C stand for "Cool" ?  Because you are cooler than a rockstar.  I'm laughing as I read this thread, the manner in which you have rubbished the article and the arguments really is that comprehensive.  Fucking brilliant job man. 
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Offline rbagg10

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Superb thread, excellent posts by Johnny, you are a finance killer!
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Offline No666

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Johnny - would you mind if I forwarded a link to this to a guy at sportspromedia who I've been in contact with during the campaign?

Offline No666

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A further thought: if Hicks is going for a damages claim, would not part of the defence be that the price may have been artificially deflated (to some extent - let's say possibly 20-50m going by the alleged Lim second offer) by the owners themselves:

a] it is widely known that they have both defaulted on loans and are in financial trouble, therefore the market perception is of a distressed sale.

b] Hicks apparently leaked the news of Gillett's default to Mill and Broughton wrote to Hicks to say how disappointed he was that Hicks had done this.

In fact you could argue that Broughton and Purslow fought a valiant battle to help the owners overcome this - giving the impression there was no date by which RBS expected to be repaid, for example; making out there was a transfer budget when there clearly wasn't.
« Last Edit: October 15, 2010, 12:03:34 pm by No666 »

Offline JonnyTwoTimes

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Great post!

Offline Johnny C

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I think it is an excellent point that the perception is of a distressed sale  The guy from Forbes and others would certainly make you think that's the case.


The irony is of course that this is the farthest thing from an actual distressed sale.   While Hicks & GG may have defaulted on personal loans and are going  through their own personal distressed situation, the fact remains that the club hasn't defaulted on anything.

That said, "perception" was the important word used.  It is 100% correct that people are perceiving that Henry's NESV is picking  Liverpool FC on the cheap, when IMO that is 100% absolutely not the case.  IMO the £300M is OVER valuing the club, but he picked that number because it should not only get him at the forefront of possible owners of this great club, but also because it gives the very profitable NESV enough dry powder going forward to build this club.


If Henry's NESV £300M purchase stands, then during Hicks' ownership the club's value will have increased 37%. 37%!!  Wow!


That is a significant valuation change when you consider that  during that exact same time
  • the value of Microsoft is DOWN 17%
  • the FTSE 100 (UK stock market) is DOWN 10%
  • the  S&P 500 is DOWN 19%
  • the Dow Jones Industrial Average is  DOWN 12%
  • the British  Pound is DOWN 25% versus the Euro
  • the British Pound is DOWN 19% versus the US Dollar
+37% INCREASE.  It just doesn't  make much sense, does it?
LFC has done relatively  nothing over that time under Hicks' siege of the club to  increase real assets of the club.  No new  stadium.  Very limited  improvements on the current one.  Meanwhile  Arsenal have built the  hotel/housing complex not to mention a brand new  stadium.  Even United  have built a substantial amount of additional  luxury boxes over this time-frame, have  re-financed their debt  overhang, and have won a closet-full of titles.  Based on that, it's  hard for me to  believe that LFC realistically should have seen a fair market value that was anything close to a +37%  increase in  value.


More than anything a +37% increase in value of LFC speaks to ONLY one thing....the new television  distribution deal that was signed for the EPL.
That is the ONLY  reason.  Furthermore, it should tell you how little  the things that use to matter will actually matter going forward.  If  LFC get that 30-ish %  valuation increase, it should tell you that TV  Rights Contracts RULE in  this century, and will be the driving force  (along with new stadiums  geared towards the corporate dollar) going  forward.



The beauty of this of course is that the Value of the club increases +37% and Hicks' doesn't see a dime of it.  In fact he loses big.
I was going through his career the other day.  And his investment in Liverpool FC could very well likely be his biggest losing investment of a storied 40 year investment career.  Now THAT is saying something.


Okay...+37%....So then tell me who were the winners in all this ?
  • Hicks' lost.
  • GG lost.
  • RBS lost.
  • Supporters lost.
  • Team lost.
  • Liverpool community...you guys know better than me.
  • IMO the only winner here was POTENTIAL ENERGY.  This club is absolutely loaded to the hilt with it.  It just needs the right ownership to unlock it.  For what it's worth it's very reminiscent of the Red Sox & the Boston community in the late '90s.
« Last Edit: October 15, 2010, 06:42:03 pm by Johnny C »

Offline redbyrdz

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Excellent as always. But you only mentioned the increased revenue through the new PL TV deal - I think the club has also increased its general marketing revenue, the new shirt deal, more advertising etc. I have no idea what the numbers are, I'm sure it isn't as much as 30% of the club's value though.
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Offline T-1000

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b] Hicks apparently leaked the news of Gillett's default to Mill and Broughton wrote to Hicks to say how disappointed he was that Hicks had done this.

