Should Gor Mahia sell shares ?
There has been much talk regarding whether or not Gor Mahia should be listed on the stock exchange. As far back as 1997 when Leslie Okudo was the club chairman he started to take steps towards listing the club on the stock exchange. These suggestions reached a crescendo during the month of November and December when Zdvarko Logarusic departed for home and it looked like the club would not be able to bring him back given his salary demands.
However as was the case during the Leslie Okudo era, many fans have expressed their reservations.
It basically comes to
A. Should the club sell shares (The Manchester United Model)
Or
B. Should the club remain a public society run by members ( The Barcelona Model)
Advantages of the Barcelona Model
1. Fans have direct control of the club because they can elect officials. If fans are unhappy with officials they can vote them out.
2. Because the club is not profit driven, all the money the club makes can be re-invested back into the club to make the club stronger.
3. Because profits go to the club and not to owners, fans will be eager to support the club by buying merchandize.
4. Fans of a social club will be more emotionally invested in the team.
5. Club officials are more likely to listen to fans and not to shareholders or owners. Therefore fans have an indirect stake in how the team is run.
Disadvantages of the Barcelona Model
1. The club raises less revenue
2. The calibre of officials running the club are usually less qualified.
3. The club is less financially disciplined, is secretive and finances are not transparent
Advantages of the Manchester United Model
1. Listing can lead to increased financial discipline with gains accruing in the longer term.
2. With overall sound management of the club and Kenya football in general, the club ca raise much needed capital.
3. Publicly listed clubs have better management because the stock market requires it.
Disadvantages of the Manchester United Model
1. Stock markets favor companies that make profits. Football clubs exist to win trophies and not make a profit. The profit motive can prevent a club from investing in good players. Such was the case when Man U sold Cristiano Ronaldo.
2. There is a danger that the club can be taken over by a rich person who is able to buy most of the shares. If a person buys over 51% of the club’s shares, he will have a controlling stake in the club which means he can do whatever he wants without being accountable to fans. He can start charging exorbitant prices for tickets. Or he could move the team to Mombasa or some other town and rename it.
3. All the profits of the club from merchandize, sponsorship and ticket sales could go into the pockets of shareholders and are not invested back into the club.
4. The stock of Gor Mahia FC will be negatively impacted by the fact that football in Kenya is poorly managed which means most investors have a negative opinion of football or sports in general.
Requirements for listing in the Nairobi stock exchange currently not met by Gor Mahia
1. Fully paid up share capital of Kshs. 50 million.
2. Net assets immediately before the public offering of shares should not be less than Kshs. 100 million.
3. Have published audited financial statements
4. The issuer must have suitable senior management with relevant experience
5. have declared profits in at least three of the last five completed accounting periods
Conclusion
The Barcelona model when combined with sound fiscal management, transparency and an engaged fan base that holds club officials accountable is a better model for a club like Gor Mahia
Final Poll Results from Voters
Let us not rush the Club into either of these models until we put proper structures into place and practice. We still need to be well organised on and off the pitch and either of the models will just come by itself.
Better the Barcelona style but with transparency in management.
Listing the club would be the best option. The advantages outweigh the disadvantages. We stand to attract more sponsorships with a listed club with publicized financials. We are not at Barcelona level to run ourselves as a community club.
Better the Barcelona model. However, the EC needs to look for serious sponsors who have the club at heart other than Tuzo.
I have always been against selling shares. Kenya football is not ready for this. Those like Leslie Okudo who wanted to float shares as far back as the late 1990s had not thought this through clearly. Kenya football does not have the level of organization needed.
@oe Riaga when will Gor Mahia be ready? Personally, I do not agree with your posting as there is nothing stopping Gor Mahia from pursuing this option. We should not fear and we need to start somewhere then built on the corporate governance structures.
At the Nairobi Stock Exchange (NSE), there are two types of markets and listings, which are the Main Investments Market (MIMs) and Alternative Investments Markets (AIMs), which can be explored by our glamour club. For Gor Mahia, we can explore any of the admin.
