What does the new equity issue mean for the Club’s valuation and for the c.14% of minority shareholders, many of which are regular fans who bought shares when they were freely traded on the London Stock Exchange and AIM?
We consider that the best way to consider valuation in this instance is to look at it on a per share basis. There are currently 213m shares in issue, of which ENIC owns 85.6% or 182m. 32m new shares would need to be issued in order for ENIC to reach 87.5% of the new total. For that they’re paying £150m or £4.66 a share. The total number of shares post-equity raise is 245m and, at £4.66 a share, that results in total equity value of £1.1bn, as shown below.
|
Shares
|
Value
|
|
Total existing shares
|
212,886,618
|
|
ENIC share
|
85.6%
|
|
Total ENIC shares
|
182,230,945
|
|
New shares issued
|
32,156,328
|
|
New ENIC share
|
87.5%
|
|
New total ENIC shares
|
214,387,273
|
|
Total shares post-issue
|
245,042,946
|
|
Amount raised
|
£150,000,000
|
|
Price per share
|
£4.66
|
|
Total equity value
|
£1,143,054,693
|
That seems lower than the rumoured amounts that ENIC were looking for to sell out, although there would inevitably be a price premium for obtaining control should a full sale be contemplated. We should also recognise that we don’t have the finer detail of the transaction and there may be some quirks relating to the convertible/ warrants structure that could affect the analysis.
It should be noted that this values the equity only. To arrive at a valuation of the Club as a whole you would also need to add in the Club’s debt, which at 30/06/2021 stood at £854m, essentially getting us to an overall valuation of £2bn.
Minority Shareholders
Minority shareholders are not being permitted to participate in the equity raise. This appears to be through reasons of expediency – opening up the offer likely invokes considerable regulatory procedure and increased costs in time and money. There would be insufficient time to arrange a wider issue if the intention is to use the funds in the summer window.
For minority shareholders the issue is dilutive – on conversion of the convertible/ warrants they go from owning 14.6% of the current pie to 12.5% of a slightly bigger pie. In return, they will notionally ‘own’ 12.5% of the £150m from the new issue, to which they will not have contributed.
Is this a fair deal for minority shareholders or is ENIC getting this equity too cheaply? From a corporate governance perspective, independent directors on the Board are legally tasked with scrutinising the deal to ensure it makes sense for all shareholders, and not just ENIC, and have agreed that it does. To assist them in this they have been advised by Rothschild. Of course, neither independent directors (having been appointed by ENIC) nor Rothschild (having worked with THFC for years) are disinterested outsiders but they have professional reputations to maintain and will need any valuation to be defensible.
By way of control, we can also consider the share price achieved on Asset Match, a third party platform for trading illiquid shares. The most recent (26/05/22) auction for THFC shares set a price of £2.10, albeit at very low volumes, and compares with the implied £4.66 price set by the new issue.
Based on the publicly available information we consider the equity raise by ENIC does not unduly disadvantage fan shareholders, many of whom will welcome the expected investment in the team. We reiterate, however, our general desire that channels should be open for Tottenham fans to become shareholders in the Club and that their collective holding in the Club should be increasing, not decreasing.
Michael Green and Henry Ellis
THST Board
27 May 2022