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08 Aug 2018

Arsenal: Positives and negatives of Stan Kroenke's buy-out

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More of the same? 

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The free use of revenue

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Any positives for Arsenal?

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Conclusions 

(Photo credit: Patrick Blaise)

In the early hours of Tuesday morning it was announced that Alisher Usmanov, Arsenal’s second largest shareholder, would be selling his 30% stake in Arsenal football club to Stan Kroenke, Arsenal’s majority shareholder.

This will give him a 97% share in Arsenal football club, which means he can make Arsenal’s other shareholders forcibly sell the remaining few shares to him, giving him 100% ownership.

The essential change is that Arsenal will go from being a public limited company to a privately owned team. This means aspects of accountability — such as the annual general meeting (AGM) — will no longer be compulsory.

Perhaps more worryingly, however, Kroenke will more easily be able to funnel money out of the club into the pockets of his own company, Kroenke Sports & Entertainment (KSE).

Put simply, there’ll be no more checks and balances on his power, and minimal accountability from the fans. But how much of a difference will any of this actually make on Arsenal? 

More of the same? 

While it’s easy to look at the doom and gloom scenarios, the most likely situation is that not much will change at Arsenal. That can be seen as a good or bad thing depending on your view of Kroenke’s ownership, but the reality is this is unlikely to alter Arsenal fans' perception of their ownership significantly in the long run. 

The AGM feasibly added a layer of accountability to the board where fans could ask questions and tell the owners or management directly if they were unhappy about things. But it’s fair to question how much influence the AGMs ever had.

Those supposedly holding the board to account had no real hard power. All they could do was tell the board they were dissatisfied. In that sense, little has changed. If fans are unhappy they can still make their voices heard, there just might not be the same formal platform for them to do so. 

Besides, as of yet we don’t know how the new ownership structure will do things. They could decide that continuing the AGM is in their best interests, and try to remain as open as possible.

Arsenal will still have to file their accounts to Companies House where they will be available for anyone to read. Currently in the Premier League only Arsenal and Manchester United are pubic limited companies, but other clubs are still forced to disclose their accounts publicly. And newspapers such as the Guardian, and blogs such as SwissRamble, annually analyse the finances of all those privately owner Premier League clubs.

The free use of revenue

While Kroenke could theoretically use Arsenal revenues to help fund his other ventures — such as the building of a new stadium in Los Angeles for his NFL franchise the Los Angeles Rams — it wouldn’t make much sense if he did.

For someone of Kroenke’s wealth there’s little need to milk his sports franchises for money, he has other business he can more easily take funds from. And if he were to drain funds from Arsenal their stock and value would fall.

Given the amount he’s invested in owning 100% of the club, it would make little sense for Kroenke to damage the value of his own asset. People often accuse owners, and Kroenke in particular, of being in it for the money, not on pitch success, but the two generally go hand-in-hand. Once you accept that Arsenal are a self-sustaining club, who only spend what they make, then the more success they have the more valuable the club will become, and the more revenue they’ll take in.

For Kroenke, given they’re his asset — and that’s what football clubs are to any owner — Arsenal success will only benefit him. It makes little sense for him to not reinvest the club’s revenues into spending for the best players possible.

Any positives for Arsenal?

While the most positive outlook so far has simply been a case of ‘things won’t get much worse’, is there reason to be positive about anything?

One thing some Arsenal fans might be happy about is the end of Usmanov’s involvement with the club. A Russian oligarch, Usmanov made his fortune much the way Roman Abramovich did, through the privatisation of assets at the end of the Soviet Union, which saw several future billionaires make their fortune at the expense of the Russian people.

He was jailed for eight years in 1980 for financial crimes, but there have also been accusations that he was charged with rape. While he had almost no influence at the club, he was associated with the club in name, and would regularly be referred to as an Arsenal owner when receiving negative press.

Some fans don’t care about ethical issues surrounding their football club, and would be perfectly happy to have success on the pitch bankrolled by Russian blood money. But for those who do, Usmanov no longer being connected to Arsenal is a positive thing.

The other potential positive is that, by purchasing 100% of the shares, the Kroenke family have shown they’re in it for the long haul with Arsenal. While Chelsea fret with the idea that Abramovich might be getting bored, it may be of some comfort to Arsenal fans that Kroenke is planning to have the club as part of his family business for many years to come, and isn’t likely to lose interest.

In fairness, KSE’s conservative ownership style means Arsenal wouldn’t be particularly vulnerable to a sudden change in ownership anyway. 

Conclusions 

Kroenke’s buying out of the reaming shares at Arsenal is unlikely to have a significant impact on the day-to-day runnings of the club. It’s unlikely to even change how they operate at board level or how transparent the club are with their accounts.

Perhaps the biggest impact of the takeover is symbolic. Arsenal were one of the few clubs left who still had some fan ownership.

While those with shares had little power, many have had their shares for multiple generations. Now Arsenal are just another club owned by a single foreign investor.