Tom English: Buy Hearts shares or live with results

IN ANNOUNCING their share issue last week, Hearts didn’t so much press a prospectus into the hands of their supporters as push a gun to their temple.

Whether it was the wording in the share brochure published on Friday or the comments made by Tynecastle director Sergejus Fedotovas earlier on the same day, the message coming out of the club was one that had more than a hint of emotional blackmail about it. In presenting a vision of the future that had Hearts in mortal danger of administration and possibly liquidation if the fans didn’t stump up more cash, Fedotovas, and the puppet master himself Vladimir Romanov, were engaging in some pretty desperate measures. Effectively they were saying: “Buy the shares or live with the consequences if you don’t...”

“The share issue is a signal, an alarm to the people who are truly concerned about the club,” said Fedotovas. What is he saying here? If people can’t afford to buy shares or don’t want to invest because they have legitimate concerns about how their money might be spent then these supporters are not “truly concerned about the club”? To Fedotovas’ mind is it a case of “if you want to prove you care, then buy the shares”?

All through Hearts’ public statements about the share issue there is a threat and the threat comes in the way of what might befall the club if enough punters don’t stump up. There doesn’t appear to any acceptance of responsibility on Romanov’s behalf, no mea culpa over the ridiculous way he has run the club. No.

“If this strategy fails, the club will be faced with a tough financial reality,” said Fedotovas. “The answer to that would be another dramatic cut in costs. And I don’t think anyone would be happy with a weak team and bad football results.”

There you go. Pay up or feel the guilt. Fedotovas made a preposterous remark on Friday when saying that “if you want to maintain a squad that is capable of playing in Europe then the budget should be according to that.” Well, firstly, merely playing (i.e. qualifying to play) in Europe doesn’t need a big budget anymore, certainly not in Rangers’ absence. Motherwell had a shot at the Champions League last season with a much smaller budget than Hearts have, so Hearts could keep cutting and they’d still be one of the most moneyed squads in the SPL outside of Celtic.

Secondly, it was the drive for the SPL title and some kind of relevance in European football that has got Hearts into this financial nightmare in the first place. While Romanov deserves credit for stopping the sale of Tynecastle when he bought a controlling interest in the club, the early years of his stewardship were marked by spending.

Throughout his supercilious phase when he predicted league titles and Champions League competition, the amount of money Romanov wasted on player salaries was nothing short of vulgar. Hearts are £24 million in debt (plus annual interest of 4.5 per cent) because of their hubristic wish to “maintain a squad that is capable of playing in Europe”. They don’t have enough money to pay their players on time, they have HMRC battering on their door, they have had to sell, sell and sell again to keep the show on the road and Fedotovas is harping on about building a squad for Europe? Enough, Sergejus.

The share brochure doesn’t so much suggest that Hearts need money now as scream it aloud. This is a hole of Romanov’s making and now he’s now demanding that the supporters fill it in with their cash, despite always saying that his private investment group, UBIG would always cover for any financial shortfall. Not anymore. In the introduction they suggest that everybody turns to page 18 for a section called Risk Factors and here is where Romanov reaches for the loaded gun.

It talks about the club being insolvent if it wasn’t for the ongoing support of Romanov’s UBIG, support that is guaranteed for this current season but will be “reassessed” on 1 July, 2013. “If UBIG were to demand repayment of the full amount, the Company would be insolvent and would face liquidation.” That’s Romanov effectively saying “I can shut this club down in the summer if I like…”

In the very next paragraph the tax case is mentioned. By comparison, the £1.75m, excluding interest and penalties, that HMRC are seeking from Hearts is buttons compared to the numbers that we’ve been speaking about for years at Ibrox, but, in relative terms, it’s a hugely significant figure. Hearts said on Thursday that they wanted to raise £1.8m in their share issue but never mentioned a potential tax bill which, coincidentally, will come in at about £1.8m if the case goes against them. Now, maybe the two £1.8ms are not linked, but the confusion must prey on the minds of some Hearts fans as they ponder the share issue. Are they being bullshitted here? Is the bulk of their share money going to youth development or is it a sneaky ploy on behalf of the club to use fans’ money to pay off the taxman?

The share brochure talks of a “significant ongoing dispute” with HMRC which could have a “dramatically negative impact on the Company”. The tax tribunal sits next month, the case revolving around a clutch of players signed on loan by Hearts from Kaunas up to seven years ago when the Lithuanian club was controlled by Romanov. The players’ salaries ran into thousands of pounds per week but only a small percentage of their wage was paid by Hearts. The majority came from their parent club. HMRC claim that Hearts were obliged to pay tax on their entire salary, not just a portion of it.

Some Hearts fans will buy shares because they can and because they feel they must but there is no moral imperative to buy, despite what Fedotovas is saying. If you’re a conscientious objector to the share issue (based on your fears about how the money might be used), it doesn’t make you any less of a Hearts fan. Maybe in Fedotovas’ mind it does, but not in the real world.

And let’s be clear about one thing. This isn’t an investment, it’s a gift. The shares will be worth nothing as the club is worth nothing, in financial terms. Last year, Romanov valued it at £50m, now he seems to have dropped the valuation to about £18m. Supporters are being asked to hand over £110, which is probably 109 times more than the entire club is worth while saddled by all that debt. There are perilous times for Hearts, but nobody should forget who is largely responsible for the shambles they’re currently in.