Fernando González Urbaneja | For years now, professional football has been experiencing a rise in value fuelled by television rights and by new entrants to the sector (sovereign wealth funds and private equity) which are increasing the value of the spectacle to the point of a typical bubble, which will burst when there are no assets left to be fattened. Spain’s top clubs have gone from a situation of bankruptcy ten years ago to a financial position of a certain equilibrium, albeit with debt risks that may become unaffordable.
In this context, the most striking thing now is the financial race of Barcelona, which between the so-called levers (sales of assets) and alliances with risk funds that smell of scorched earth is writing a story that will one day deserve to be presented as a “case” in business schools: a case of success or disaster. Time will tell.
The asset sales operations (levers) that Laporta’s Barça has formalised in order to be able to sign players means hollowing out the club in order to obtain tangible and immediate liquidity to be able to make signings. It loses future income and compromises the integrity of the club’s assets. It even goes so far as to sell the same thing several times over. All of this is happening with a limited transparency that is only justified because they are free market operations in which the buyers assume the risk and impose confidentiality.
The latest big deal, the so-called Barcelona Media, proposes to go to the global capital market from the Netherlands, specifically the North American market, with a valuation of one billion dollars for this marketing activity. What lies beneath such a valuation? Basically the future exploitation of intangible assets, potentials, image rights… for the next thirty years that promise profitability. Hypothetical promises that depend on uncertain factors and fashions that may be fleeting.
The basic balance sheet of FC Barcelona is worse than deficient. Bad liquidity and worse solvency; it is sustained by selling the future to pay for the past, to one buyer (hedge funds) who are experts in buying and selling, i.e. acquiring, embellishing and endorsing another audacious investor.
The owners of Barcelona (in theory) are the shareholders of the “sports association” that has so far resisted becoming a public limited company like most other football clubs. The financial situation of the Catalan club is the most typical one to force the conversion into a limited company, but nobody dares to urge it, nor to demand it. What do the members own after the sales (levers) formalised over the last few months?
That some daring and visionary investors value part of Barça’s potential assets at a billion dollars is striking, and deserves explanations, independent and professional reports, that justify such a valuation of one of the sources of income of the club, which is overwhelmed and unable to register the players it has contracted.
What accompanies the club presided over by Laporta is tumultuous and difficult to explain. It smells like a bubble, like pedalling away from the heat towards the centre of the fire. Maybe one day the accounts will work out, but it is not clear; it is barely credible unless one has blind faith.
