Newcastle United: Is the club really worth £400m?

(Photo credit: Glasgow Celtic)

Upon crossing the mythical 40 point safety barrier in the Premier League table, reports that Newcastle United are back up for sale have been quick to resurface. While surprising nobody who knows of this ongoing saga, a £50 million increase in the club’s valuation has raised eyebrows.

With ludicrous sums of money becoming tightly woven into the fabric of the modern game, £400 million may seem like a bargain at first glance. Two Neymar’s or perhaps more pertinently, just over 3.5 times the value of the current squad Newcastle United own according to Transfermarkt seems like a reasonable price. 

With the seventh largest stadium in the country, a large global fan base and a hint of top-flight stability to lure buyers, might Mike Ashley be able to cash out his interests for just such a sum?

A billionaire’s playground

The Premier League has been regarded as something of a plaything for the rich for more than 10 years now. 

This was also the time that Mike Ashley entered the scene on Tyneside. However, he highlighted how much this has changed during his tenure during a rare interview at the beginning of this season.

This was most probably a ploy to put the club in the shop window by an owner who has tried and failed to sell the club more than once in recent years. The sentiment, however, appears to ring true. 

The sums of money involved in today’s game far outstrip the figures of 10 years ago and this is, after all, a club who have not broken their own player transfer record since 2005 when former chairman, Freddy Shepherd, still ruled the roost.

The ever-inflating balloon

As has been widely reported, the current TV licensing deal has made a huge cash injection into the Premier League clubs coffers. With increased player transfer prices, higher operational costs and more money being paid to agents, the vast wealth harvested by these clubs is quickly lost from their grip.

Despite this, a financial report published by Deloitte earlier this month notes that Premier League clubs made a record £0.5 billion profit before tax over the last financial year. 

Although these calculations don’t take player transfers into consideration, this does present owners with a significant opportunity to turn a profit.

With the next licensing deal set to grow further still, there seems little reason why this can’t continue to prove the case. Due to begin in the 2019/20 season, the next TV deal will see a rise from 168 to 200 of the Premier League’s 380 scheduled matches being broadcast. 

With streaming services offered by the likes of Amazon, Netflix and Facebook yet to enter this market and global TV markets expected to continue growing, the short-term outlook appears financially healthy for the Premier League.

A time to sell

Despite the bad feelings which run deep on Tyneside regarding Mike Ashley, the Newcastle owner has re-balanced the accounts of a club who were woefully administrated prior to his involvement. For a businessman who puts numbers first, Ashley will recognise the opportunity which is currently presenting itself.

As a club looking more certain than not to finish in the top half of the Premier League, the consensus is that they’re currently performing to the peak of their abilities. 

If an additional £50 million can be added to the club’s value from them gaining this stability, it can also be quickly lost if the club’s future once more becomes endangered.

Furthermore, what is arguably Newcastle United’s biggest asset at this present time is also precariously balanced. Rafael Benitez has only one more year remaining on his contract with the club. Losing him is likely to result in a significant hit on the club’s perceived future prospects and, therefore, the club’s value.

Media blackout

Throughout the whole of this protracted sale, one thing has proven a constant. 

There has been a significant lack of reliable information put into the public forum by any of the involved parties. A lack of solid sources being quoted to back up any media claims has only worked to cloud the issue and exasperate the club’s fans.

For all intent and purpose, the club is only worth the amount that someone is willing to spend. If Ashley wishes to try to and get the best possible price for his club, this is entirely his own prerogative.

With the club currently stripped and ready for sale, boasting a relatively small wage budget, plenty of advertising potential in replacing the Sports Direct logo, a streamlined hierarchy and the fastest growing brand in world football, Newcastle offers a tempting investment for any interested parties.

A new risk

But while potential is one thing, the current reality shows something else. The lack of an effective academy at the club, a training ground in need of improvements and a first team in need of serious investment to reach the next level means there would be much work and much money needed from a potential new owner. 

The coming World Cup will provide a cover in which negotiations can proceed without too much media glare, however, the Premier League’s shortened summer transfer window this year leaves little time for a new owner to act.

It’s also worth remembering that the club has only officially been back on the market for around six months. However, it took Everton four years to find a suitable investor in the shape of Farhad Moshiri. 

The curious tale of Everton should also warn fans that even if a takeover of £400 million, or any other sum, does go ahead this summer, good intentions and a significant transfer budget are no guarantee that life will improve. 

The North-East’s sleeping giant can finally be woken from its slumber this summer but sometimes it’s best to let sleeping dogs lie.

What do you think? Are Newcastle worth £400 million? Let us know by commenting below.