Most sports fans will never have a chance to own into a professional franchise. From a cost standpoint, the barrier to entry is simply too high. Mark Ciociola, along with business partners Steve Paris and Trey Fitz-Gerald, are trying to change that. With a minimum investment of $500, fans can now buy equity interest in FC Pinzgau Saalfelden (FCPS)—via Fan Owned Club, Inc.—on the regulated crowdsource platform WeFunder.com. The FCPS Managing Director is selling prospective investors on the unique experience associated with owning a part of a team and insists there is an opportunity for shareholders to profit financially as the third division Austrian soccer club achieves success on the field and rises through the various divisions. But one prominent sports banker said “getting from here to there” in European soccer leagues is much easier said than done and while not impossible, suggested the team’s chances of gaining promotion—without losing a fortune of money in the process—were akin to an extreme long-shot winning the triple crown.
Our Take: The Green Bay Packers are the only big four sports team with a fan ownership model. Unfortunately, shares sold in the NFL club are more of a novelty item (shareholders get a certificate) than an investment asset. They can’t be traded or sold, their value does not increase, and there are no dividends paid. Packers fans are buying shares simply for bragging rights.
Back in January 2019, we wrote a story about Chattanooga Football Club (of the NPSL) becoming the first U.S. sports team to take advantage of reformed securities laws that now permit non-accredited investors to buy into sports organizations via an online crowdfunding platform. Ciociola says the biggest difference between buying into the Tennessee-based team and his club is the lack of “potential for upward mobility, from an investment standpoint, [within the U.S. soccer ecosystem. Chattanooga FC] is always going to have similar revenue [figures] and a similar [sized] season ticket base [because] even if they win their league, they’ll still be in the same league again next year.” By contrast, the promotion/relegation system in European soccer enables FCPS to “work [their] way up,” “gain access to the biggest football tournament in the world” (save the World Cup) and in theory grow in value. It should also be noted that while Chattanooga FC shares do hold value, shareholders do not maintain liquidation rights (Fan Owned Club shareholders do).
While opportunities for the average fan to buy into U.S. clubs are limited, several prominent European teams are publicly traded (including Manchester United and Juventus), and there are entire leagues on the continent (see: Bundesliga) that limit commercial ownership in an effort to ensure the clubs’ members maintain majority control (see: 50+1 rule). Ciociola says the opportunity for Fan Owned Club shareholders to get a “behind-the-scenes experience” (think: monthly calls with head coach) is what makes investing in his club different.
There’s certainly appeal in having a chance to peek behind the curtain of a pro sports team, but it’s hard to suggest an investor seeking positive returns should invest in FCPS over the larger clubs. Truth be told, from an investment standpoint “they’re both dumb,” the sports banker said. They are all really just plays to emotion, but as he notes, shares of MANU and JVTSF are at least likely to still hold value in 3 years. That’s not a given for FCPS. “Statistically speaking, [the club is] unlikely to make it. The odds of them running out of money are very high,” he said. It takes a lot of capital for a club to move up a division.
To be clear, our banking source wasn’t trying to insinuate that Ciociola’s aspirations of playing in Europe’s top leagues are unobtainable (see: Leicester City and/or Sheffield United). He just wanted to be sure that those investing in the team understand that they are “buying a lottery ticket. There’s always a hope and a dream, but a third division club [reaching the Champions League] is highly unlikely, and it’s probable they’ll lose money trying.” That should help to explain why all of the funding raised to date has come from “private individuals” (as opposed to smart money).
Of course, money is the reason Ciociola and Co. are in Saalfelden (the team’s home market) to begin with (aside from the locale’s natural beauty and central location). The American businessman explained the Austrian soccer league receives “five berths into Champions League and Europa League,” and it costs less to access those tournaments from within the country. While English, French and German teams are “spending hundreds of millions of Euros per year,” clubs in Austria’s top league are spending “tens of millions per year” to compete.
FCPS is selling shares at WeFunder.com/fanownedclub ($10/per). Once the initial sales period concludes, shareholders will be able to trade or sell shares on either a public or private U.S. exchange (remains TBD). In theory, it is feasible for a third division club to make the jump to the second division, increasing its value in the process (even if it never makes it to the first division or Champions League). But FCPS may need to climb even higher within the Austrian football ranks for those buying in today to generate a positive ROI. Shares are currently selling at a $26.3 million valuation, rich considering a team near the bottom of the second division sold for just +/- $13 million Euros (+/- $15 million) last year. With that said, FCPS is believed to be working on restructuring founders stock allocations in an attempt to bring down the team’s pre-cash valuation.
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