A minnow of English soccer, Stevenage FC, is an unlikely candidate to be at the forefront of financial innovation in the game.
Yet it has become the first soccer club in the world to sell bonds directly to its fans online via crowdfunding, according to the organizers of the deal.
Stevenage, in England's fourth division, raised £600,000 (US$795,180) in September via a five-year bond to rebuild a stand in its stadium. It is set to be followed by Frosinone Calcio of Italy's Serie B second division which unveiled a bond worth up to £1,5 million ($1.76 million) on Monday.
Tifosy, the crowdfunding platform behind the deals, was founded by former Italy, Juventus and Chelsea striker Gianluca Vialli, along with a former Goldman Sachs banker and two others investors. The company's name is a play on the Italian word tifosi meaning fans.
The figures at stake may be small but Vialli said he and his partners were aiming higher.
"We're close to finalizing something with a big club in Serie A and an (English) Premiership club as well," he told Reuters in an interview. "We're also taking to many other clubs in football, rugby and cricket."
He added Tifosy takes a 4-6 percent cut of all funds raised.
Such fundraising offers a new source of funding to sports clubs who do not have the access to international capital markets, typically to fund their sports infrastructure. It can also give fans another way of supporting their team.
But it comes with risks for investors.
The Stevenage and Frosinone bonds cannot be traded and their holders would only be repaid after senior creditors such as banks in the event of a default.
There are also perils associated if the team performs poorly on the pitch. In Stevenage's case, if the club is relegated in the last year of the bond the repayment is delayed by one year.
If a club sees its revenue slump due to poor performance, it may not be able to repay bondholders.
"The risk is high for fans investing in their club (...) that they will lose all their money or that they are not compensated for the risks they bear," said Luca Enriques, a law professor at Oxford University who has researched crowdfunding, where businesses raise cash directly from small investors online.
Stevenage bondholders can choose to either get a 4 percent gross annual interest in cahs or 8 percent in credit that they can spend on the club's products, such as merchandise, food and drink.
Frosinone's bond comes with a 5 percent cash coupon plus 3 percent in credit. Proceeds will be used to build a restaurant, a health centre and some shops around the club's new stadium.
Aa time when a five-year United Kingdom or Italian government bond yields less than I percent, this may look like a good return.
But, by comparison, investors can get a 6 percent yield by buying the debt of Premier Foods, the owner of brands including Mr Kipling cakes and Oxo stock cubes, with an equivalent maturity.
Unlike Stevenage or Frosinone, listed companies such as Premier Foods are obliged to publish their accounts regularly. Their debt is rated by independent agencies and can be traded on the market.
Finbarr O'Connell of accountancy firm Smith & Williamson, who helped now dissolved Formula 1 team Caterham raise donations in 2014, said selling subordinated debt to fans took crowdfunding too far.
The risks associated with the Stevenage bonds are clearly laid out in the documentation and users are also asked to self-certify as experienced, wealthy or everyday investors before applyng to buy the bonds online.
Carole Legrand, a 65-year old Stevenage fan, invested 1,000 pounds after a small lottery win.
Reuters
London
Yet it has become the first soccer club in the world to sell bonds directly to its fans online via crowdfunding, according to the organizers of the deal.
Stevenage, in England's fourth division, raised £600,000 (US$795,180) in September via a five-year bond to rebuild a stand in its stadium. It is set to be followed by Frosinone Calcio of Italy's Serie B second division which unveiled a bond worth up to £1,5 million ($1.76 million) on Monday.
Tifosy, the crowdfunding platform behind the deals, was founded by former Italy, Juventus and Chelsea striker Gianluca Vialli, along with a former Goldman Sachs banker and two others investors. The company's name is a play on the Italian word tifosi meaning fans.
The figures at stake may be small but Vialli said he and his partners were aiming higher.
"We're close to finalizing something with a big club in Serie A and an (English) Premiership club as well," he told Reuters in an interview. "We're also taking to many other clubs in football, rugby and cricket."
He added Tifosy takes a 4-6 percent cut of all funds raised.
Such fundraising offers a new source of funding to sports clubs who do not have the access to international capital markets, typically to fund their sports infrastructure. It can also give fans another way of supporting their team.
But it comes with risks for investors.
The Stevenage and Frosinone bonds cannot be traded and their holders would only be repaid after senior creditors such as banks in the event of a default.
There are also perils associated if the team performs poorly on the pitch. In Stevenage's case, if the club is relegated in the last year of the bond the repayment is delayed by one year.
If a club sees its revenue slump due to poor performance, it may not be able to repay bondholders.
"The risk is high for fans investing in their club (...) that they will lose all their money or that they are not compensated for the risks they bear," said Luca Enriques, a law professor at Oxford University who has researched crowdfunding, where businesses raise cash directly from small investors online.
Stevenage bondholders can choose to either get a 4 percent gross annual interest in cahs or 8 percent in credit that they can spend on the club's products, such as merchandise, food and drink.
Frosinone's bond comes with a 5 percent cash coupon plus 3 percent in credit. Proceeds will be used to build a restaurant, a health centre and some shops around the club's new stadium.
Aa time when a five-year United Kingdom or Italian government bond yields less than I percent, this may look like a good return.
But, by comparison, investors can get a 6 percent yield by buying the debt of Premier Foods, the owner of brands including Mr Kipling cakes and Oxo stock cubes, with an equivalent maturity.
Unlike Stevenage or Frosinone, listed companies such as Premier Foods are obliged to publish their accounts regularly. Their debt is rated by independent agencies and can be traded on the market.
Finbarr O'Connell of accountancy firm Smith & Williamson, who helped now dissolved Formula 1 team Caterham raise donations in 2014, said selling subordinated debt to fans took crowdfunding too far.
The risks associated with the Stevenage bonds are clearly laid out in the documentation and users are also asked to self-certify as experienced, wealthy or everyday investors before applyng to buy the bonds online.
Carole Legrand, a 65-year old Stevenage fan, invested 1,000 pounds after a small lottery win.
Reuters
London
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