Loyalty to your investments can go down as well as up

Last updated : 15 May 2005 By Aidan O'Byrne

The second half was dominated for me at least with looking at the incoming stream of Stock Exchange announcements. I'll deal with the second half first…

You might well find it a bit surprising given my background, but I and my investment portfolio were personally affected by the widely reported events of Thursday last week, as the perils of being a quoted plc were revealed all too clearly to leave you at risk of attack by a corporate raider, in this case from a fair distance across the Atlantic. For fairly obvious reasons, I haven't normally admitted to being a shareholder myself, let alone positively advertised the fact. In truth, I bought my small shareholding on a fleeting whim, pretty much against my better judgement, have regretted it ever since and after some recent indifferent financial results had found myself wondering whether I should quietly cash my stake in. Now, of course, I no longer have to wonder about that, as my shares will get hoovered up by the mandatory offer.

But enough about my Lastminute.com stake*, you'll also have noticed that Malcolm “I'm a true fan” Glazer's inexorable progression to full ownership of Manchester United is almost done, with his securing on Thursday of the Irish racing magnates' stake and the consequent tabling of a full mandatory offer which will probably already have passed the unconditional level, and that required for delisting of the club, by the time you read this commentary. This is the price the club will now pay for having funded a period of success through the capital markets, and no-one could argue that Man U has not enjoyed success on the back of its flotation, marketing and financial expansion and consequent “rich list” status – put simply, it's an attractive, if high risk, business.

From the relative isolation of being an Arsenal supporter watching from the sidelines, whose club has always been, and hopefully will continue to be, a well-run, conservatively financed outfit with tightly held ownership, I reckon much of the current reaction from Man U fans is overdone, even if the emotions behind it are very understandable. Glazer will not advance his own cause any, or generate positive returns from his investment, should the team fail to achieve playing success on the field. In the absence of tangible assets, which cannot therefore be asset-stripped, the continuation of – or in current form should we more accurately say a return to – the tradition of winning silverware is paramount. Yes, ticket and particularly season ticket prices may well rise (arguably, they are currently artificially low by comparison to those of other teams with less well-oiled marketing machines, like mine for example), but you're not going to find Glazer proposing a merger with City, “extra time multi-ball”, or monster truck racing at half time à la the current and all too percipient Budweiser ad.

Similarly, transfer spending will not be eliminated – although the likelihood of payback on the investment concerned will be subject to more scrutiny than has historically been the case at Old Trafford, it's not as if other clubs operate without this commonsense check, Chelski aside, or that this a anyway a bad thing. Is a regime which allowed Sir Alex to spend £28m on Juan Veron really that deserving of survival? If you were going to sign players from a Brazilian World Cup winning side, would you really rather have spent £6m on Kleberson rather than £4m on Gilberto? And did everyone suddenly forget where Beckham, Scholes, Giggs and the like came from, anyhow?

However, it is no doubt true that operating under the constraints of substantial debt will have some impact on how Man U performs, particularly in light of the unique clash of business models and financial circumstances which from next season will mirror the on-field battle of the top three clubs – Chelsea, backed for the moment by effectively unlimited funds which the fans are pretty happy to see buy success without querying its sources, and where financial discipline is at least pro tem irrelevant; Arsenal, where prudent management has for some years had to make the best of limited financial resources, but where investment for the longer-term infrastructure is now starting to generate sustainable surpluses that can be reinvested into the playing squad; and Man United, where the existing fanbase and squad ought to be enough to punch harder than they've been doing of late, but where at least part of that effort will now be absorbed just standing still, and where I suspect a requirement for less wasteful management might not be as bad a thing as the fans currently believe.

I suspect that this challenge may be too much for Sir Alex, who I've long believed should have left a few years ago as he had originally announced he would. Glazer, ironically enough, would undoubtedly want to keep him in place, but I think the fact that his decisions may no longer be unfettered and that he copes badly with having to take the views of others into consideration will mean he'll walk. If so, this will undoubtedly be the cause of much gnashing of teeth from the United faithful, though quite how much faith they actually had in Sir Alex a scarce two nights before the announcement of Glazer's bid – when, after losing to Chelsea, half the stadium walked out early rather than applaud his last home game's ‘lap of honour' – is very questionable indeed.

Back in the first half of the week, there had been quite a different end of season atmosphere at Highbury on Wednesday as Everton went down to an Arsenal post-war and certainly post-Wenger record 7-0 scoreline, and the emergent young talent of the squad, combined with the enduring class of the contract-chasing Dutch master Bergkamp, made it an absolute honour to be there. I shan't go on about that match further lest I appear to gloat (besides which, despite a further Bergkamp goal, the Gunners went on to suffer a last day reaction through defeat at the hands of Emile Heskey, of all people).

However, I would point out that Liverpool's relatively dignified defeat at Highbury three days prior to their blue neighbours' cataclysm will have made them all the more rueful of the league table positions which had handed the Toffees a Champions League place at their expense, and all the more determined to give the FA a mighty headache by bringing back a fifth European Cup from Istanbul in eleven days' time. That Bolton went on to inflict a slender defeat on Everton in the last day, means the Toffees actually qualified for Europe with a negative goal difference, which appears pretty mad.

And so, with the closest-to-the-wire relegation battle in Premiership history having today seen all four potential survivors take turns in throwing or having snatched away their lifelines, and eventually serving up West Bromwich Albion as the survivors of the drop-zone death match, the domestic season is over bar the FA Cup final next weekend.