Motherwell FC - A Thread For All Seasons

[Cedrics Mighty Well Army]

I'm very much in favour of re-negotiating with EB. Let's see if we can improve things at our end without just dismissing the guy as a charlatan.

It may work out. It may not work. But give it a chance.

[Cedrics Mighty Well Army]

Now for something serious: should I spend my pocket-money on this flag?

Edited June 14 by Cedrics Mighty Well Army

[Wellin]

54 minutes ago, welldaft said:

I understand. It may well have been a lot closer than expected for the reasons you mention.

The good news however (hopefully) is the original deal looks to be dead in the water and a new deal being worked on as we speak. So again if nothing else this forum and other voices have helped influence this. 

If the original deal looks to be dead in the water then there's not going to be a vote? 

[one m in Motherwell]

30 minutes ago, Wellin said:

I was agreeing with you 

 

I'll be honest, these last few days have been a bit of a minefield - my apologies!

[Wellin]

3 minutes ago, one m in Motherwell said:

 

I'll be honest, these last few days have been a bit of a minefield - my apologies!

It's ok. I could have worded what I said better. 

[Vietnam91]

Sent to the club last night:

Quote

I will start by acknowledging I am not an account or have any background in it. It is why I sought counsel from friends who operate in senior roles in different accountancy specialities. The exchange yesterday has sat poorly with me since and I keep returning to it.

I would note using EV to quality the business as a method that was selected of the clubs choosing. It is why I sent in my first email I linked the reference source I used. 

It is very clear the way to derive EV is to:

“calculate market capitalization—if not readily available online—you would multiply the number of outstanding shares by the current stock price. Next, total all debt on the company’s balance sheet, including both short-term and long-term debt. Finally, add the market capitalization to the total debt and subtract any cash and cash equivalents from the result.”

(source: https://www.investopedia.com/terms/e/enterprisevalue.asp)

As our stock is not publicly traded I understand we have to use equity and EV is expressed (in our case) as Equity + Total Debt – Cash/Cash Available. It can also be expressed as Equity + Net Debt.

I wish to return to our EV stated as £7.7m if I may. While you are correct, I can only use published accounts from one year ago and much may have changed since. I note the equity of Motherwell FC determined by Wild Sheep Sports of £3.9m includes £3.8m attributed to the covid and WS loans. I still cannot understand even from your explanation that;

“I can also advise that the biggest difference between your number and the club’s valuation is connected to the complex accounting of the government loan.”

The question of how the cash/cash available of £3.59m did not seem to factor especially as it is an intrinsic part of the formula and not an insignificant sum (in fact in excess of the £3m covid loan which would have had at least two repayments made reducing its liability by 10% or £300k to £2.7m outstanding. The complex way a loan is accounted for is not expanded upon in the definition of EV, it makes it clear that total debt and cash can be found in the balance sheet.

I therefore looked back at the last 5 sets of published accounts and had them checked by a professional, they advise these figures and terms used to describe are correct:

YEAR END	DEBT		GROSS DEBT	LIQUID ASSETS	NET DEBT
	Sort Term	Long Term		Cash & Cash Avail
May-23	£          1,938,472	£          1,542,666	£   3,481,138	£            3,585,784	£             (104,646)
May-22	£          2,633,730	£          1,534,928	£   4,168,658	£            5,759,943	£          (1,591,285)
May-21	£          1,833,670	£          1,458,799	£   3,292,469	£            7,314,289	£          (4,021,820)
May-20	£          2,510,434	£                50,000	£   2,560,434	£            2,313,619	£               246,815
May-19	£          2,170,152	£              318,637	£   2,488,789	£            1,834,044	£               654,745

May I suggest an exercise where the club demonstrates EV in each of the past 5 seasons. I think that will allay a lot of undue conjecture and negative accusations. The EV in May 2021 would be very interesting to see. From what I understand if this was 3 years ago, an equity value of the club of £3.9m would require an investor to pay approximately £11.7m for 100% of the club if a EV of £7.7m was to be maintained. With 50% = £5.85m.

