For most businesses across the globe, the last few months have been one of the most bitter pills to swallow.
The effects of the COVID-19 pandemic, which continues to wreak havoc, have been felt in almost every sector – and sport is one of those to really feel the pinch with reality biting hard.
For Liverpool owners Fenway Sports Group, they have had to cope with a hit on each side of the Atlantic.
Coronavirus will have impacted Liverpool’s finances, of that there is no doubt, although they have managed to position themselves in such a way that they are able weather the storm better than some.
But it is in the United States that FSG have really seen first-hand just how damaging the pandemic has been to finances, their Boston Red Sox baseball franchise suffering huge losses, something seen across the board in Major League Baseball.
Trying to capitalise a business when big losses are sustained can be very challenging, and when you own two sporting organisations that want to be leading the race in their respective fields despite the financial hurdles that stand in their way, the struggle is two-fold.
That’s why the potential deal between FSG and special purchase advisory company (SPAC) RedBall Acquisitions, fronted by American billionaire financier Gerry Cardinale and baseball and statistical analysis guru Billy Beane is on the agenda.
The deal, which would see RedBall take around a 20 per cent stake in FSG and take the firm onto the stock market, would allow FSG to recapitalise their businesses to aid Liverpool, the Red Sox and Roush Fenway Racing, their NASCAR team.
The motivation for RedBall is to get a foothold in the European football market and build on their plans to add to a portfolio of clubs, much like Red Bull and City Football Group do for Leipzig and Manchester City, to add value to the business.
For FSG, Covid has given them the push to press the button on a new approach.
“FSG has the motivation now that they didn’t have a year ago or two years ago and that is the very substantial impact that Covid has had on their finances,” explained economist Andrew Zimbalist, a lecturer at Smith College in Boston, Massachusetts, who has been following FSG’s approach in recent years.
“I don’t know in detail on the income statement for Liverpool, but the kind of figures that are being thrown around for the Red Sox and other Major League Baseball teams is somewhere between a $70m and $100m hit.
“That is an enormous hit for any enterprise to take, particularly one that is held by few individuals. It is predominantly held by John Henry but there is a partnership of about 15 or 16 different people who hold different shares in it. It’s hard to capitalise an operation when you take that kind of a hit.
“By selling 20 per cent of their operation to RedBall they immediately are going to be bringing in about $600m dollars. It enables them to get over any cash crunch that might have been created by Covid.
“Covid has opened up a window of opportunity and I don’t think that will close right away because not only are there massive financial losses for the teams this year, Covids effects will go well into 2021 and there will be cash flow issues.”
So, the cash comes into the business at a time when capitalisation is extremely challenging in the midst of a pandemic. But how does it benefit Liverpool? Is it merely a tool to make other people money or one to invest into making sure the Reds have the ability to remain a force in the market despite the challenging economic climate?
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Zimbalist sees the benefits or business, team and fans.
“How it impacts fandom, I would say it is very positive,” he told the ECHO.
“What it means is fans of the team can have a direct ownership stake in the success of Liverpool. If I’m a Liverpudlian I buy stock in the team and now I have two reasons to support the team, the first one being that I’m a fan and the second being the extent that if Liverpool does well and the price of my stock goes up.
“That can create more avidity and fandom. That is a good thing for the owners but it can be a good thing for the fans also.
“This allows the owners to recapitalise their financial standing and gives them additional money to sign players and could serve as a lever to help strengthen the team.”