From what I've gathered, didn't Gillet secure another loan he had with Mill against his Liverpool shares? So if he defaulted on money loaned by Mill, then surely they would have known about it since they gained control of his 50%. That problem was purely of Gillet's own doing. If that's correct then there's no need for a leak then?
.....where once we watched the King Kenny play

Offline Angelius

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That's what I call ownage. That was an excellent read.

Offline Johnny C

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A 67% stake in Roma was just purchased today by LFC's limited partner DiBenedetto valuing the entire Club @ £93.3M.

In case you were wondering if Forbes' disastrous 42% miss in the valuation of LFC was a one-off mistake...

Liverpool FC
  • £515M :  This was Forbes' valuation of LFC
  • £300M :  This is the real-life valuation
  • 42% miss by Forbes
AS Roma
  • £190M  :  This was Forbes' valuation of Roma
  • £93.3M :  This is the real-life valuation
  • 51% miss by Forbes
A 51% Miss in the Roma valuation!  You can't say these Forbes guys aren't consistent.

You put out this kind of quality in any other job and you'll be searching for a new line of work almost immediately.  Apparently not when it comes to financial journalism.  In financial journalism, guys like Hicks get to use your shoddy work to try to distract from their own mistakes...

Their next attempt of the "Most Valuable (Football) Teams" is due out over the next few weeks...

I can almost guarantee that they are going to slap some high £300-s or low £400-s valuation on LFC.  (headshake)  Does anyone else really think that the valuation of LFC will have appreciated much in the 6 short months since FSG acquired the Club ?  Not a chance.

Forbes' work is apparently not to be trusted, unless of course you take a 40-50% haircut to all of their valuations of non-public clubs.
« Last Edit: April 16, 2011, 11:15:15 am by Johnny C »

Offline robb95

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Johnny another quick but good read.

You should try this/last years account when there're due, see what you make of them.
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Offline jillcwhomever

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Johnny another quick but good read.

You should try this/last years account when there're due, see what you make of them.

When do the accounts come out?
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Offline TepidT2O

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They will be interesting reading.....but they will reflect the final full year of G&H.

Interesting to see just how bad things got..
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Offline ttnbd

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When do the accounts come out?

They are due at companies house at the end of the month.  I suspect the clubs will be there for then but I am expecting the Kop Football ones to be late and it's these one's I'd be more interested in.

I can make a few guesses of what may appear in the accounts.

As for Forbes I've said for a long while to ignore anything they print as, despite being a financially orientated publication they have got very basic financial information wrong in the past.

In terms of the comment about the level of financial journalism, it's not just there where they get away with complete garbage etc it's journalism and punditry in general.
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Offline ttnbd

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They will be interesting reading.....but they will reflect the final full year of G&H.

Interesting to see just how bad things got..

They should reflect, either in the numbers or in the text, the takeover as the takeover will more than likely have happened before the numbers were signed off.  They will also cover the period where the takeover procedings started so we should see what happened to the intercompany debt, whether it was changed to a capital contribution or otherwise.

We should also get an idea, in the group accounts, of any write-off taken on the sale of the club as there should be an adjustment in the accounts if something is known before sign-off.
So all say thanks to the Shanks

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Offline CraigDS

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How much did Forbes value Arsenal at and how does that compare to what Kreonke has just paid for a sizeable chunk?

Offline TepidT2O

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They should reflect, either in the numbers or in the text, the takeover as the takeover will more than likely have happened before the numbers were signed off.  They will also cover the period where the takeover procedings started so we should see what happened to the intercompany debt, whether it was changed to a capital contribution or otherwise.

We should also get an idea, in the group accounts, of any write-off taken on the sale of the club as there should be an adjustment in the accounts if something is known before sign-off.
I don't think they will include the takeover at all will they?

They are for the last financial year not the current one...not that I would really know :)
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Offline ttnbd

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they valued them at about £700m but they'd be easier to value as arsenal shares are listed.

What is strange about the arsenal deal is that the premium paid by kroenke over the market listed price was about £600 per share, that's only a 5% premium.  Seems very low for a club/business that is effectively very cash rich.
So all say thanks to the Shanks

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Offline ttnbd

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I don't think they will include the takeover at all will they?

They are for the last financial year not the current one...not that I would really know :)

It depends.  If there is a material transaction post balance sheet date (but before sign off) then generally there has to be a restatement of the accounts.  For example, if there is a writedown of an asset value after the year end (for example a player is sold for less than the stated balance sheet value) then the writedown of the value on the balance sheet has to be put into the accounts pre-balance sheet date as it is material.