One of those I sought for professional overview, a management account specialising in acquisitions advised me “you value a business off sustainable profit or cash generation. Only in a distressed situation do you start valuing the balance sheet.”, another conveyed “that is correct for a normal business but I don’t know how they apply that football club that doesn’t have a sustainable profit.”

 

Furthermore, the club press release stated the following”

“A multiple of maintainable profits – this can be profit, profit before tax or EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation- sometimes referred to as a measure of the free cash flow a business generates).

We have operated at around breakeven over the period since we moved into fan ownership.

There is no standard multiple for businesses – especially football clubs – there generally is a range – eg pubs might go at 5/8 times profits.

But to get to £7.7m EV for MFC would require something like stable EBITDA of £1m and a multiple of 8”

Upon first reading to me this seemed odd from an entity trying to make itself as attractive as possible to investment to convey something for want of better words sobering and downbeat.

Again, I turned to counsel:

“That reads to me like something a buyer would say to devalue than the owner.”, another added “it doesn’t mean it’s not true however, it is possible the club agree to that with the valuation because they won’t get a better offer …. Or don’t want another offer.”

Again, this did not sit well with me. I would strongly suggest as part of the announced comprehensive update scheduled for early next week you maybe address the following. Armed with everything above it would be fair to look at it with surrounding context and not unfairly surmise a potential reverse engineering of a figure to make valuation palatable and therefore acceptable plus no impose any additional financial requirement on a purchaser if they have indicated their red line top limit. An EV of £3.8m one year ago needs something drastic to happen to become £7.7m within one year.

I would be interested to know the club’s response to the observations above in full.

Response

Quote

I can confirm the subject of the valuation of the club will be covered along with many other subjects in next week’s update.

I’d direct everyone to look at what my accountant acquaintances said.

[Al B]

1 hour ago, Neil86 said:

That is almost certainly playing a part in it, even towards the end of last season, I did notice a bit more happening on match days. EB makes a good point about making it more of a day out as opposed to turn up for the game and bolt, That is something that shouldn't be too difficult even at the most basic level. But we still need to see a huge deal more done.

On this point, a huge frustration of mine (I specifically notice as I leave via the gate right next to it) is the amount of times I've come out of a game and the club shop is already closed. Mind boggling.

[Fergie79]

10 hours ago, Erik Barmack said:

@David1979, thanks for these questions.  I'm going to try to answer as many of them as I can briefly.  My ask here is that we can expand on many of these topics, and that I'm sticking to 2-3 sentences per topic in the name of not turning this thread into a Tolstoy novel.  So here goes, in terms of long term projects, here are a few considerations.  This is by no means an exhaustive list.  And I'm pretty convinced that the best ideas will come from interactions with TWS Board and fans who are passionate about the Club.  Secondarily, my theory from Netflix is that you need to have a lot of ideas, and you need to "fail quickly" on the bad ones, and that ideas that are risky, low-cost and fast, with some upside should almost always be tried.  So when we talk about "success," I'm not going to give you great answers on each project, but each one should have enough potential to change the business by 100k pounds+.  Paramount to this strategy is that we should always have a queue of new ideas incoming that are 10-20 deep, and that mostly improves based on what's worked already.  That (partially) answers your "measure of success" question, which is that good businesses should be constantly trying and failing.  Here are some things I'd like to try -- I'm going to start with 10 as conversation points (and the focus of this list is by no means the "best ideas" for the club, as there are several ideas for football ops and already well in progress, I think, by TWS -- so I've tried to focus on ideas that may be a bit farther afield, for now):

(1) On Predictive AI ... this is a topic that can easily go down the wrong track, but there's generative AI (think Chat GPT "creating content") and predictive AI (think of Amazon deciding what ad to place in your queue).  I'm mostly interested in predictive AI, which can be used to implement better ticketing campaigns (if it knows something about our users), upsells, merch sales, determine the frequency of correspondence per person, and so on.  Your database should not be static, but always learning, and in MFC's particular case, there's 13k+ people who have had season tickets at some point, but currently don't.  Reaching 5% of them means we'd be up 20% y-o-y on season ticket sales, which passes the, "could this be worth 100k or more?" test.  Predictive AI tools can be implemented for single thousands of dollars (and we've worked with companies that are good at this).

