Juventus’ On Field Performance has “Significant Financial Implications” for Shareholders

Juventus

Cristiano Ronaldo’s hat-trick (last Tues. night) gave Juventus Football Club S.p.A. a 3-0 victory over Atlético Madrid (in the 2nd leg of their round of 16 matchup) and pushed the club through to the UEFA Champions League quarterfinal round on aggregate (3-2). CR7’s performance also had “significant financial implications” for the publicly traded Italian football club. Participation in the next round guarantees “The Old Lady” another $18 million in UEFA prize money and ticket sales (team sold a record $6.2 million worth in last round), and should Juventus go on to win the tournament for the 1st time since ’96, the team would stand to take in at least $57 million more ($39 million from UEFA, +/- $18 million in gate receipts & hospitality). JUVE shares climbed by as much as +30% on Wednesday (3.13.19), before closing the day +18%; they’re up +23% ($1.70) since Tuesday morning’s open.

Howie Long-Short: There is a volatility to the share prices of publicly traded European football teams that you won’t find in U.S. sports. Troy Brazell, CEO of Optima Sports Group, explained “while U.S. investors are looking for long-term capital gains, the shareholders of these thinly traded penny stocks are emotional fans looking to capture the excitement associated with being a part of a winner.” 

Publicly traded European football teams are also owned by fewer individuals than a common stock like MSG (Knicks/Rangers) or RCI (Maple Leafs/Raptors), so their shares are going to be more susceptive to the whims of the irrational emotional investor. JUVE’s strong rally has been super-charged by the low expectations investors had heading into the 2nd leg last week, but historically speaking the biggest fluctuations in the market come after a bad loss; investors simply become more risk adverse after losing.

Juventus’ value has increased by more than $225 million since the Borsa Italiana opened on Wednesday, +/- 150% more than Juventus would claim in prize money if it were to win the tournament, but that doesn’t mean the share price is now overvalued. Troy says that winning the Champions League would boost sponsorship revenues and positively “impact everything from ticket sales to merchandising and television revenues moving forward.”

Winning on the field isn’t the only way for a publicly traded European football team to move the share price. “The introduction of a new stadium, signing of a star player or the announcement of a high-profile match against a team that would not normally appear on the schedule can all excite the masses; and remember, these are global fan bases.” JUVE shares are +140% since the team acquired Ronaldo.

Round of 16 results also impacted the share prices of the other publicly traded teams participating in the Champions League. AFC Ajax (AJAX) and Manchester United (MANU) shares climbed +8% and +2% respectively, as both teams advanced to the quarterfinal round. Borussia Dortmund (BVB) shareholders weren’t as lucky. The stock price has fallen -10% since the club was bounced by Tottenham Hotspur.

Fan Marino: Some Champions League team executives are said to be meeting with UEFA officials tomorrow to discuss “radical changes” to the league format – including the introduction of a promotion/relegation system (4 teams/year) that would benefit the “biggest and richest clubs and make it harder for smaller teams to qualify.” As it currently stands, participation is based on where clubs finish within their respective domestic leagues during the prior season; a format that has resulted in Arsenal, Manchester United and AC Milan all failing to qualify in recent seasons. The league is also said to be considering moving games from mid-week to weekends, a move that would encroach on the territory of the national leagues. Needless to say, Richard Scudamore (EPL) and Javier Tebas (La Liga) are not supportive of the ideas. No changes are expected to be implemented before the 2024 season – last month the ECA and UEFA agreed to extend the league’s Memorandum of Understanding for 5 years.

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Author: John Wall Street

At the intersection of sports & finance.

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