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Will fans want a stake in Rangers?

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Flotation of football clubs in which fans are encouraged to take a stake have gone out of fashion.  The recent offer of a stake in Manchester United was a debt reduction measure aimed at (supposedly) sophisticated institutional investors.

However, Rangers are swimming against the tide.  Rangers chief executive Charles Green recognised that many previous retail offerings had resulted in losses.   He told the Financial Times, 'Some people will buy £500 of shares (the minimum investment) and put the certificate in a frame and put it on the wall,' he said.   Indeed, someone once had a business once offering single shares in clubs for this purpose, the ideal birthday present for a fan.

He went on to argue that many others would make far more substantial commitments in the expectation of making a long-term gain.  He told the Pink 'Un that clubs such as Arsenal and Manchester United had demonstrated that fans making small, long-investments could profit from holding stock in their favourite clubs.

It is up to Rangers fans to decide whether they want to buy the shares to back the club and to seek appropriate financial advice if they view them as an investment.   As a general point, I would observe that Manchester United shares became available for purchase in very different financial circumstances in which the club faced fewer immediate challenges than Rangers do now.   Indeed, before they became generally available, the story is that the former owners went round buying pockets of small shares from widows of former supporters, no doubt at a good price.

The prospectus calculates that it will take Rangers three promotions to return to the Scottish Premier League (SPL).   However, Mr Green said that the club could return as early as next season if there was a restructuring of the divisions, although that might not go down well with other Scottish clubs who want to see Rangers work their passage back.

Mr Green clained that if it took three years to return, there would be no SPL by then because it wouldn't survive without a television contract and there would be no TV contract if Rangers was excluded for that length of time.

Mr Green reckons that a successful flotation might see 20 per cent of the ownership in the hands of the club's backers, 20 per cent with fans and 60 per cent held by institutions.   Mr Green is a venture capitalist who was once chief executive of Sheffield United.

The existing backers of the club, 19 in all, originally raised funds at 50p a share to resurrect Rangers and have since committed a total of £12m following further private placings at £1 a share.    Their shareholdings will be diluted (reduced as a proportion of the total) by the new offer. They are hopeful that the new business might be valued at £35m and £50m.

The club has other fund raising plans.  They are negotiating partnerships with British Land, Cancer Partners, Ardmore Group and the Marriot and Holiday Inn groups.   They are building a megastore and two new bars in the stadium.   They have plans to rebuilt the defunct railway station outside the stadium.

They are looking for a new sponsor that may involve renaming the stadium whilst retaining 'Ibrox' in the title.  They are tapping into their large fan base by opening five new shops, including one at Glasgow Airport, one in London and another in Belfast.   They are continuing negotiations with adidas and Puma to manufacture the shirt for next season.

The new owners have recently entered a 51-49 joint venture with Mike Ashley's Sports Direct ,after the collapse of JJB Sports, to sell Rangers' products.   Mr Ashley, who has shown that he can bring in the Wonga, wants to take a stake in Rangers.

Rangers Share Flotation

I must say I am surprised you have a prospectus for this share issue as no one else has. The information which has been released appears mainly to come from the Rangers CEO Charles Green former deputy chairman of Panceltica, the short-lived Dubai construction outfit which left shareholders losing £55 million when it collapsed.

However turning to this latest Flotation Mr Green has stated that it is being done to increase working capital and to buy players. The club is currently under a player signing ban until January 2014 so it will be a while before that is required. A number of commentators believe that the money raised is essential to keep the club afloat and that there may be little left to pump-prime any of the dozens of expansionist schemes aired in recent weeks.

Rangers is currently barred from European Football for 3 years and the only way into Europe is by winning the SPL which Rangers won't get into for 3 years at best and then it would be another year, if they won the SPL, before they got into Europe.  However Mr Green has repeatedly publicly stated that Rangers would never join the SPL while he was CEO.  With no Euro football it is impossible for Rangers to financially survive even when it reached Division 1 of the SFL.  In the last few days Green has tried to get round the problem by claiming that the advent of Euro Super Leagues are upon us and Rangers would definitely have a place there. Well I've been hearing this one for decades.

The reality is that they are playing in Scotland which is a very poorly funded football set-up compared to England and although Rangers have a very faithful support there is only so much money can be wrung out of it and at some stage reality will kick in as to the long term future for all Scottish Football teams including Rangers and it ain't very reassuring.

Within days HMRC is expected to announce the result of their enquiries into £94 million tax non-payment of the old Rangers and a SPL enquiry is currently looking at various alleged financial-doping activities of the old club, connected to the HMRC investigation, which could results in at least 10 titles being stripped from the Rangers history.

Rangers went into administration with £130 million owed to creditors and its assets bought for £5.5 million by a consortium of mystery investors assembled by Green and Zeus Capital. BDO will be appointed as liquidators within days and one of the areas they might feel worth investigating is whether the asset sale price is acceptable.  If you ceck your propsectus you should find a warning about this kind of risk I would think.