(2) On TV ... yes, I think I a docu-series can be made.  I've been approached by a broadcaster.  That model has some revenue attached to the show, some distribution rights that could stick with the club, and it would pass the 100k test, and, more importantly, get MFC known as a brand to more people outside of Scotland.  That could have big implications beyond a simple licensing revenue stream.  

(3) On Player Media Amplification ... I believe that, between our experiences at Netflix, Youtube, and Snap, we'd be able to put players in touch with experts to help them build their own content in a way that's not expensive to the Club.  Wrexham has used this as a recruiting tool in a way that's not insignificant.  Players want to understand how they can expand their own brands, and it will be valuable for the Club to sell product tie-ins and sponsorships.  This one, I don't have a target business case against, but feel strongly that it would differentiate MFC over time with minimal investment.

(4) On TWS (ex-Scotland) ... The Caledonian Braves have a platform that's raised 1m dollars this year. They are in the 5th division.  Their stadium is in Motherwell.  What they've done has made their platform accessible and entertaining for Americans (and others).  Part of this is that they're on a platform that's easier for Americans, and part of this is that their value proposition is clearer for Americans, but I believe implementing a platform for better fan engagement (combined with #2 and #3, and investors below) could lead to bigger engagement abroad, which would strengthen, not weaken, TWS.

(5) On TWS Tools (Generally) ... a more engaged TWS will lead to better ideas, more fun, and higher engagement on activities that could drive revenue to the Club.  That means weekly video meetings, more ability to vote on things, greater access to talent within the Club, and clearer engagement around communal activities.  As an example, there's tons of evidence to suggest that a fan who is part of a vote on the look of a kit is much more likely to buy that kit.  Nike has done a ton of work on this, and I believe that the more TWS is a platform for fan engagement, the higher the revenue around that engagement will be.  (But I think this will take awhile to prove out.)

(6) On integrated sponsorships ... There's a pretty thriving market here for celebrities who a) like sports and b) want to push branded products into integrated marketing approaches, which suits sports fairly well.  Those include musicians who have new liquor lines, and things of that nature.  I think we can tap into some of these opportunities.  And again, if we're building 1-5 well, the question then becomes can we work on marketing deals with brands that are a bit more global, but still integrated into local sports?  

(7) On Using Players/Coaches/Talents to Promote Season Ticket Sales/Other Sales: This relates partially to #1 and partially to #3, but there's increasing value for celebrities (or, in this case, players) being involved in helping a club achieve certain sales goals.  The challenge is that players are stretched thin for time, so you want to optimize how and when they can be used for, say, a season ticket push, and also incentivize them financially to help.  Here technology matters to maximize the use of their time, as well as to create the proper incentive structure.

(8) On In Game Experiences ... When Tottenham moved to its new stadium, they managed to get the average person there for over 40 minutes longer, which had significant gameday revenue implications.  I don't know enough about how to make this change within Fir Park, but pre-game acoustic concerts, post-game radio/podcasts or Q+As at particular places, local food vendors -- I think there has to be some thinking that extending the time spent in or around Fir Park is a measurable and objective goal that would lead to more revenue over time.

(9) On Stadium Sponsorships ... No, I don't want to be a dumb American here, but over half of the SPFL has some sort of stadium sponsorship.  I think there may be some cost to finding the right package to present, and the right branding implementation.  But I wonder if this is an idea worth investigating if the right positioning can be achieved.

