More woe for the Club on two fronts, is the worst yet to come?

The news of Theo Walcott’s injury to his shoulder whilst on International duty is the last kick to the groin that this football club needed. His hereditary shoulder weakness will require surgery and the initial thoughts are that he will be out for 3 months. What have we done to deserve such ill fortune? We seem cursed by referees, mocked by the media, and now even supposedly loyal fans are turning on each other and the club. I have always taken the view that our perennial difficulties are character building, but this is now beyond a joke. there seems to be more woe every day that passes but is the worst yet to come?  Alisher Usmanov is closing in on his prize, being now only 30 shares away from his blocking percentage, and for me this news brings a feeling of distinct uncertainty.
Given that the opposition to Alisher Usmanov is established among the most vocal of fans, I am entitled to ask the question of those who in these troubled times, who are inclined to feel that Usmanov having a greater influence in the club is very much a positive, what it is they hope will happen. I have already clearly pointed out the doomsday scenarios of mega debt ridden clubs, and it is interesting to note that even Roman Abromovich has imposed new restrictions upon the usually excessive spending sprees of it’s football directors.
Is it a positive that someone with a massive fortune, may seek to buy in it’s entirety a well run club with a controlled and viable amount of debt, and turn it into a club saddled with potentially three times that debt burden? OK Usmanov may give us £50 to 60 million to spend upon players every year, but paying off that kind of debt would take several decades. The season ticket prices would have to rise substantially and we would have to lose the Champions league and FA cup games which are usually included in the price of the ticket.
The usage of the Emirates would have to increase, in terms of the pitch laying idle, from pop concerts every spare weekend, to perhaps rugby or American football tournaments like the new Wembley. No longer a bowling green slick surface I’ll wager and this could affect the ability of the players to continue playing beautiful football. So what is there to be gained from having this blocking share of 25% from the point of view of Usmanov and Moshiri?
The appointment of Stanley Kroenke to the Arsenal Board without there being a representative of Red and White is not as sensible a proposition as first thought. Mr Kroenke has just over half the number of shares owned by Red and White. In terms of natural justice, Red and White Holdings can perhaps claim that their interests are not being met. The precedent may hold for the Board being able to invite members, rather than a seat by rights in terms of share ownership, but other investors may feel uncertain about the value of their shareholdings given the power of the blocking share.
Usmanov can effectively impose a veto over any major restructuring of the club or it’s constitution. There will be a price to pay for his exclusion and snub with the presence of Mr Kroenke on the Board. There is clearly an end game, and only Usmanov knows it. I suspect that the price to be paid by all will in fact be a contentious one. The payment of share dividends. If in fact Usmanov has no intention to buy the club outright, then what better way to divide and rule? The existing shareholders would at last benefit from having their shares and would see them as a source of income. They would be more likely to support Usmanov, and in the future, he may then get his seat on the board.
But what of the consequences for the club? The payment of share dividends benefit only shareholders. The money has to be found from the existing income streams of the club, and is like having to pay off another debt. The impact could be disastrous for Arsenal Football club in these troubled economic times. An example of the impact of share dividend payments upon the running of a football club was highlight in 2000 at Aston Villa football club. The media headline Villa fans call on Board to scrap dividend payments was carried by the Independent newspaper.

The Aston Villa Independent Supporters’ Association (AVISA) is calling for the club’s 16,000 shareholders to vote against receiving a dividend at the annual general meeting on 8 September. If the vote fails, AVISA will try to encourage shareholders to return their cheques to the club – amounting to a total of around £700,000.
“If all the shareholders returned their dividends it would amount to a fair whack and be a help to the finances,” said Ian Robathan, shareholder and chairman of AVISA. “We also want to know how the Board [justifies] paying that dividend given the losses the club made last season.”

The share dividend amounted to 8.8p a share of the 11 million or so shares in circulation, which in todays economic climate would translate to around 12p. The financial director of Aston Villa at the time said the following


“Mark Ansell, finance director at Aston Villa, said that the club had considered cutting the dividend, or not paying one at all. “But after taking advice from our brokers and consulting our institutional shareholders, we decided to maintain it at the same level,” he said.
“Football club shareholders are long suffering and the dividend is a way of recompensing some of our shareholders who have seen their shares fall in value.”
Mr Ansell added that the dividend payment is important to institutional shareholders, who would consider selling their holdings if they did not receive an income from them. Aston Villa has 12 institutional shareholders owning 20 per cent of the club; a further 40 per cent is owned by small shareholders, most of whom are supporters.
“We are talking about a [sum] of £700,000,” said Mr Ansell. “That won’t make much of an impact when you consider players’ salaries and transfer fees – there are bigger issues.” However, Mr Ansell could not guarantee that the club would pay the same dividend next year.”

The dividend payments were subsequently suspended. In Arsenal’s case the share dividend would be substantially higher. If the current share price of £8,000 were translated into a 2% dividend then £160 would be payable for each share. In Usmanov’s case he would profit to the level of £2,483,680, nice work eh? Lady Nina Bracewell-Smith would get £1.6million per year and Danny Fiszman would get £2.3 million and Stanley Kroenke would receive a very healthy £1.0million per year. The small shareholders would receive between them £2.6million. Total dividend payout from the club? A cool £10.5million.
But what is £10.5million in an overall turnover in excess of £200 million? A mere 5% surely the prospect of this kind of payment is not worth getting upset about? Well in real terms, that might be right, but would you be comfortable with that? Especially as the Directors would be rewarded for not putting vast sums of money into the club at a time when arguably we could have benefited from a cash injection
How far Mr Usmanov has come since the 30th August 2007 when David Dein disposed of his 8,952 shares for a rumoured cool £70 million. His initial 14% holding now stands at 15,523 just shy of the 15,555 blocking share, which would allow veto of special resolutions which require a 75% majority in favour in order to allow them to pass. The symbolic n ature of this blocking share is in my view less of a veto in hiding, and perhaps more of a very public bargaining chip with regard to the possible future payment of dividends to people who don’t really need them.
Comments invited
Fabregas the King.

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