- The strong U.S. Dollar versus a weaker Euro sparked an interest in Europe among American investors,
- Stocks battered by the pandemic, such as travel and sport, are in the process of recovering, which coincides with consolidation that disrupts the historic status quo,
- The Silicon Valley Bank (SVB) collapse raises urgent questions about diversification.
This week, as we face the shocking aftermath of the Silicon Valley Bank (SVB) collapse, it is a time where most businesses with more than $250K in the bank ask themselves: Where can we park our money safely and have less exposure to the U.S. financial sector?
The scary domino effect this could have, is one I wish we did not have to contemplate. Besides, I always stood in favor of diversification.
Although such anxiety is rarely a sound basis for important decisions, this is frankly where we are right now. At this stage one might question whether clever money that moved towards Europe ahead of the curve had a point? This happened, as the combination
of U.S. risk and a weaker Euro, coupled with the surprising resilience of European economies to a war right on their doorstep, let some to snap up European assets.
As Americans rode their stronger Dollar all the way to Europe, sporadic opportunistic buying frenzies already took place. These are not day traders, but people who buy up assets and positions in entire industries. Many take aim at stocks that have not yet
recovered from their pandemic slump, for example travel, sports / recreation and even hospitality. They are much less exposed by any potential banking crisis in the U.S.
The famous Ed McMahon said “God invented whiskey to keep the Irish from ruling the world.” Well, this might not apply to football and travel:
It would seem like a handful of Irish masterminds swiftly analyzed potentially undervalued assets: Firstly, the CEO of Ryanair in Ireland provided some interesting insights on industry consolidation in the air travel sector. Secondly, there is
Brera Holdings (Nasdaq: BREA) from Ireland, which by virtue of its recent IPO, is responsible for listing the first Italian football club on the American stock market.
European air travel stocks soar despite negative headlines
Starting with the air travel industry: The CEO of Ryanair, Michael O'Leary,
told Reuters that after the pandemic, European airlines are now facing a four or five year period of consolidation. Among the interesting growth prospects he touted, was that the Portuguese and Italian governments ought to get commitments from airline buyers
that they’d increase traffic by 50%. O’Leary argued that "It is inevitable that AliItalia will be bought, TAP will be bought," referring to national airlines in both of these countries.
Analysts are upbeat: “Aviation is investible again,” said Jun Bei Liu, a portfolio manager at Sydney, Australia-based advisory firm Tribeca Investment Partners who
spoke to Bloomberg.
Investors in European travel stocks believe that it has shown tremendous resilience. For example, Greece and Italy initially feared that the Russia / Ukraine war and absence of Russian tourists would harm their industry, however the number of American tourists
in 2022, far outpaced the Russian travelers, which led to a bumper year for tourism.
Football is going through a huge “MCO” driven disruption:
Football investments were long thought out of reach for the average person. The football club has usually been somewhat used as a wealth preservation vehicle. The profiles of investors in the sport have been extremely diverse! A look into recent times might
reveal that the list of football owners is predominantly full of questionable characters. From fugitives, and former and exiled politicians, to Russian oligarchs with obscene amounts of money, the list is quite scary. At least, that is most likely how it appears
to the common. And why is this the case? Perhaps it is because of the huge outlays and risk of buying football clubs.
However, European football has turned the corner. It is now looking more attractive to the average investor every day. But what is the driving force for this shift? One driving force is the multi-club football ownership model, which is all about consolidation
and scale improvements for football operators.
Multi-club Football Ownership (MCO) Model
The rising number of publicly traded firms and newbie individual investors in the nearly
$30 billion European football market can be likely attributed to this model. These investors are giving the wealthier football
investors a run for their money. A firm that probably exemplifies this new-age shift is Brera Holdings (Nasdaq: BREA). Brera Holdings, an Irish holding company, focuses on expanding social impact football (American soccer) by developing a global portfolio
of emerging football clubs.
The firm aims to increase opportunities to gain sponsorships, earn tournament prizes, and offer various football and related consulting services. Red Bull and the City Football Group are notable entities that have also leveraged the Multi football club ownership
model to fantastic effect.
This model has been instrumental in paving the way for more American investors to easily enter the European football market
Gulf nations like Qatar, Saudi Arabia, and the United Arab Emirates (UAE) have long been the biggest investors in the European football industry. Just think of the often talked about names that splurge insane sums of money in football transfers. From Manchester
City’s Sheikh Mansour (United Arab Emirates) to Paris Saint Germain’s Nasser Al-Khelaifi (Qatar), these individuals have left little place for the common investor.
Huge investments by Russian Oligarchs such as Monaco’s Dmitry Rybolovlev, Vitesse Arnhem’s Valeriy Oyf, etc., are another reason for this. However, thanks to the Multi football club ownership model, ordinary investors like John Textor can today stake a claim
in the European football market.
The multi-club model is the sport's hottest craze. According to UEFA, football's European governing body, more than
180 teams are now part of a larger network. John Textor is part of a new breed of club owners who invest
in teams across multiple leagues through his company, Eagle Football Holdings Ltd. It may interest you to know that John Textor's background is not even in sports. Textor is a visual effect and virtual reality expert. Eagle also owns Belgian tier-two club
RWD Molenbeek and approximately
40% of Crystal Palace in the south London Premier League.
Ares, a US investment firm, contributed approximately
€400 million to the Lyon takeover. It now has two board seats at Eagle. Eagle Football Holdings Ltd. intends to go public in the United States, making it the first multi-club
football company to do so. According to SEC filings, it would be valued at
$1.2 billion. Eagles clubs' most common strategy is asset creation or producing young players. Textor's contribution aided in completing the new academy
at Crystal Palace, located in one of the world's most productive cities for young talent. Botafogo and Molenbeek, on the other hand, are well-positioned to find players in Rio de Janeiro and Brussels, respectively, and to profit from player trades.
The football industry in brief: What attracts investors?
Now that the notion subsided, which asserted that investing in the football industry was reserved for the super-wealthy and sophisticated investor - and the multi-club football ownership (MCO) model is at the forefront of change, it is worth understanding
the value investors might see in this sector too. The sports industry has been growing steadily post-pandemic, and investing and growing with it is an attractive proposition to regular investors after all.
The number of mind-blowing deals in the industry will likely continue to skyrocket!
It is easy to see what attracts calculating investors to invest in the lucrative football market. The statistics always speak for themselves! Media outlets frequently sign multi-million-dollar contracts to cover events. As if that weren't enough, major sports
brands like Adidas, Puma, Reebok, and Nike usually compete for lucrative sponsorship deals with football clubs worldwide.
With club values, commercial deals, transfer fees, and player wages increasing exponentially, long-term club owners may see a dramatic increase in the value of their shares. They can then sell these shares for a “fat” profit.
How we respond during and after a crisis matters a great deal. Yes, it is easier for me to talk about this calmly as I am unaffected by the Silicon Valley Bank (SVB) saga - and I appreciate that many companies face an existential crisis right now.
Speaking of what we do after a crisis: The pandemic battered some stocks more than others, to the extent that analysts have a hard time predicting recovered valuations, undervalued stocks and bottoms in some cases. By its very nature, stock Market and company
valuations are always a tricky topic. In a way, one can argue that both the football and air travel industries are ripe for transformation and consolidation - for the reasons mentioned above. I have personally seen large numbers of investors pivot towards
both Europe and Latin America as they run for cover. At the end of the day, just remember that Utopia has always eluded people.