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Private vs Public Ownership

Private vs Public Ownership


A study has found that football clubs registered
as public limited companies have a better firm
performance compared with football clubs registered as private limited companies; meaning those
registered as public limited companies have better financial performance than those as
private limited companies. Football clubs within the English premier
league are housed in one of the following formation of companies;
i) A public limited company regulated by the stock exchange to which it isregistered or ii) a private limited company which has shareholders
who hold sway over the direction in which thefootball club is going; this is the arrangement for the majority of clubs in the English Premier League. An example of how shareholders can change
a club is when Chelsea almost went into administration under Ken Bates, before Roman Abramovich became the majority shareholder – and Chelsea’s future changes. The main exception to this rule is Arsenal,
as they have a parent company. The parent company is a public limited company; Arsenal Holdings PLC. Public Limited Companies have their
shares listed on a stock exchange where they are traded and regulations must be adhered to. Although Arsenal’s shareholder is a public
limited company, their shares are traded infrequently onthe NEX Exchange, which itself is a niche exchange. Public limited companies have far more stringent
rules and this was highlighted by the purchase of shares of Arsenal Holdings PLC by Stan Kroenke. As the majority shareholder of Arsenal Holdings PLC, Kroenke has to make an offer on any shares that are put forward for sale, this is to comply
with company law rules. Although public limited companies have more
laws and corporate governance protocols to follow there are still difficulties that arise and Kroenke’s purchase shares of Arsenal Holdings
PLC is a prime example of this. Kroenke was not trusted when he purchased
shares in the company in 2007. Therefore, there was a sell off of shares
between Kroenke and the second largest shareholder Alisher Usmanov. Over a period of four years Kroenke went from
being seen as a hostile shareholder to now an ally of Arsenal football club and a non
executive director of Arsenal Holdings PLC. Kroenke holds 66.64% of Arsenal Holdings PLC and Usmanov holds 29.25%. As mentioned, Public limited companies have
significant governance rules and laws to abide by and this gives a significant security to the company as every move made by the public limited companies
is scrutinised. Private Limited companies on the other hand
do not have the stringent rules to follow. An example of how a single shareholder can
change a football club, with little resistance is Hull City AFC. In December 2010, Assem Allam and his son
Ehab Allem took over Hull City AFC for £1 on the condition that they invested £30 million into the football club. As sole shareholders, through a
private limited company and the only two directors of Hull City AFC, there are no barriers to stop any changes by the board. This became evident in the summer of 2013,
when Assem Allam announced that the club would dispense its 109 year
old name and would be remarketed as Hull Tigers. This received strong criticism from the fans; however, Allam retorted “nobody questions my decisions in my business”. In normal circumstances a private limited
company would not need approval to change their name however, as Hull City AFC belongs to the football association, the association gets the final say. The FA rejected the name on a number of occasions
and this infuriated Allem who stated that he would “not invest a penny more in
the club” unless he is allowed to change the club’s name ​to Hull Tigers. In the same interview, Allam said, “I have
never been a football fan. I am still not a football fan. I am a community fan.” Since the year 2000 forty four football clubs
across the Football League have been placed into administration, which is a significant number and shows that there is a fundamental flaw in the management of football clubs. Both forms of company seemed to be flawed when it comes to running football clubs however, public limited
companies are much more regulated than private limited companies and therefore, there is
more scrutiny over the actions taken by the clubs which appears to lead to greater financial protection. The evidence also identifies that it is imperative that clubs are protected and are not run into the
ground by owners as football clubs are part of local communities.

Comments (11)

  1. To read Joe's supporting piece to this video, please visit bit.ly/PublicvPrivate

  2. One flaw here bates bought Chelsea for £1 literally and sold the shares to abramovich for 30 or 40 million

  3. Brilliant! Can you do a video about the finance disparity in Scottish football?

  4. Thank you for these videos focusing on the Finances of football ! Really appreciate it!!!

  5. They are both quasi-privately owned, not publicly owned. Public ownership is ownership by an elected state. Public assets cannot be sold by individuals and members of the state have no incentive and limited capability to maximize their value.

  6. incorporated as a plc did not mean it is a listed company…..listed company certainly better performance as regulated

  7. P U B L I C L I M I T E D C O M P A N I E S

  8. When was kroenke ever considered an ally?

  9. Get rid off the hand and this video is perfect

  10. It's very dangerous to make this type of conclusion. Strict government regulation have almost always been damaging to firms. Take for sad example the Gender Pay Act, a significant law that persuaded Ford to reduce the size of the Dagenham plant which now mainly makes engines and pull out of British business somewhat (not that I don't believe in equal pay, I do). Government regulations are bad for an economy and not every action a football club takes is scrutinised – LSE is free from gov intervention hence how it functions properly. The fact that stocks and shares move around concerning the football clubs is why no individual can damage the clubs hence how public LCs perform better than private LCs. PLCs perform better than private ones because shares change hands frequently restricting the powers of any certain individual whereas private companies are ran by an owner who can run the club as stable or unstable as they can. It is the lack of control, rather than the greater control, which means that public limited companies perform better than private limited companies, and if there were such strict regulations on the stock exchange and the free market, the British economy would come to a standstill.

  11. The growth of china’s state sector and the number of allegedly capitalist western multinationals in joint ventures with the communist party’s SOEs prove that state ownership can and does work

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