(10) On Improving the Value of TWS/Season Tickets within Motherwell: @Vietnam91 pointed this out to me a long time ago, and I agree with him that there's a big opportunity to provide discounts locally for people who are invested in season tickets and or TWS.  It's a win for the stores to increase business, and, with restaurants, if you have a family, you can justify season tickets by getting, say, 3 pounds off per meal per kid -- it adds up quickly.  This isn't a new idea, but something that I think requires some sweat and technology, and is important to the community.

Again, I've tried to focus on ideas that are slightly more in my domain here -- I don't think all of them are the biggest ideas. Brian Caldwell, I know, has at least 10 ideas as big as these worth investing time and thought into, as does TWS, as does this Board.   In a sense, culture will always beat individual ideas, and a culture where we can debate and try things wins over one in which we're endlessly stuck on a few fixed ideas.   So, before you shoot half of these ideas down, I'd say, "That's the point." We need 30-40 ideas, picking 10, and getting a new set every few months. 

@David1979, If it's okay with you, I'll split your thread into multiple answers, so that each one can have its own discussion.  My next answer (on investors) will come after my F**cking kids stop yelling at me.

Putting value of club and deal structure aside (which I think everyone is now really looking forward to seeing how this has been amended I am guessing with an aim to unite as opposed to the opposite impact the current deal has had) these are on the face of it a big plus to bring in revenue being more intelligent with available time, money and technology outside the cash injection. 

#7 could impact the footballing side of the club in attracting players currently out with our reach if additional cash incentives out with salary and bonuses are available to top up their salary 

#8 I have thought alot about in the past however the stadium and surrounding land really limits what is possible here imho without some investment on physical structural works taking place

#10 I have also thought a lot about this in the past and something that I have some experience in and think a lot could be done and achieved here to help fan engagement and benefits

Hopefully a deal can still be done in partnership with TWS and the plans the TWS are working on can also run alongside @Erik Barmack's proposals to the benefit of the club (it shouldn't be a case of pick one or the other).

One area that hasn't been mentioned at all is how this could improve the youth academy and how we can entice the best young talent at home and potentially abroad (with potential increased international exposure) with any new plans? As one of our main current business model objectives (developing, improving and selling talent) some focus on how new people and investment can assist with this would also be a big positive. Are there any ideas regarding this?

Edited June 14 by Fergie79

[YassinMoutaouakil]

10 hours ago, Erik Barmack said:

@David1979, thanks for these questions.  I'm going to try to answer as many of them as I can briefly.  My ask here is that we can expand on many of these topics, and that I'm sticking to 2-3 sentences per topic in the name of not turning this thread into a Tolstoy novel. 

We're used to Stuart Kettlewell press conferences, it's fine 

[StAndrew7]

9 minutes ago, YassinMoutaouakil said:

We're used to Stuart Kettlewell press conferences, it's fine 

[capt_oats]

Good stuff from Derek and Speedie.

[Alanos]

Right lads, I’m away into town to watch the Scotland game.

Don't make any big decisions while I’m gone.

C’mon Scotland

[camer0n_mcd]

 

[Gianfranco]

I’m only really interested in big weird Serbian strikers at this point.

[one m in Motherwell]

In a normal close season that would be enough for us.  But no, we had to complicate with talk of ‘investors’ and ‘content’ and such

[Jim McLean's Ghost]

5 hours ago, capt_oats said:

Good stuff from Derek and Speedie.

Words mean nothing without actions

They say they don't like the timing of the vote. Well simply chage the timing of the vote. The cluib cannot make the Well Society vote on a proposal with no input from the society. They are getting led by the nose here.

if there are issues they need to step up and take control.

[Ill Ray]

Am I mental for thinking the national team hasn’t been the same ever since patching SOD? 
 

[Ill Ray]

Me to Liam Kelly after watching that Angus Gunn performance tonight. 
 

[Gianfranco]

I think Sods would have been an upgrade on Ralston tbf.

[well again]

2 hours ago, Ill Ray said:

Am I mental for thinking the national team hasn’t been the same ever since patching SOD? 
 

No worse than Ralston.