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The Sheffield United ownership trial at the High Court will get underway at 11.30 this morning, when they will begin looking at evidence about the value of shares in the club with two expert witnesses #sufc #twitterblades
As you will no doubt be aware by now I’m a only a simple-minded bloke from Bolton so some of it might be beyond me but I’ll do my best to keep up #sufc #twitterblades
Just got to court and for the first time in the case while I’ve been here Kevin McCabe isn’t here and neither is Prince Abdullah, although many of the other key players in the case are #sufc #twitterblades
Lawyers are now talking to the judge about evidence which relates to ALK, the company which McCabe had been lining up to buy #SUFC, and whether we might need to sit in private for some of the day although they are hopeful it won’t be for too long #twitterblades
Expert witness for the SUL side being called to the stand. Nicholas Good (spelling?) works for accountancy firm KPMG is now being asked to agree his written witness statement and will then be cross-examined by UTB’s lawyer, Andreas Gledhill QC #sufc #twitterblades
Gledhill now saying that Goode has been asked to value the club twice, once before promotion and once afterwards. Gledhill says he will use the current figure and that Goode values the club now as £88-104m, around £14m less than the UTB side #twitterblades #SUFC
Gledhill asking about the ‘prestige’ of investing in a premier league football club and what Goode says in his statement about investing in a football club is not an ‘entirely rational’ thing to do. Goode agrees it is not merely a financial investment #sufc #twitterblades
Goode says at the Championship level clubs are almost always loss making, however this changes when a club reaches the premier league as they can sometimes be profitable #sufc #twitterblades
Gledhill asking Goode about his expertise and experience. Says Goode hasn’t submitted a CV with his evidence, and is the only one of the expert witnesses who hasn’t. Goode says it is the standard way he presents expert evidence #sufc #twitterblades
Gledhill saying Goode doesn’t have expert experience in the football field, and had to rely on a colleague for some of the evidence he has submitted to the court. Goode accepts this #sufc #twitterblades
Goode says he has done forensic work for two other clubs in the last year but can’t reveal what they were because it is confidential. Accepts the work he did in the football sector was not primarily share valuations #sufc #twitterblades
Gledhill now asking about the multiplier effect on share valuation for an established premier league club and says the two sides have broadly comparable figures, 1.3 times for SUL to 1.4 times for UTB #sufc #twitterblades
However, he says that for clubs that are newly promoted, using Birmingham City as an example, the two sides differ. Goode says he has come at it slightly differently and have arrived at different figures #sufc #twitterblades
Goode says his figure is lower as clubs are often related and the odds are against #SUFC. ‘We don’t know how the season is going to turn out or if the club is going to crash back to the Championship’ #sufc #twitterblades
They are looking at other clubs who have been bought and sold over the last 10 years. It is agreed Arsenal and Manchester City are ‘not comparable’ but clubs like Blackburn and Birmingham are much more similar #sufc #twitterblades
Gledhill asking how Goode gets to a 0.7 figure for the share value multiplier for #sufc. Says the only figure that comes close to a valuation that low is the Blackburn transaction, who were sold in 2010 #sufc #twitterblades
Gledhill now asking Goode to look at Blackburn’s accounts for 2007 when they were loss making and the owners had said they were not putting in any more money. Says they were ‘highly motivated sellers’ and that’s why they had such a low share valuation #sufc #twitterblades
Goode says you need to compare apples with apples. Says the history shows #sufc have a 50/50 chance of staying up and the current bookmakers odds suggest they have a 60% chance of going down #sufc #twitterblades
Gledhill says Goode gets to some of his figures from bettings odds, asks why an investor would ever use something like this. Goode says it is an proxy for the chances of the club going down #sufc #twitterblades
Goode now being asked about the valuation of the club if they were to be relegated next season. His evidence says the club would be worth £30-30m if that was to happen. Gledhill says this is too low #sufc #twitterblades
Gledhill asking why Goode valued the club lower in January 2019 than he did in January 2018. Goode says this is because they had sold David Brooks #sufc #twitterblades
Gledhill says Goode’s figure of £30-35m is too low as it doesn’t reflect the fact that the club would have a better squad. Goode says this might not be the case but accepts the figure doesn’t factor in players #sufc #twitterblades
Gledhill: ‘No one would think that the club were worth £182m now or as little as £25m if they were relegated’. Says the assumptions Goode has made are a ‘poor substitute’ for a better knowledge of the market. Goode says they are based and tested against data #sufc #twitterblades
Gledhill has now finished his questioning and Paul Downes QC for McCabe has now taken over. Asks Goode about the comparison to Blackburn and whether the division they were in at the time they were sold would be relevant. Goode says it would be #sufc #twitterblades
Downes now asking about his degree of confidence in his valuation. Goode says it is difficult because investing in football clubs is ‘not entirely rational’. Says his £96m valuation would take six months to be realised #sufc #twitterblades
Downes asking what happens when a club is relegated. Goode says players protect themselves by signing contracts that benefit themselves even if they go down and that the players are worth less if relegated. ‘It is a buyers’ market’, he says #sufc #twitterblades
Mr Goode has now finished giving evidence and the court has broken for lunch. We’ll be back at 2pm #sufc #twitterblades
Just realised I’ve been spelling Nicholas Good’s name wrong all morning. Apologies #sufc #twitterblades
Lawyers now talking about UTB’s expert witness and his desire to keep the details of two other clubs he has done work on secret. They are discussing whether I will be asked to leave or they will write down the names of the clubs on a piece of paper #sufc #twitterblades
