High value assets

BY URI JONES

Imagine how steeply stark the value changed in 24 hours between Barcelona and PSG, with the value of one single player exposing collateral value. Paris is now inhabiting Internally Displaced Fans (IDFs) — not to be confused with Israel’s Defense Forces — due to one man. Down to social capital, PSG has in 48 hours speculatively grown about 120% in followership from 19 million to 42 million followers on Instagram alone (even at conflicting numbers from 29m or 49m to 43m, thus, approx. 45% & 10% respectively, it is still a very impactful increase) and a total sell-out of merchandise online 30 minutes after release.

We can argue on financials and sustainability from the effects of “state ownership”, particularly of an affluent type that feeds off oil wealth as liquidity guarantee, and can conveniently afford large expenditures, finance its debts and accommodate losses to achieve its vision of creating the most valuable football club in the world.

Oil money is good; the stinkingly intimidating type from the Middle East — but it is beyond oil.

It is about wealth. Wealth creation. Wealth expansion & wealth management.

Running a football club is simply wealth management, each employing its own investment strategy. The portfolio; the players. Some employ purely long or short strategies (building, buying, selling and reselling of players), others a combined on time basis.

Qatar as a country has grown exponentially over the decades. Its current GDP is about $170 billion and is estimated to reach $270 billion this year, with contributions majorly from the service and industry sectors accounting for over 99% and under 1% in agriculture. Qatar has a 0% poverty rate with 0% of its citizens living below the poverty line.

PSG profits from this despite being unprofitable, although revenue has increased significantly from merchandising & sponsorship and has built an upward trending value with YoY tremendous change. Like Qatar’s increasing GDP, PSG has seen a consistent rise in its value since the ownership takeover.

It is not new or stingy to spending money fit for purpose. Its investment philosophy is obviously pumping $€£ to increase value despite being mostly unprofitable with the backing of the Qatari government through its sovereign wealth fund’s Qatar Investment Authority (QIA) and the sports subsidiary, Qatar Sports Investment (QSI).

PSG’s most famous investments and ranking assets in its portfolio are Zlatan Ibrahimovic, whose famous claim is “I came as a king and left like a legend” and was liquidated in a strategic, albeit controversial sale. Others are Neymar, Mbappe, and most recently Messi — the indisputable MVP at the moment.

This is how it differs from other football clubs with financial liquidity guarantee and somehow its strength is as much its SWOT all at once. An advantage for PSG, but could be a disadvantage in the event of structural/ownership change that will prove if it is sustainable or may ultimately have a Barcelona moment. Except in the event of a like-minded affluent buyer rich enough to pay for and sustain its value, PSG’s biggest challenge now is to increase profitability and win the cup, even more so, considering the hemorrhage in losses to the tune of $124m during this pandemic.

Drowning in debts, Barcelona in my opinion needs a total restructuring like Nigeria with a long-term strategy, some private equity needs to buy out Barcelona or maybe pitch to the QIA, restructure its debts, scout multiple, fresh talents highly scalable in value for the future.

Any attempt otherwise is death. In fact, this PSG’S move feels like a hostile takeover by the QIA. Messi is a highly strategic acquisition by PSG.

However, what has happened simultaneously in value change between Barcelona and PSG is beyond money. It is about a movement — one that can equally be credited to Barcelona and a big lesson for PSG (perhaps they are aware of it, hence the enjoying of the cake at the stage of its icing).

Clubs have to be evolutionary & non-complacent to manage their risks of dependency on players.

Unlike 99% of players, Messi is a movement. An intangible tangible asset. In a portfolio, he will be considered with as much impact as a high-value asset (HVA) which has the power to seriously impact a company’s ability to perform or carry out operations. They are like bloodlines.

There are players and there are forces.

Maintenant, ici c’est Messi.

Live up to your legend.

Be a FORCE like MESSI

Bonjour et Bonne journée

Uri Jones.