Rangers analysis: Financiers will take a lot of convincing

CHARLES Green, chief executive of The Rangers Football Club, talks a good game. He will need to if he is to get institutional investors and fans on board for what looks to be a high-wire new Stock Exchange float of the club.

That is not just to do with the pantomime of ownership and corporate governance that Rangers has become in recent times. It is the whole question of the suitability of football clubs for stock market membership.

There has been a far from glorious history of football clubs taking the stock market’s shilling. Manchester United, Tottenham Hotspur, Millwall and a host of others hardly set the world alight or became more profitable, thriving businesses through having a public listing.

In the mid-1990s one investment bank in the City even launched a football fund to try and ride the fad. It proved to be an own goal and was swiftly discontinued.

The problem is that football clubs and the supporters’ passion they inspire are the exact opposite of how most publicly listed companies are meant to be run. That is for the medium to long term and for profit, rather than for all-important glory on the pitch and paying nearly as much in player wages as revenue comes through the door.

It often resembles a ragtag madness: an attempt to yoke tribal loyalty and the need for instant bragging rights on results to pin-striped conventional financial prudence.

Manchester United eventually gave up their UK listing because they weren’t doing the job the then-boss, Martin Edwards, wanted, ie, providing a tailwind of shareholder backing to accelerate business expansion away from the turnstiles. The club has since relisted on Wall Street under the Glazers to largely pay down borrowings.

There was little chance United would have got the float away with any degree of success in this country, and even Asia was shunned. Well, they do say the Yanks don’t understand ‘soccer’ so maybe there was a reason there.

But the Rangers float faces significant credibility issues on top. Most businesses would not tend to try to attract City money when they have just been banned from their main field of action (the SPL), fined for not disclosing their owner was previously disqualified as a director (Craig Whyte), and gone into administration to boot.

That sort of ‘baggage’ tends to raise institutional eyebrows even when the amount Rangers want to raise on the AIM market – £20 million – is comparatively piddling.

The case of attracting even the legendary fanatical Rangers supporters to the float is also problematic. Consumers are really hard-pressed in austerity Britain, food and fuel prices are rising, job security is not brilliant. It is far from the best of times, therefore, to be asking for strong private shareholder support for Rangers.

Equally, many fans who were previously shareholders of the club on the Plus market lost their investment amid the ownership merry-go-round and corporate debts and now they are being asked to stump up again. Again, we are not in Tell Sid territory, the highly successful British Gas flotation of the mid-1980s.

So, are there any pluses for Rangers’ plan to go public again? Yes, and Green won’t be tongue-tied in telling investor roadshows about them.

Rangers have no debt as part of their rescue last summer – unlike Manchester United, for instance, who are drowning in the stuff, the Glazers having used the club’s own money to buy it.

The Scottish club has significant property assets, and credible plans to build more. Its revenue coming through the turnstiles is pretty copper-bottomed and would undoubtedly recover swiftly if its footballing fortunes turn up.

Green is targeting a step-change in Rangers’ merchandising effort, and it is true that over the past 20 years shirts sold have been a far more durable asset for the major football clubs than mercenary players’ shirt-kissing. Rangers have clearly under-achieved in the merchandising arena given the strength of the brand and the worldwide support.

The question is whether, on balance, Rangers will be able to convince big institutional investors in particular to make the leap of faith away from the poor history of football floats to a bright new dawn of commercial possibility?

Tough call. Sceptical investors might consider instead that the £20m is a short-term fix for Green’s property plans near Ibrox, some working capital, and to tide the club over a hopefully temporary revenue fall from playing outside the top flight. Oh, and an unquantified amount for manager Ally McCoist to strengthen the playing squad.

That’s the cynical take, and sometimes the City can be a cynical place. But I suppose that after the recent distressing history of Rangers, a saga of embarrassment, a muted or even disappointing flotation would just be another relative setback rather than a life-and-death game-changer.