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The Hedge Fund & The Football Club: A Year-Round Pantomime

Editorial | Article posted on December 19th, 2013

The Hedge Fund & The Football Club: A Year-Round Pantomime

By Ian on Dec 18, 2013 in Finance, Latest | 0 comments

Every once in a while, we receive an anonymous email or two here at the 200% underground bunker. Usually it’s a gramatically incompetent stream of abuse from an über-fan because we’ve been mean about his – and let’s face it, it’s only going to come from a “him”, isn’t it? – football club, the little diddums, but this afternoon we received one from somebody looking to vent their spleen on the subject of Coventry City. So, here’s “Tallulah Oppenheimer” (if you’re going to give someone a nom de plume, do it in style, I reckon) with their take on all things Sky Blue of late.

Hedge funds in football – now there’s an interesting notion. What’s extraordinary is that there are plenty of people in the football authorities themselves – Football League, Premier League in particular – who see no problem, or rather, wouldn’t want to ‘discriminate’ against the possibility that they might prove to be good owners. Funny line that: it’s somehow a matter of equality that a hedge fund should have the right to own a club. You can imagine the ‘missing’ chapter of Nelson Mandela’s ‘Long Walk to Freedom’ focusing on the rights of the downtrodden masses of City of London investment funds to own Rochdale if they so choose – ‘“All are created equal, black, white or banker’, I said addressing a rally of pension fund managers’….

Yet we set limits on some things in football – you can’t easily have multiple interests in clubs (it’s technically possible, though unlikely – but we saw it when Dave Allen was allowed a free pass when he bought Chesterfield whilst retaining a significant shareholding in Sheffield Wednesday), you’re not allowed, in this country, to operate ‘third party’ ownership of players – rife in countries like Portugal. So we do have limits. Except not so many on who can own a club. We have the ‘Owners and Directors Test’ (changed from ‘Fit and Proper’ – borrowed from the failed Financial Services Authority’s ‘regulatory’ [cough] system, and presumably dropped for that same reason), but it’s self-declarative (have you robbed a bank, been banned from athletics for steroid abuse, etc?) and clearly doesn’t pick up the bulk of problems that we see in football. Like hedge funds. Especially ones operating openly as specialists in ‘distressing’ companies to obtain assets. Nasty stuff.

You know what this is about by now, of course – Coventry City. SISU Capital, led by Joy Seppala – herself a City of London regulator as part of the Takeover Panel, and with a cast now including a former financial advisor to Tony Blair, Mark Labovitch. Alongside the delectable Tim Fisher as CEO, we have a group of people who have taken a City’s football club to the brink over a land deal (David Conn). Dumped in Northampton with a three-or-is-it-five-year rental deal (the Football League seemed happy to let SISU fill in the gaps) and a bond ‘payable’ if they don’t return within that time (if they don’t, who’s going to take them to task for that if they race off into the sunset?), the losses are mounting – around £2.5m a year seems like a reliable estimate, and the crowds hovering below 2,000.

With all this – and a back-story worthy of a Tolstoy novel – the fans are kind of stuck: it’s pretty obvious they won’t like SISU very much, but given SISU are, at this moment in time, the ‘Club’, they feel rather at hostage to what SISU decide the Club is, says, and does. Meanwhile the stadium company, ACL – 50/50 owned by the Council and the Alan Higgs Charity (who bought the Club’s half after years of financial mismanagement meant that the family silver had to go) – is running a decent business to pretty much a profit without the Club even being there.

And that’s it. The Council are trying their best to deal with an incredibly determined hedge fund with clear motives – give us the ground on the cheap please, or else. Any attempt to deny that flies in the face of the facts, their behaviour, their raison d’etre. The fact that Coventry City/Otium/SISU threatened only the supporters’ trust with legal action for republishing a link to David Conn’s story explaining the wretched behaviour of Seppala, Fisher, Labovitch and co (one that so many others had done, without such a threat) just exposes their litigious nature. Unfortunately though, because SISU is effectively the club people get torn: some find it hard to reject Tim Fisher’s cries of ‘foul’, and Joy Seppala and Mark Labovitch’s declarations that the Club (remember who the ‘Club’ is at the moment: it’s important) needs the ground for future profitability are compelling when they hold all the cards.

That would be difficult enough, but one of the leading journalists in the City, Les Reid, seems to be struggling to forgive Coventry City Council. For what, few seem to know, but they seem to have upset him somewhere along the line, because he maintains, despite the facts of the case – the behaviour of a hedge fund ‘distressing’ companies for an asset, that the Council (he rarely mentions ACL unless he actually means the Council) are at a minimum equally to blame for the mess – implying very often that they are the ones who hold most of it. And his attempts to smear the Trust by implication are curious for a journalist who you would have thought might have some sense of loyalty to the facts – if not his professional colleagues.

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Indeed, when award winning journalist and writer David Conn published that aforementioned article, Reid even accused the new British Sports Journalist of the Year of being ‘reckless to the facts’. Let’s just repeat that word: ‘Reckless’ David Conn, probably one of the most revered football and sports writers of his generation and with a trail of award-winning writing behind him over about sixteen years. Reid’s behaviour on Twitter is where it all comes flooding out – including unsubstantiated allegations made  against the Deputy Chair of the Trust and it so happens former leader of Coventry City Council John Fletcher (surely this bears no relationship to his self-evident dislike of the Council…).

Still, back to the story. The villains of the piece in many respects here are The Football League. This is a failure of regulation by a body who have shown themselves repeatedly to be incapable of regulating. A Football League too weak and rudderless to know how to respond, and at the heart of it, the fact that the clubs themselves make the decisions is surely the major problem, and with an absent Football Association who, because of the chaotic self-interest in the game are not permitted to rule on such issues unless The League explicitly request intervention.

Make no bones about it, the only reason we’re where we are is because we still allow hedge funds, looters, carpetbaggers and assorted cranks into our national game because not to do so would be somehow discriminatory – and one presumes ‘against my human rights, innit?’, and the reason nothing changes is because the whole business of reform is being slowly inserted into its place on the dusty shelf alongside four other reviews in the last forty-odd years. This is the League who when presented with the notion of a ‘fit and proper test in about 2002, poo-pooed the idea as it would prevent the kind of ‘interesting characters’ we saw then from being part of the story. Presumably they viewed George Reynolds as a positive influence on Darlington, then.

This is a failure of imagination. A deep set inability to face up to the truths, a game run by cowards who only every respond to those with the biggest legal budget and don’t’ actually listen to ‘fans’ because it’s not actually in their DNA to do so – because the politicians at the top are cowards and care only about their own reputations, and those at most Clubs are in the main only interested about what they can get for themselves. Whatever the behaviour from SISU as a hedge fund, it’s what we expect. But from the so-called ‘Governing Bodies’? No. This isn’t good enough. This has to change.

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This article is provided courtesy of Surreal Football

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