More than once Joan Laporta said in his long disquisition on the grave state of Barcelona’s finances on Monday that the club would always be owned by their members, although the president of such a heavily indebted institution will know that only for so long can he ignore the obvious.
There is no simple way out for Barcelona, whose debts of €1.35 billion are a consequence of financial mismanagement that predates the Covid era by many years and represent a problem so large it will surely at some point require a solution that is equally profound.
The club’s mythology is built around their fan-owned model, one of only four clubs in Spain permitted by law to operate that way for the past three decades, although in recent years that advantage has been given up by presidents who spent the money with little regard to the future. The club’s negative equity calculation, the amount by which borrowing exceeds the value of assets, is – according to Laporta (right) – €451 million.
That number is significant. In the late 1980s, culminating in a change of Spanish law in 1990, all but Barcelona, Real Madrid, Athletic Club of Bilbao and Osasuna were forced to adopt the model of a public limited company. It was driven by the negative equity of clubs such as Atletico Madrid and Real Betis, then comparably small amounts compared to modern day Barcelona, but deemed enough for a major change in Spanish sport law.
Under the conversion, the value of the shares which could be purchased by the members of those clubs was calculated by doubling the size of the negative equity and dividing that number by the size of the membership.
Although the Spanish law which gave the four member-owned clubs special status has since been declared illegal state aid in a decision adopted by the European Competition commission, the mechanism in transforming to a sports plc – sociedad anonima deportiva – remains the same. Barcelona’s constitution lays out the procedure for such a change. The question is not whether they want to do it, rather whether they can afford not to do it.
In Barcelona’s last published financial report, for 2019-’20, they claimed to have 140,175 paying members, or socis. Under a transformation to a sport plc, working on current negative equity calculations, each would be offered the chance to buy a share priced at around €6,435. It would raise €902 million to recapitalise the club and pay off a large amount of the debt, of which at least €525 million is owed to the US investment bank Goldman Sachs.
It would leave around €435 million of debt remaining, a figure that is likely to grow. For many ordinary Barcelona members, €6,435 would represent a large outlay but it would also prove an astute investment. What would Barcelona shares be worth to a potential new owner who sought to take control of the club?
Manchester United, the closest comparable, are valued at around €2.35 billion on the New York Stock Exchange. At a similar valuation, each Barcelona share would be worth €16,780 after a conversion to a sport plc under Spanish law. A tidy profit for the members.
It would be the end to the bold claims about ‘mes que un club’, and Barcelona would have an owner like any other. Perhaps even a sovereign wealth fund, which would make for some difficult questions. Either way, Laporta’s claims that there are commercial deals on offer which will help Barcelona climb out of their pit of debt sound fanciful. Any other club, especially those forced to run as a plc, would be involved in a firesale of their best playing assets to try to manage the debt. The club are already controlled by its creditors, with Goldman Sachs chief among them; as well as the Spanish state; and many of its players on deferred wages including Lionel Messi.
Their member-owned status also conferred on them tax privileges for which the EC has demanded it pay back a paltry €5 million for the 30-year period – the least of Barcelona’s worries.
The right to constitute themselves as a member-owned club was denied to so many others, and Barcelona have squandered it. While the Spanish state has always treated Barcelona, and Real Madrid, with the greatest leniency it is hard to see why institutional creditors would do so. Many elements of the club, including Laporta, would resist but life is changing fast. Even one year ago it was deemed unthinkable that Messi would be permitted to leave and there were assurances that a solution would be found – yet none was. It has become clear that Laporta was holding out for the European Super League and when that crashed there was no alternative.
It would only take a 75pc majority at a general assembly which encompasses 5,000 of the members elected to represent the membership to vote for the change. That may well be seen by some as a betrayal of the club’s ethos. But free-spending administrations with no liability have run Barcelona into the ground.
Laporta said more than once on Monday that when it came to the sport plc conversion “the board does not want it”, and one can see why he would. The club’s presidency offers the incumbent a global platform without the attendant financial risk. The question is what will enable the club to survive and emerge from the shadow of debt.
Each day brings more chaos, with Barcelona now locked into Perez’s two legal battles over the European Super League and with Javier Tebas, president of La Liga. Indeed, Perez came out to deny allegations that he had influenced Barcelona to end negotiations with Messi.
It begs the question what is going on at the club.
Barcelona’s closest ally now seems to be their historic rival, although their biggest problem is the debt they have accrued and there are no easy decisions in that regard.
Telegraph Media Group Limited [2021]