The argument that the current West Ham owners will wait until 2023 to sell up is flawed and here’s why.
Eight years ago the West Ham owners agreed to a windfall tax with the government if they sold the club before 2023.
Under the terms of the London Stadium concessionaire agreement – signed in March 2013 – they agreed to pay the stadium owners a share premium should they cash out within ten years.
The owners are able to deduct investments made into the club since 2010 including rights issues with both bank/share holder loans also able to be excluded from the calculation.
Should 27% of the club be sold to Czech billionaire Daniel Kretinsky for £150m as suggested it will value the club at £555m.
So let’a look at what windfall tax would be due if the club was sold for that amount before 2023?
The current shareholders are reported to have spent almost £100m buying the original shares between them plus a further £30m in a rights issues last year.
Both are deductible from the tax calculation. If a £150m worth of new shares are created these will also be deductible brining the total to £280m.
The current outstanding shareholder loans of £55m are also deemed deductible as is the MSD Holding credit facility of up to £150m.
With a potential total of deductible amounts reaching up to £485m it would mean the remaining £70m would be subject to the windfall tax calculation.
As the profit could be potentially less than £125m then no windfall tax would be due.
I think your argument may be flawed. Here’s why. If Kretinsky buys “new” shares there is no reason for Sullivan to be financially involved at all. The Board will agree that new shares will be issued and sold to a buyer (Kretinsky) at an agreed price. As you correctly say the value of the club itself will not be affected as the individual share price will reduce. Simply put if the club is valued NOW at £550 million let us assume there are £55 million shares at £10 each.
27% of £550 million is £148.25 million which, let’s assume, is what Kretinsky will pay for his shares. The total number of shares Kretinsky will need to have to own 27% of the club is obviously 27% of the NEW total of shares in existence. These NEW shares will not be valued at £10 each because the club is still valued at £550 million, that hasn’t changed, but the individual share price will have fallen because there are now more shares in existence thus reducing their individual value.
I hope that makes some sort of sense. Obviously there are other methods that can be used to determine share issues but fundamentally I believe this is what happens.
Clearly however if Kretinsky is to buy the shares directly from Sullivan or Gold that is a totally different scenario because no new shares will be in existence so the individual share price will remain the same. But in that scenario the PLCs working capital would not be increased because the value of the shares would go to the seller.
Finances aside I agree 2023 selling theory is flawed. Kretinsky has lots of businesses the chairmen have been looking for investors not a buyer. Kretinsky investing fits that criteria. Deep pockets and not interested in working full time on the football. Let’s be honest also Slavia aren’t ripping up trees in European football or buying players at high prices so this guy doesn’t have a track record of investing heavily in players does he. At Slavia the only player that might be of interest is Hlozek whereas our youth players might benefit from a spell at Slavia so I suspect that this deal may go ahead but the outcome will be more like status quo with a little less debt. Right up Sullivan’s street.
Right up most streets I reckon
Food for thought here with a Czech article that Kretinsky might be like Sullivam with Team interference https://english.radio.cz/czech-billionaire-daniel-kretinsky-buying-west-ham-just-football-8732908