Judge says he is reluctant to sit in private unless absolutely necessary so decides we will take it in stages and discuss if the paper writing or private sitting is needed as and when it arises #sufc #twitterblades
The clubs are identified on the piece of paper being handed round and Downes says his questioning might identify them so the judge decides that we will sit in private for a short time during Mr Harmer’s evidence #sufc #twitterblades
Douglas Harmer has been sworn in and is now being asked by Mr Gledhill to confirm his witness statement before being questioned by Paul Downes QC for McCabe #sufc #twitterblades
Downes: ‘Football clubs are especially difficult to value. At the lower end clubs are loss making. You are not buying a cash flow you are buying the right to put in more money’ #sufc #twitterblades
Downes says there is a great deal of volatility in valuing football clubs due to scandal or form and a world of difference in valuing Manchester United and Sheffield United. The people who would be in the market for those clubs are different #sufc #twitterblades
Not quite sure why but Downes asks Harmer whether he has been through witness preparation training for this trial. Harmer confirms he did two hours of it. An indication of the high stakes involved in this trial #sufc #twitterblades
Downes now asking about the revenue multiplier that Harmer has applied in arriving at his figures. Downes says you need to understand the motivations of the people involved in the transaction and the revenue multiplier is misleading and distorting #sufc #twitterblades
Harmer says he accepts that revenue multipliers have limitations but we do our best to infer comparability with other transactions that have taken place #sufc #twitterblades
Harmer: ‘We look at a range of evidence, put all that together and come to a judgement. I am well aware that there are very, very limited examples of Championship clubs selling for more than one times their asset value’ #sufc #twitterblades
Downes says there are two valuation models. One based on turnover and the other based on net asset value. Harmer says he used the revenue model as Championship clubs tend to trade for less than their net asset value #sufc #twitterblades
Harmer agrees with Downes that the revenue multiplier model includes the revenue + the a multiplier based on other factors about the club. Downes asks him where he applies these other factors, says his report comes up with judgements the court can’t test #sufc #twitterblades
Harmer explains some of the factors which he considers in order to come to his judgements. Talking about comparisons of the sale to other clubs like Wolves and Bolton. Harmer says Wolves we’re comparable but Bolton wasn’t as it was a ‘distressed’ sale #sufc #twitterblades
Downes asking Harmer why Bolton had a revenue multiplier as low as 0.8 while #sufc were as high as 1.8. Harmer says the circumstances of the clubs were very different. Reading are higher at 1.8 because of their specific circumstances #sufc #twitterblades
Downes says the methodology Harmer has used is not transparent. I can see that that make it somewhat subjective, says Harmer. Downes asks why #swfc were as high as 2.3. Harmer says that is because there owner had named a price #sufc #twitterblades
Harmer: ‘It goes to the question of saleability. How saleable were #sufc in March 2019. The strong run of form may have encouraged a potential buyer to invest in the club’. Downes says his valuation has disregarded negative factors like the lack of a stadium #sufc #twitterblades
Downes: ‘Sometimes a buyer is buying the turnover of a business. Other times if you were investing in a loss making company and wanted to break it up you would look at the net asset value. You need to understand the motivations in the transaction’ #sufc #twitterblades
Downes: ‘There are two motivations behind buying a Championship club, prestige and hope’. Harmer adds a third being part of a broader strategy. This makes them enormously challenging to value, says Downes. Harmer agrees #sufc #twitterblades
Downes says no one has used a calculation based on revenue during the whole of the last six years history of #sufc. Harmer says they still represent a potentially useful analysis of what sellers are prepared to sell for and buyers are prepared to pay #twitterblades
Downes asking Harmer about deals he had been involved in. Asks him if a calculation based on the revenue has ever been used in any of his other transactions. Harmer says turnover speak to the ultimate sustainability of he business #sufc #twitterblades
Downes: ‘These are all invariably loss making clubs so turnover is not going to produce a profit unless there is promotion’. Harmer agrees but says in his experience buyers are interested in the overall turnover of the club #sufc #twitterblades
Downes says the only thing that matters to a buyer is what chance to club has got of going up. Harmer agrees the prospect of promotion is a big driving factor. Downes says Harmer’s judgements contain no methodology, no workings, it is opaque #sufc #twitterblades
Downes: ‘The best evidence of what a real person would sell for and a real person would buy for’. Goes on to list six transactions that have featured in the recent past of #sufc. Harmer says some of them were far to high but agrees they are relevant #twitterblades
The original agreement between the two parties in 2013 implies the club was worth £20m. The so called Project beta investment with the Qataris says the club was worth £47.5m with its property assets #sufc #twitterblades
Sorry, that £47m was the club alone not its property assets. A subsequent potential Chinese investment implies the club to be worth £30m and the later still project delta investment suggests £31.5 #sufc #twitterblades
Downes says Mr McCabe then made an offer when the parties had well and truly fallen out. He makes an offer to sell his half for £10m giving an implied value of the club alone of £20m subject to further conditions #sufc #twitterblades
Mr Downes is about to come to the prospective ALK investment but we run out of time and have adjourned until 11am tomorrow morning. Hope that’s been useful and not too complicated! See you again tomorrow. Dan. #sufc #twitterblades
The main takeaway from today I think is that the Prince’s expert witness has valued the club higher than McCabe’s, although not massively so. The case is ultimately about who the judge will forced to sell their shares so I guess that’s why it’s important #sufc #twitterblades
