“Mike Ashley will not be selling in the near future” – 8 big questions for the NUFC owner

By Archie Brand

As we continue to read (or not) articles being published online it’s becoming more and more difficult to ignore the fact that sites, blogs and rags, in the name of ratings, are pandering more and more towards the kiddies end of the gene pool.

There’s nothing wrong with that – after all, Mackems need stimulation too (assuming they were at school the day they taught reading) but what ticks me off most about it is that so many virtual hacks appear to bundle toon fans in with those lesser educated, which I think is a tad unfair.

It was recently “explained” to me that the reason for new wave journos reducing everything to list form (apart from permitting them to operate within their own personal limitations) is that they claim its more conducive to our hectic modern lifestyles where we feel we just don’t have the time to take in our data in the old fashioned “reading an article” kind of way.

Personally, I think they’re just dumbing it down in the hope of getting a few more hits – namely those who can’t cope with long sentences.

So I thought I’d try to take it up a notch by taking it down a notch, with a list. 8 questions that will lead you to the conclusion that Ashley will not be selling in the near future.

Before we dive in I’ll make the comment that TV has become very educational over the years. Everyone is now pretty confident that they can save a life by jamming a biro into a windpipe, or that they could take out a drug crazed mugger with a single punch, and I can’t think of any other way that I would ever have come to know that Occam’s Razor is“the scientific principle that, all things being equal, the simplest answer is usually the right one”, had it not been for Jodie Foster all those years ago in the movie Contact.

I’ll just leave that hanging there for a while, but promise you’ll see why I mentioned it later.

 

1 – WHEN IS A LOSS NOT A LOSS?

In line with traditional financial wisdom “a loss isn’t a loss until you sell”.

Think about that mint, shiny Fiesta that you bought on the drip a couple of years ago that’s now sitting on the drive with faded paint, a flat tyre, dead battery, no radio and a protective pool of gearbox oil surrounding it.
Yep – it cost 5 grand 2 years ago, you’ll be lucky to get 2 for it now and you still owe 3 and a half, but technically you haven’t lost any money on it until you actually sell it.

The same applies across the board regardless of whether it’s a motor, a set of golf clubs or a Premier League Football club

2 – WHAT HAPPENS?

It turns out that the only thing you can depend on when it comes to trying to make anything but the most basic return on an investment is the fact that, in answer to the question above, ****, as they say, happens!

And by strange coincidence this brings us round quite nicely to our illustrious owner – investor, gambler and bon vivant extraordinaire, a certain Mr Michael James Wallace Ashley.

Forget for the moment that he may have been named after one of Aardman Animations’ three fingered, cheese-munching, hairless simpletons – that could just be a coincidence – and let’s think instead about his business habits.

 

3 – WHAT DO PEOPLE NOT KNOW?

It’s always rather amusing, and possibly a little sad, that we can be so quick to criticize people simply because they don’t know something that we think we do know.

If we were a little less “experienced” we might be able to look back and accept that our owner is a multi-billionaire and as such he must know something about something. You don’t accumulate a multi-billion pound fortune without knowing something about something.

And I’m sure he does know something – but beyond the basics of “stack’ em high and sell ‘em cheap” I’m buggered if I can figure out what it is.

On the plus side, we very quickly found out what he didn’t know. Football.

From his shoddy treatment of King Kev and the disastrous appointment of ex-Chelsea midfielder and  fishing rod / wheelbarrow model, Denis Wise, through to the appointment of Joe Kinnear and the re-naming of the stadium, we very quickly learned a lot about what he doesn’t know.

And, conveniently, what he doesn’t know also ties in nicely with the previous answer to “What Happens?”

To quote one of my old bosses, who suggested that at times I could maybe be a bit sharp with some of my colleagues, “people don’t know what people don’t know.”

And therein, as the Bard would tell us, lies the rub. (Yep something else nicked from a film, just like Occam’s Razor).

4 – WHY DID ASHLEY BUY NEWCASTLE UNITED?

You know what it’s like when you’ve made your first billion. You’ve become bored rattling round in the 30 room mansion, your waistline has outgrown the seats in the Aston Martin, and there are only so many times that you can pop down the pub in the chopper before the punters in the beer garden start to complain that you’re blowing the lettuce off their ploughman’s, not to mention their kids off the bouncy castle.

So what are the choices for your average billionaire?

Set up an organization to try to eradicate disease in the third world? All sounds a bit too time consuming.

Dress up like a big black bat and fight crime on the streets of Gotham City – sorry that should be Gosforth City? Maybe not. The cossie might be a bit snug in all the wrong places.

Ah sod it! Buy a football club. Your mate’s got one and it’ll give you both something to talk about over G&Ts down at the club.

I suspect that Ashley turned up expecting that the club would pretty much run itself, “wipe it’s own ****” financially, as he put it, and give him a way to fill those pesky Saturday afternoon gaps that appeared on his social schedule after he was banned from JD Sports for trying on Speedos in their Northumberland Street shop window.

I’d also guess he was searching for that that warm and fuzzy feeling that you get when you’re standing on the terraces (“surely you mean verandahs?”) cheering on your team with 50,000 of your newly purchased mates.

