These Shares Have No Place On The Market

Published in Investing on 4 November 2011

Returns have been poor and delistings have been common.

Now I know the London Stock Exchange (LSE: LSE) has seen its fair share of suspect companies trading on its markets down the years. Indeed, I'm sure we can all recall a few dubious dotcoms, biotechs and mineral explorers that, in hindsight, shouldn't have been able to enjoy a listing.

But there is one sector in particular that continues to harbour shares that really have no place on the stock market: football.

Sick as a parrot

Football is, as everyone knows, a funny old game for investors. As far as I'm concerned, clubs are generally run for the vanity and ego of the majority owner, whereby success on the pitch comes first and last, and players -- and not us outside shareholders -- collect all the cash. Die-hard customers that keep paying to watch awful performances, plus the industry's taboo on takeovers, are other factors that make football the strangest of investment sectors.

Thankfully the market has cottoned on to football's awful economics and has been more than happy to wave goodbye to many teams of late. Look back at this Fool article from 2002 and you will discover no less than 20 football shares -- including Manchester United, Chelsea and Newcastle United -- were trading at the time.

Some of those teams, such as Man U, Birmingham City and Aston Villa, were subsequently acquired by wealthy benefactors so they could spend their fortunes without awkward questions from the City. Most of those teams, however, delisted at penny-share prices. Southampton, Watford, Hearts, Aberdeen, Leicester, Bolton -- all were relegated from the market without trace.

Dragon at the Den

Indeed, the delisting count gained another name this week when Millwall Holdings (LSE: MWH) decided to quit the market.

Famed mostly for having entrepreneur Theo Paphitis as a former chairman -- and issuing so many shares that the count once topped 37 billion -- the London club accompanied the delisting news by extending its annual run of operating losses to at least 12 years.

Right now, just OFEX-traded Arsenal, Celtic (LSE: CCP), OFEX-traded Rangers and Tottenham Hotspur (LSE: TTNM) retain public quotes. However, the haphazard financial records of Celtic, Rangers and Spurs have caused their shares to drop anywhere between 50% and 95% from the highs reached way back in the 90s.

Meanwhile, a good run of profits and takeover fever at Arsenal have helped triple its shares since 2005. However, the current price of £13,600 is hardly indicative of a quoted company that welcomes outside investors. To me, that is just another reason why any serious investor -- and the market as a whole -- should have nothing to do with this sector.

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Comments

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LastChip 04 Nov 2011 , 6:55pm

Can't argue with this article at all - 100% correct.

4spiel 07 Nov 2011 , 2:12pm

The inclusion of LLOY and RBS I was surprised not to see

pickepics 07 Nov 2011 , 2:24pm

So why don't we draw the same conclusion on the large number of aspiring oilies and other drillers, not to mention the techies, who come in and drop out again? Or the plethora which do not easily fit into any category or sector? But some survive and a still smaller number go on to prosper sufficiently to join the main market. In the early days of football club listings who was to say whether some of those may have done similarly? The case needed to be proven and if they met the joining criteria, why not?

I have only ever been aware of knowing two football club shareholders. One Milwall and one 'Spurs, as it happens. The ball is the wrong shape for me so I take no interest. But these guys were very proud to display their certificates as a badge of belonging. They each acknowledged purchasing what would probably be a depreciating asset and having done so with their eyes wide open. Were there serious investors who dabbled with a view to making profits? Other than the likes of Bates (Fulham, Leeds United) who wanted to make productive use of the (property) assets surrounding a pitch? If so, they were no more gullible in my view than those purchasing an oilie based on the granting of an unproven prospecting licence.

There were probably other sectors in the past which have come and gone in the investing world for reasons of suitability as investment vehicles rather than because of obsolescence. No doubt there will be more in the future.

Interesting topic though. Thanks for the article.

BarneyCowshed 07 Nov 2011 , 2:27pm

Play/watch Rugby - Invest with the Rothschilds

Leave footie to the oligarchs, egomaniacs and superbrats.

ukgold 24 Nov 2011 , 12:31am

most "spurs" shareholders are fans of the club and have a very small holding sometimes only 1[one] share that has been given as a present or gift....

but

ukgold 24 Nov 2011 , 12:37am

sorry I hit the wrong button
I was going to say as from the 16/Jan/2012 SPURS shares will be delisted, a nil charge dealing service is being supplied by the club for small shareholders [under 1,000 shares] a letter to all shareholders has been sent out 21/NOV/2011
as the structure of the AIM market can not raise the sort of money that Tottenham needs to expand their stadium

Alan

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