Also there is a post-balance sheet events section in the notes to the accounts that contain details, although generally brief, of anything that occurs after the balance sheet date and before the accounts are signed off.  This is likely to contain information about the takeover and hopefully it'll involve numbers.
So all say thanks to the Shanks

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Offline Danyaals Kop

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Good Read :thumbup

Offline TepidT2O

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It depends.  If there is a material transaction post balance sheet date (but before sign off) then generally there has to be a restatement of the accounts.  For example, if there is a writedown of an asset value after the year end (for example a player is sold for less than the stated balance sheet value) then the writedown of the value on the balance sheet has to be put into the accounts pre-balance sheet date as it is material.

Also there is a post-balance sheet events section in the notes to the accounts that contain details, although generally brief, of anything that occurs after the balance sheet date and before the accounts are signed off.  This is likely to contain information about the takeover and hopefully it'll involve numbers.
As long as it has numbers that show how much the cancers lost then I am happy.


What could be awful is the fee we payed for konchesky and poulson and possibly worse, how much we wasted on signing on fees for Cole

I watched the konch play against Norwich last night and he was awful.  Got forward a lot and nearly every cross hit the first defender, if it didn't then it was usually over hot behind the goal.
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Offline Lush is the best medicine...

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They will be interesting reading.....but they will reflect the final full year of G&H.

Interesting to see just how bad things got..

pretty sure i remember reading something that said we were credit blacklisted along with pompey last season

Offline Johnny C

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What is strange about the arsenal deal is that the premium paid by kroenke over the market listed price was about £600 per share, that's only a 5% premium.  Seems very low for a club/business that is effectively very cash rich.
I think that 5% premium has more to do with Blackstone unsuccessfully trying to unload Bracewell-Smith's shares for £13,000 to £15,000 for the past year, and that valuation target bogey being out there.

Plus if you think about the difference that Kroenke paid in the two tranches (Fiszman @ £8,500 and Bracewell-Smith @ £11,750), that's a pretty big difference (38%) and I'm sure there is some significant *premium* in Arsenal's valuation built in there.
 
*** Who knows...  Maybe Kroenke and Bracewell-Smith agreed to a deal @ £11,750 per/share that is +20% above where the Arsenal board realistically value the Club.  That makes more sense to me given the fact that Fiszman sold out for £8,500 on what likely was some pre-arranged deal triggered by his impending death.

I think it probably also strongly speaks to the fact that there were only going to be a very very limited # of buyers for Fiszman & Bracewell-Smith's shares, and that the two of them DESPERATELY didn't want to see the shares fall into Usmanov's hands (something the ASTrust should strongly consider regarding their sabre-rattling and alliance making).

Offline Gifted Right Foot

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Jesus Jonny where have you been for the last three years mate.

Great work. Again.

Offline ttnbd

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I'm farely sure the fiszman shareswill cost kroenke £11,750 each as the offer price for all shares when a takeover is launched must be at the same price as the last transaction to trigger the takeover.  I can't find anything that says Fiszman sold for £8,500 (although he hasn't sold yet, it's currently just an option to buy)
So all say thanks to the Shanks

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Offline horne

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i confess,i havnt read it all.got two paragraphs through...and jumped to this conclusion.
you and they can talk figures all you like.
The art of valuation isnt an accurate one.
what is accurate,is the market place.
thats the doer.
what someone is willing to pay, is the price...the be all and end all!
that is the only valuation that matters
bad market,better price!...espeacially when there is only one player in the market ....who ..get this....is the only one that will perform!
success = the absence of the fear of failure

Offline Johnny C

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For what it's worth, the new list is out.

The good news is that they had someone else @ Forbes compile the list.
The bad news is that the numbers once again are a farce.

I think it's somewhat fitting that they limited their scope of valuation data big-time.  Now only assessing 10 clubs (vs 20 in the past) and providing no financial info.


They have Liverpool's valuation now @ £335M.  So essentially they are trying to say that in the 6 months Henry/FSG have purchased Liverpool FC that the Club's value has increased 12%.

This of course makes no sense, but at least they aren't sticking to anything close to what the previous hack @ Forbes was touting (£515M) even after the very fresh £300M sale to Henry.

While they conceded their position on Liverpool FC, they stuck to their guns on everything else (not good).  Probably the most curious thing about the list is that they have the value of every Club other than Liverpool being flat-to-up.  As you read down the list on their site think about the circumstances surrounding each team and ask yourself if that makes any sense.  In almost every case it doesn't (e.g. Shalke teetering on bankruptcy and exiting out of Europe for the 2011/12 season does not equal a flat valuation).

While this new guy @ Forbes has his hands full trying to reign in the incorrect numbers from the numbskull who did it in previous years, the new guy really should have given most of these clubs big haircuts to get closer to reality.

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Sir Johnny, you are class.  8)
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Offline CarolinaKopite

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I have no idea what I just read, lol.  That was a little bit out of my league numbers wise.  But it sure did look good.
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Offline leroy

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Jesus what a horrible "format" for the article too.


Offline kermit^^

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Johnny, they should offer you a job there to just piss on them.