A Blog by @PR_WhoRu
Broken down, this means that over the last six and a half months, Usmanov has bought 79 shares in Arsenal Holdings PLC and he now owns 18,663. Whilst the exchange listed bid ask price (the difference between you can buy and sell shares) is £15,000 (to sell to the exchange) and £17,000 (to buy from the exchange), on the ICAP securities and derivatives exchange, the volume-weighted average price is closer to £16,000 over that elapsed time period, meaning that Usmanov, and his business partner Ardavan Farhad Moshiri, have spent roughly £1,264,000 since October 12, 2012 buying shares in Arsenal Holdings PLC, the parent of Arsenal Football Club.
During the same time, Kroenke, according to the figures anyway, hasn’t bought a single share. What we do know is that since October 12th, 36 fleet-float shares have been bought in Arsenal Holdings PLC meaning that if, in theory, they were all Usmanov, then, he will have bought 43 shares in the Over The Counter (OTC) market from private investors.
Obviously, it shouldn’t be discounted that other parties will most likely have bought shares given that fan schemes such as the Arsenal Supporters’ Trust offer an investment vehicle called Fanshare for fans to own equity in both ‘fan shares’ and category A shares. Given that Arsenal do not pay a dividend; however, it is unlikely that someone bar Usmanov bought the majority of these shares. This ultimately means one thing, Usmanov is, according to Arsenal’s websites, only 2.1 (3 rounded up) shares away from 30% that would, at most PLCs, enable him to submit a take-over bid for the club which has an approximate market capitalisation (i.e. market value) of £1bn.
However, Tim Payton and angryofIslington ensure that Arsenal have removed this obligation. He can, therefore, submit a bid at any point. Slowly building his portfolio of AFC shares at £16k a share means it will ultimately be cheaper now if he bids for Stan's shares which he will expect to pay a hefty premium on, if successful. What makes me think that Usmanov will submit a takeover bid, and perhaps not necessarily when he strikes 30%, within the next year or two, is that it simply wouldn’t make sense for him not to. If you look at the pricing pattern of the bought shares and the subsequent time elapsed between each purchase, it is clear that caution is given as not to spike the price.
There appears to be a slow-growth strategy. It wouldn’t make sense for Usmanov to launch a takeover bid for several reasons. Predominantly, these are 1.) illiquidity, 2.) no power and no 3.) no dividend.
1. Illiquidity refers to the ease with which you can buy a security (stocks, bonds, credit default swaps, etc) and, it is clear, that Arsenal share are illiquid, i.e. they’re not readily bought and sold especially compared with shares of leading FTSE companies like Shell and Vodafone. Usmanov’s stake is now worth, at current market value of £16,000 per share, £298,608,000. Even if the share price of Arsenal continues to increase, it is unlikely that Usmanov can easily sell those shares as few investors would purchase his stake for such a volatile and non-dividend paying share which holds such liquidity risk. If there’s greater demand to sell than there is to buy then the price will drop and this will wipe out his profit. Also, compared to Manchester United which has investment from large institutions such as Blackrock, Soros and Fidelity, there are no major funds interested in investing in Arsenal, only a handful of wealthy individuals and fans. Some Hedge Funds have found that they have bought so many shares in 1 company they rose the price so much that, when they came to sell and cash-in on profit, no one wanted to buy. This is liquidity
risk. 2. As it stands, Usmanov isn’t a board member and it seems unlikely that the Arsenal board are going to change their mantra any time soon that they will not care his sort in N5. This means that Usmanov is unable to influence policy such as dividend payments, commercial agreements and revenue streams, player transfers, ticketing etc aside from his pr campaign.
3. Arsenal Holdings PLC does not pay a dividend and have suggested that this policy will continue.
The question is, why would you hold nearly £300m ownership in a company knowing full-well that there is a liquidity risk to holding those shares, so even if the value rises it would be hard to sell, the club won’t listen to you and there is no financial reward if the form of a dividend for the huge investment risk you are taking?
My answer is that unless you are slow growth investor with ambitions to become the owner of the company, it simply wouldn’t make sense. That is why I believe, and I could very well be wrong, Usmanov will launch a takeover bid for Arsenal Holdings PLC within the next 24 months.
We know that there are roughly 2.44% (1,519) shares available for purchase on the free-float exchange market which could be snapped up by an investor with ambitions to launch a takeover bid. Follow me, @PR_WhoRu for information on Arsenal’s shareholdings.