Gor Mahia will be required to engage the following services:-
1. Lawyer for legal services
2. Transaction advisor
3. Reporting accountant
4. PR
3. Company registrar
Suppose Gor Mahia is to list 50 million shares of par value of 20 at an IPO price of ‘shs 100 per share. We can raise Kshs.d billion which we can use proceeds on the following:-
1. Buy 10 acres of land
2. Build a multi modern stadium with capacity of 30,000 fans with all sporting amenities that can be leased out and raise money for the club.
3. Work on branded and replica products such as jerseys, track suits, jackets, caps,scarves, towels, carpets, mugs, cups, bags, gym gears, ballpoint, biros, etc
4. Develop distribution channels and infrastructure systems with selling outlets opened throughout the country and region
5. Put up a club house and apartments for rentals and players accommodation.
I know we can make it and grow our club to be among the besr teams in the world.
This is a very good article indeed worth discussing. Congrats the author.
We are two listing at the Nairobi Stock Exchange (NSE), which are in the Main Investment Market (MIM) and Alternative Investment Market (AIM). The laster has less rigorous requirements and I think this is where Gor Mahia fits well.
@odhiambo p. owuor, your comment is wrong. Structures can be put in place in the process of listing. Please the Capital Markets Authority (CMA) rules and regulations regarding the listing and you will agree that we pursue restructuring as well as listing together.
The club can issue approximately 100 million shares at an initial price offer at Kshs.50 per share and this will raise approximately Kshs.5 billion, which will translate into a net of Kshs.4.7 billion less the listing expenses.
The proceeds can used for the following:-
1. Acquire land of 10 acres
2. Build sports centre of 30,000 fans capacity with all sporting accessories
3. Build income generating apartments/flats and club house
4. Develop academy football team in three level different age categories
5. Set up other income generating ventures such as commercialize clubs replica and branded jerseys, track-suits, caps, bags, polo t-shirts, cups, scarves, headgears, wheel covers, pens, towels, carpets, mobile covers etc
6. Set up distribution centres of the club branded merchandises in all major towns throughout the country and region.
This is a very insightful article and commend the writer that we need such articles and I hope our Executive Committee and Admin is reading this article.
This is what I always call thinking outside the box for our glamour club.
Thanks Mwakio. You could not be more succinct. This is the way to go. Our Chairman is a lawyer, I thought he could understand better, if he is not thinking in these lines, what legacy does he want to leave behind? For the rest saying no to listing, I think it’s the fear of unknown. But Mwakio has broken it down so well, I wouldn’t understand any further fears. True supporters of Mighty Kogalo, lets push this agenda.
I believe GM as constituted today is in the model of Barcelona. Its only for the corruption and gullible management that makes us think its otherwise. Actually its registered under the Societies, which makes it a community thing.We must concede it hasn’t worked.
GM will not be ready for change as it is for ever ,because an organization is as good as the managers, just look at what we have as management. We also as fans are more happy with the fundraising model to the extent that people madly run to elect officials promising bigger fundraisers forgetting that implementing sustainable income lines and formal management is the key.
As For this, if the Barcelona style has not worked for GM from 1968 to date, its imperable that we switch from the home made system to a formal thinking for the sake of development.
I can see alot of us believe in ‘ownership’ and that shares will cause a few people to take the perceived ownership away. I dare ask what really do we own? No assets, no brand, nothing at all quantified in real terms even the name has been watered down by persistent hooliganism.
Let GM be owned in real terms financial and formally in a representative form and substance.
I may not argue very concretely between listing and not listing Gor at the stock exchange, but I think that if there is something that may ease off financial burden on the EC, then we should go for it. Absolute readiness will never be there. The only way is to start by taking a risk. Once the processes are in place then it is easy to debate on the table as opposed to what is still in the mind.Since Gor is already under the leadership that is alert, with good consultation, they should be able to come out of status quo.Just keep us informed and in case we see you stuck, we will let you know.You have already shown that you are not afraid to take risks. In fact you would rather be a risk taker than be a safe player all the time.