Either way, you can’t beat one of those down to earth male-bonding “common-folk” experiences, and let’s face it everyone else can see you’ve made it when you own a Premier League football club.

5 – WHAT WAS DUE BUT NEVER ARRIVED?

I’ve bought more than my fair share of used cars over the years and as a matter of course now I just accept that I’m going to miss a few problems and I put a few quid aside to cover those problems when I discover them.

I suspect Ashley buys multi-million pound corporations in pretty much the same way.

However, I think I can safely say that I am more Sherlock Holmes compared to Ashley’s Scooby Doo when it comes to the quality of my checks. We knew from the off, when it surfaced that he’d “missed” debts of 85 million quid that this wasn’t going to be your average Metro ride.

Makes a sticky electric window on a 5 year old Audi look pretty trivial in comparison.

Is there such a thing as “over-due diligence?”

 

6 – WHAT’S THIS FINANCIAL FAIR PLAY THING ALL ABOUT?

Ashley’s sticky window turned out to be a bit more expensive and he ended up having to chuck a cool hundred mill into the kitty, presumably to cover debts, reduce interest due, and add a bit of working capital.

He then lobbed another 30 to 45 in to cover day-to-day running costs when we were in the Championship.

The total owed to Ashley, according to the Chrinkle, is 144m, but apparently there’s nothing to worry about as that’s a debt, not a loss, and FFP rules differentiate between the two.

Our recently revealed accounts from our season’s break away from the bright lights of the Prem declared a loss of 90 million, which is claimed to be a direct result of Ashley’s efforts to ensure that we came straight back up. Oddly this tactic was praised by the FA, who appear to be a bit arbitrary when it comes to application of the Financial Fair Play stuff. I assume the fact that we’re back and earning the big bucks again sits well with the regulators.

Yes, even here, a mere 6,421 miles away from SJP, I can still make out the rampant harrumphing at the mere mention of the Toon’s version of the club’s accounts, and as I shout “INTEREST FREE LOAN” down the stunning Cagayan valley in front of me, the echo that returns sounds suspiciously like “FREE ADVERTISING”, but let’s save that discussion for another day.

The Financial Fair Play regulations are a little bit dubious in so much they appear to punish excessive investment while being a bit more lenient on debt. Maybe that’s Mikey’s plan.

 

7 – HOW MUCH DID IT COST ASHLEY?

That font of all things factual, Wikipedia, tells us that Ashley paid around 134 million for the club.

Add 144 million thrown in as loans and the 90 million loss from last year and to buy a patch of turf, a few drinking buddies and getting the words ”Sports Direct” painted in big letters on top of the Stadium has probably cost him in the region of 370 million quid.

The accounts are all a bit vague and we don’t really know if what’s gone in paid off the 85, the 90, or just general operating expenses. Truth is we don’t really have an accurate picture of how much he’s in for.

We can guess, but really that’s all it would be – a guess.

 

8 – WHAT IS NEWCASTLE UNITED ACTUALLY WORTH?

The simple answer to that is “whatever someone is willing to pay”.

The question should be “How did Ashley arrive at his valuation?”

There are a number of ways to value a company, usually involving share prices, comparison with other similar companies, asset value and revenue.

With Ashley the method used goes along the lines of “I bought it for this much, I put this much into it, and there’s no way I’m taking a loss.”

Guaranteed revenue from TV etc gives him a better bargaining position but one thing you can be sure about is that he will flatly refuse to lose money on the deal.

That’s why we’re hearing numbers up around 400-450 million. And he’ll hang on until he gets it. Remember – it’s not a loss until you sell.

The problem with these numbers is that by the time the books are released we’re a year behind, and since Ashley took over even something as simple as how much a player costs has become shrouded in secrecy.  When you consider income and expenditure, staged payments for players and TV money I doubt if Joe Public will get within 30 or 40 million of where we really are.

If nobody comes forward with a price he likes he’ll just continue to try to make us as profitable as possible while taking the TV money.

There will come a time –  maybe 2 or 3 more years – when he’s made enough to recover his investment, his version of club value normalizes and he’ll be able to move us on, no doubt entered into his register as an “SMI” (Slow Moving Item), similar to Curried Spam Fritters in the Co-Op.

Man City sold for 200 million 10 years ago and they are in a 2 club city with limited history and support, and at the time their revenue potential was far below ours. Is 400 million really that unrealistic?

Based on what we think we know about the club’s finances, and the demise of huge footballing institutions that we see around us, the principle of Occam’s Razor would point us towards the assumption that running a Premier League Football Club is a precarious pastime, with no guarantees of success and frequent exposure to the possibility of financial ruin. The simplest answer.

However – throw in our ongoing experience of a certain Mr Michael James Wallace Ashley, his propensity for appearing to be economical with the truth, and what many fans consider an aversion to spending money and I doubt that the basic criteria for the use of Occam’s Razor are met.

I therefore recommend that we instead embrace a new philosophical principle  which is very similar to Occam’s Razor but is tailored to take into consideration conditions of severe tightness while protecting you from the vast quantities of **** that you can expect to encounter on the way.

I give you “Ashley’s **** Plug”.

It’s a fact of life – all things being equal, sometimes the simplest answer is not the right one.

By Archie Brand