What Lessons Does the Super League Fiasco Have for Traders?

Football, also known as soccer, is maybe the biggest sport in the world. The World Cup, English Premier League (EPL), and La Liga are among the most prestigious and lucrative events globally. Further, teams like Barcelona, Arsenal, Milan and Manchester United have millions of fans around the world.

Therefore, in the second quarter of 2021, news by the most popular teams in Europe about Super League sent shivers around the world.

What was the Super League?

European clubs compete in several leagues every week. The most popular are the national events like La Liga and EPL while the most prestigious one is the Champions League where the winner receives more than €20 million.

Therefore, in a bid to boost their income, several of the most prestigious clubs in the UK, Spain, and Italy teamed up to create another midweek event known as Super League in the first quarter of 2021.

The league would have several of the biggest teams in the region. Most of them would have been guaranteed to play in the league every year while some other clubs would join depending on their overall performance.

Founding members

The founding members of the Super League were the most prestigious clubs in the UK, Spain, and Italy. They were Manchester United, Manchester City, Chelsea, Arsenal, Liverpool, Tottenham, Juventus, Inter Milan, AC Milan, Barcelona, Real Madrid, and Atletico Madrid. Other popular European teams like Bayern Munich and Borussia Dortmund declined to join.

Super League proposal

The proposal of the Super League was relatively simple. The participating teams would have both home and away matches between the week. The total participating teams would be divided into ten groups of two.

After the group matches, the top three clubs were to qualify for the quarter-finals and proceed to play with the goal of finding a winner. The winner would receive the lion’s share of the prize money.

Before the games were set to begin, the founding teams would each have received 3.5 billion euros to support their teams. The original funds would have come from JP Morgan, the biggest bank in the United States.

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Why the Super League idea died

The Super League idea died mostly because of protests from around the world. Most football players, including among the participating teams, criticized the idea for putting commercial interests ahead of the game.

It also received criticism from politicians, including Boris Johnson. Further, the British monarchy, which is usually neutral in most events also criticized the move. Most importantly, fans of the participating teams from around the world expressed opposition.

At the same time, the governing bodies of football in the region like UEFA issued threats on the teams. They warned them that they would place limits on what they and their players could do in the future.

As a result, British teams like Manchester United and Arsenal decided to abandon the idea. Without them, other founding members decided to abandon it.

Football is big business!

Like all sports, football is a big business. In fact, most clubs that compete in European football are owned by people with commercial interests. Further, some of the biggest clubs are owned by foreigners.

Arsenal’s majority owner is Stan Kroenke, an American tycoon who is married to a Walmart heiress. Chelsea is owned by Roman Abramovich, a well-known Russian oligarch. Liverpool, on the other hand, is owned by an American private equity firm that counts Lebron James as an investor.

This trend has seen several clubs become publicly traded companies. For example, Manchester United is listed on New York Stock Exchange and is valued at more than $2.6 billion. Juventus is also publicly traded and is valued at more than $1.1 billion. Its biggest shareholder is the Agnelli family, the founders of Fiat Automobile.

Borussia Dortmund, the German team, is also a publicly-traded company that is valued at more than $630 billion. Other popular football clubs that are publicly traded are Ajax, AS Roma, Celtic, Lazio, Bali United, and Benfica.

These teams are big companies because of how popular soccer is globally. These teams have millions of fans that can be monetized. They monetize them through accessories, jerseys, and other items. They also have vast television rights deals that ensure a regular stream of revenue.

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Stock reaction after the Super League announcement

Because of the fact that some of the founding members of the Super League were publicly traded, their share prices reacted after the announcement.

As shown below, the share price of Manchester United rose by more than 9% after the deal was announced. That’s because investors expected more income from the new club. However, as the Super League crambled, so did the stock.

Manchester United Stock price

The same trend happened in Italy, where the Juventus stock price also rose and then crashed as shown below.

Juventus stock price

JP Morgan shares, on the other hand, declined sharply after the deal was announced and then bounced back afterwards. This is mostly because the company was to provide the league’s financing and take all the risks.

JP Morgan stock price

On the other hand Borussia Dortmund had a surge in the stock, like the others, but did not experience the same decline. This is because, having declared itself out of the project almost immediately, it did not suffer too much from the failure of the Superleague idea.

Borussia Dortmund stock price

How to trade football stocks

In this stock, we have looked at the short life of the Super League. We have also looked at the popular publicly traded stocks. As a trader, you can trade these stocks just like you trade other publicly traded companies like Microsoft and Apple.

However, the challenge is that most of these companies are listed in Europe and some brokers don’t provide them. If you are in the United States, the easiest way to trade them is to use the American Depositary Receipts (ADR).

Summary

The Super League was probably the biggest sporting news in 2021 following the major accident by Tiger Woods. The idea would have changed the game in the biggest way ever. It would also have been good for publicly traded stocks like Manchester United and Juventus.

External Useful Resources

  • Super League: Why have the plans collapsed? – BBC

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