Michael Reeves
Yesterday’s announcement of “investment will help fund ongoing running costs within the club and avoid more debt on the club’s balance sheet” will be applauded by many and a sign of further intent from the owners but the reality could be very different – is the club heading towards a £30m sale?
This is the fourth share issue in the club in the past five months and takes the majority shareholding of Swansea LLC up to 82% ownership of the football club. As a direct result – and the one of interest to the fans – is that the Trust shareholding has now been diluted to 11.5% total shareholding, of which 2.7% is the Class A shares that twelve months back made up 5% shareholding in the club.
It is fair to point out that that 2.7% shareholding does hold 5% of the voting rights of the club but as a shareholding it is diluted in line with Class B shares every time there is a further share issue.
There has been some strong rumours around Swansea for some time that the club has been touted about for sale and of course more recent rumours has suggested that Nigel Morris is about to be confirmed, as a minimum, as an investor in the club.
Yesterday’s announcement added to those suggestions with further rumours that this was merely just a further step designed to ready the club for a sale to Morris with the majority owner stake now valued at a touch under £25m based on current valuations of the club.
There is, of course, nothing that we like more than a conspiracy theory when it comes to investment into the club but it does appear that we are coming further and further away from the fan owned model that we craved and valued for so many years.
It is also possible that the money was needed to prop up the club finances which should be ringing many alarm bells with the fan representation on the board that we continue to hemorrhage money on a regular basis which would certainly account for our complete inactivity in the January window. Either way it shouldn’t just be applauded without a question as to what is happening in front of us – the club is either in a very precarious position or there is preparation for a sale.
When “Non Dilution” is actually dilution
Yesterday’s Trust statement that accompanied the injection read “With the subsequent investments made in the club, the Trust’s Class A permanently non-dilutable shareholding remains at 5% of course, while our Class B shareholding has been diluted to about half the level at the time of settling the legal dispute. This dilution over time was a known reality at the time of settlement as the Trust simply does not have the financial resources to avoid dilution of B Class Shares by matching new investment monies coming into the club.
“Today’s changes in no way affect the Trust’s ongoing involvement and influence in the club, and our position as a Board member of the club that is permanently protected through our permanent non-dilutable A Class shareholding. We continue to engage at all levels and the dilution has no material impact on that or the work that we are doing. ”
Non-dilution is a very misleading statement given that the Class A shareholding is 47,500 shares. By default the percentage of the club this relates to has been diluted to 2.7% although the voting rights of that shareholding remains unaffected.
It is therefore factually incorrect to state that the 5% class A shares cannot be diluted as they can, and they already have been. The Memorandum and Articles of the ownership state this and it would also be correct that should there ever be a dividend payment then the dilution would impact that as well. The Class A shares do retain – as mentioned above – the rights of a 5% shareholder but this does not include dividends or a guaranteed 5% ownership.
So what next?
It genuinely is difficult to predict the next step although the rumour of Morris will not be without substance. It seems inevitable that he will be playing a part in the club going forward and the smart suggestion is that he will be involved in the club at some point in the near future with strong suggestions being that his involvement will be by acquiring the shareholding of Swansea Football LLC which would, in turn, have no impact on the other shareholdings within the club.
When and how this happens remains to be seen but it is certainly the case that there was more to yesterday’s announcement than initially met the eye.
We think!
So who is Nigel Morris?
Morris is the co-founder & managing partner of QED Investors. He currently resides in Virginia, USA but he grew up mostly in England, claims to be 1/2 Welsh, obtained his MBA from world-reknown London Business School with distinction, where he’s a Fellow. He’s a Fintech venture capitalist, was named by CB Insights in the Top 100 Venture Capitalists in 2019, and was a Midas List member in 2020 & 2021. He currently serves as Chairman of Clear Score & Mission Lane, and serves on the boards of numerous fintech & technology companies that are focused on disruptive, high-growth, financial services companies. His company QED has made multiple unicorn investments, including Credit Karma, Nubank, Avant, SoFi, Klarna, GreenSky, and AvidXchange. His cv has board stints with Capital One, The Economist, Brookings, National Geographic, Klarna, Braintree, Transunion, and London Business School. Quite impressive!!
Oh dear seems yet another of the distant American money movers. That sort of cv shouldn’t impress anybody with a love of the club who wants to see grass-roots investment in the match day squad, rebirth of our previously excellent academy, more staff employed in the stadium and out in the communities, and a quality team with realistic ambition of promotion.
History tells us that USA ownership of British football clubs never works out for the club and its supporters. It is a simple fact that SCFC has been on a downward spiral since these owners took over. One example: since relegation alone we have sold £108k worth of players yet spent only around £15.8k on replacements. That’s a hell of a profit. Notwithstanding Covid which affected all clubs, it is no surprise that without meaningful reinvestment, we are in our worst league position for well over a decade. To think just 10yrs ago I was at Wembley watching a Laudrup team playing wonderful football, and then ripping Valencia apart.
So if ‘USA Nigel’ proves me wrong then brilliant. But I strongly suspect he won’t.
Really worrying to be fair, club could and would lose its whole ethos and feel
This news is disturbing on several fronts .It is hard to believe that the owners latest ‘investment’ is not self – serving.It is even more worrying to think that the club might need all of this extra money to clear a debt psrticularly when we have no high earners on the books and live so frugally .
We seem constantly to live on the edge and if the current owners are still in place you have to wonder how they will handle the probable sales of Piroe ,Obafemi and possibly one or two others and how much of that money will come back to the manager to buy replacements.
It’s hard to believe that the Supporters Trust rolled over so easily and have passed this investment off as needed for cash flow when it’s clearly the owners increasing their stake ready for the sale
I am also staggered to learn that the lines of non dilution rapped out by the anonymous Trust board is nothing more than a lie, their positions have been untenable for some time now but yet they continue to suck the freebies out of the club on a weekly basis
Whoever this Morris bloke is let’s hope he shunts them out pronto