A Groundbreaking Opportunity to Invest in a Sports Team

Author

Adam Katz
July 10, 2024

The Rise in the Valuation of Sports Teams

The value of sports franchises has seen exponential growth in the past couple of decades. The NBA Champion Boston Celtics were just put up for sale and carry an estimated value north of $5 billion - the current ownership group bought the team for $360 million in 2002. Last year, Mark Cuban sold a majority stake in the NBA’s Dallas Mavericks for a reported $3.5 billion. He originally bought the team for $285 million in 2000, and still retains a 27% share. Chelsea FC, one of the biggest clubs in European soccer, was sold for $5.2 billion in 2022 after being bought for $172 million in 2003. There are countless other examples of the recent meteoric rise in the values of franchises, across sports, leagues, and countries.

Sports franchise value growth from 1996-2021 (Sportico)

It is no surprise that over the past few years celebrities and former athletes have started to buy in, from LeBron James (stakes in the Boston Red Sox and Liverpool FC) to David Beckham (Inter Miami CF), Magic Johnson (L.A. Dodgers, L.A. Sparks, LAFC), Tom Brady (Birmingham City FC), Natalie Portman (Angel City FC) and many others. Perhaps the most publicized story is that of actors Ryan Reynolds and Rob McElhenney, who bought a lower-tier soccer team in the UK, Wrexham FC, for $2.5 million in 2021, and have shepherded them to two straight league promotions and a current value of $11 million.

For retail investors, however, the ability to invest in a sports team has been limited. Most famously, the Green Bay Packers sell shares to the public, but those shares are symbolic - they pay no dividends, have no equity share and cannot be resold. There are also a few teams that are publicly traded, such as the Atlanta Braves, Manchester United, and the New York Knicks and Rangers (Madison Square Garden Sports - $MSGS).

Why Invest into Sports Teams?

Sports franchises have been some of the best investments in the past decade, and there are no signs that this rapid growth will slow down anytime soon. In the era of streaming, the audience demand for live sports has become more attractive to media companies, and the amount paid for broadcast rights has been growing exponentially. Sports teams have some of the strongest and most enduring brands in the world, and incredible customer loyalty.

Sports ownership also offers the possibility of asymmetric returns, with championships, the acquisition of a prominent player, or promotion to a higher league leading to significant growth in franchise value. For example, when the San Antonio Spurs drafted phenom Victor Wembanyama last season, it led to an estimated 63% increase in the value of the team - meaning his acquisition was worth over a billion dollars.

Average team values have skyrocketed in the last decade

Soccer teams, in particular, have become a hot investment, as the sport becomes more popular in the U.S. as the country prepares to co-host the World Cup in 2026. Soccer great Lionel Messi’s move to Inter Miami CF last season drove increases in team valuations in the MLS, and the women’s U.S. professional league, the NWSL, is also seeing dramatic growth in franchise values. There is a reason that institutional investors, private equity firms, and notable athletes and celebrities, have all gravitated towards investing in soccer teams.

The Opportunity to Own a Sports Team

Investment platform Republic is offering a groundbreaking opportunity to own a true equity stake in a professional sports franchise - Watford FC, a London-area soccer team that has spent six of the past ten seasons in the English Premier League, and the last 26 seasons in the top two tiers of English football. Watford is offering up to 10% of its shares to the public, at a valuation of £175 million ($222 million), with a minimum investment of just $127.60. The plan is to use this infusion of capital to improve the team’s roster and make a push for promotion to the EPL, which would boost the club’s value. Already, the team has raised over $6.5 million from over 4500 investors and growing, as the unique offering has generated droves of media attention.

Watford was founded in 1881, has spent a total of eight seasons in the Premier League since its founding in 1992, and has twice reached the final of the FA Cup, the oldest competition in England, most recently in 2019. It was owned by legendary musician Elton John from 1976-1990 and again from 1997-2002. Current owner Gino Pozzo bought the team in 2012 and led it back to the Premier League by 2015. He also owns the Italian team Udinese, which has spent 29 consecutive seasons in Serie A, the highest league in Italy. In the most recent season, Watford finished 15th in the Championship, the second tier of English football and will play again in that tier in the upcoming season. This investment opportunity is a chance to get in before a potential return to the Premier League and the valuation rise that goes with it.

How Does English Football Work?

The English football system is a series of leagues, with the English Premier League (EPL) at the top, and semi-pro and amateur leagues at the bottom. The EPL is the most valuable football league in the world, with revenues hitting an all-time high of £6.1 billion ($7.7 billion) in 2022-23, buoyed largely by media rights that have grown to £3.2 billion ($4.1 billion). Each season between levels, three top teams get promoted to a higher level, and the three bottom teams get relegated to a lower level.

The English Football Pyramid

The most straightforward way for an English football team to increase its valuation is to achieve promotion, with a move to the Premier League being a financial boon. For example, Brentford FC, which was worth around $7 million when it was in the third tier of the pyramid in 2012, reached the Premier League in 2021 and is now worth as much as $500 million. The club saw its revenues grow from $19 million the year before promotion to $175 million the year after. Third-tier team Ipswich Town was purchased in 2021 by private investment firm ORG for £40 million, and after just three years, they have secured two promotions and will play in the EPL next year for the first time since 2002. In March, ORG sold a 40% stake in the club for £105 million, valuing the club at over six times what it originally bought it for after just three years. Of course, relegation can have the opposite effect on valuation, with teams losing value when they drop to a lower league.

Teams also generate revenue developing young players and then selling them to bigger clubs on the transfer market. For example, in 2023, Watford sold Joao Pedro for $36.3 million after originally acquiring him for $11.8 million in 2020. Smaller clubs can then use that revenue on their current team, so a club with savvy scouting and development can see rapid improvements in their fortunes.

Why Buy Shares in Watford FC?

Watford is in a strong financial position, which should appeal to potential investors. In the 2022/23 season, the club recorded a pre-tax profit of £24.1m, which is believed to be the highest ever at the Championship level. Watford’s scouting and development network has generated a net profit of $146 million in player sales over the past four seasons. They also saw a 239% growth in commercial revenue from 2018-2022, the fastest rate for any club in European football, with partnership deals that include American Airlines, ASUS and Budweiser. If the club were to achieve another promotion to the EPL, revenues and the value of the franchise would increase substantially.

The team has a long history, a recognizable brand, and a sizable fanbase, with a social media presence of over five million followers, ranking #16 in England, ahead of many Premier League teams. Attendance has averaged 90% capacity over the past two seasons, and season ticket renewal rates have topped 90%, even during the recent seasons at the Championship level. The club and its stadium, Vicarage Road, was previously recognized for Best Hospitality in the Premier League, and its playing surface was previously named the Premier League Pitch of the Year.

The structure of this opportunity allows the club to potentially offer investors liquidity in the future on a regulated secondary market. Shareholders could also receive exclusive offers, and there are current perks for different investment levels, the full details of which are on the offer page.

Being able to own true equity shares in a sports team as an individual investor (note that this offering is only available to accredited investors in the U.S.) is a unique opportunity with high upside. It offers exposure to a burgeoning asset class with a low buy-in and potential liquidity, features that are simply not available elsewhere. The opportunity is only going to be open for a short window, so now is the time to get involved.

Not investment advice. Investing involves risk and may result in total loss of invested capital. Past performance does not guarantee future results. Users must meet Republic’s criteria to invest.