WARNING
I wish to alert my fellow esteemed bloggers that I have noted that since late last year gate collections of K’galo matches (even Harambee Stars) are no longer being provided by the media.
Neither do I expect the our hard working (verbally) Secretary General will make another gaffe and issue a financial statement of K’galo affairs.
With these sad occurrences I regret to inform you the I will not be able to issue you with the ONLY FINANCIAL STATEMENTS for GMFC. Therefore you (especially the critics) will have to get them from the officials. Wish you luck but may you will have better luck getting milk for a stone
As @Kassam has said the Gor model is more or less the Barcelona model. What we need is to have officials beyong reproach. The model as it is will require only those who can contribute ideas, time or finacial (or other resources) to vie for leadership. Expecting to gain materially or financially as officials will not do. Our Chairman (I’m not campaigning for him though) has fitted the bill of those who assist the club in many ways without seeking public attention. So many people don’t even know who the chair is yet they support gor. Can we say the same of the rest of the officials? Not sure. At times there is clamour to appear on rado/telly with unconfirmed news from these officials.
On gate collections the last competitive match we played as a home team was the Thika match where around 5m was collected.
Admin
Ooops, have I been blacklisted. Unsuccessfully tried to post my comments 3 times
@ Mwakio. This seem feasible on paper. But in reality its another story. There are 5 points listed in the article that a company must meet in order to be listed on NSE. Currently Gor Mahia is very far from meeting those.
But I am mostly concerned about the fact that football management in Kenya is so shambolic that the club stock will inevitably plummett.
@Joe Riaga, there are main requirements for listing in the main investment segment…but note that there are exceptions that can be granted by the Capital Markets Authority (CMA).
Rome was not built in a day buy over time.
@Mwakio now lets be realistic. Who will buy Gor Mahia shares ? Remember that Man U are not counting on their fans to buy shares. They are counting on investors who see the profits that Man U makes.
If Gor Mahia depends on its fans to buy shares then the IPO will never succeed. They have to count on investors especially big investors to buy shares or else the value of the stock will plummet.
Question : Do you think Kenyan investors are ready to buy the shares of a football team ?
I dont think so. Thats why I say Kenya is not ready yet. Rome was not built in a day is right. Bado tuko mbali. We as fans of Kenya football should try to put pressure on the powers that be such as FKF to get our football house in order so that potential investors can have confidence in football. Right now Kenya football has a very bad reputation amongst the business community. Try and talk to people who buy shares often and ask them. A lot of things would have to fall in place before any Kenyan football team can float shares.
This is a very healthy debate, can more people with the financial minds join this noble contribution.
I tend to agree with Joe Riaga on this. Kenyan football is just no ready for Stock listing. Man United was formed in 1878 but only listed in 2012. That should tell you something about listing. And till now there are still protests against the listing. Lets first get our house in order, at least make a profit for a few years and challenge continentally before we can even think of listing. Anything more would be thinking ahead of ourselves. Baby steps for now.
The Barcelona model is good for the club only that in the local situation where corruption thrives unabated, the officials stand to gain more than the club. Transparency is very wanting, just take the jersey saga as an example – the Adiddas branded jersey continue to sell as a hotcake at the expense of the Tuzo one meaning that some unscrupulous officials has made it their business totally ignoring the Tuzo contract! the club doesnt get returns from the Adiddas jersey sale which is sold in the pretext that it is a club merchandise and takes full advantage of fan’s loyalty! Millions have been made from the sales and considering that the club is properly sponsored and has been posting quite handsome returns from gate collections from their home matches, one would expect a fat bank account which surprisingly might not be the case. If such loopholes are sealed, then the Barcelona model is an ideal one!!!