Apart from Manchester United and a few other exceptions, no soccer team has floated shares on the stock exchange successfully. Spending problems and overblown expectations are why.
Manchester United (red) has a sound business model
The biggest role model was Manchester United.
In 1991, the British club floated shares on the stock exchange for the first time and never looked back. In 2004, the club was the richest sports organization in the world, for the eighth time in a row.
Borussia Dortmund, on the other hand, has spent the past few months battling insolvency and has watched its stock drop from the 11 euro ($14.50) selling price in 2000 to 2.36 euros on Monday. Across Europe, other listed clubs are doing the same. Lazio Rome shares are trading at 49 cents at the moment, far below their offering of price of 7 euros in 2000. Juventus Turin stock dropped from 3.70 to 1.38. The news is bad for Dow Jones Stoxx Football, the index hosting the teams plus other clubs like Fenerbahce Istanbul, Aston Villa and AS Roma.
Nothing but bad news for football stocks
"It hasn't been worth it to buy football stocks," said Wolfgang Gerke, a banking and stock specialist at the University of Erlangen-Nuremberg.
Spending without diversifying
Bad business practices are to blame for their dismal performance. Analysts say teams were too eager to spend the money that flowed in after floating shares without laying out a sound business plan. Expectations that a team would play in the lucrative top tournaments -- like the Champions League -- year after year were overblown. Large sums were given out to players who didn't fulfill their potential.
"They win the Champions League once, and players want more money, and new players are bought," said Gerke. "But it's not sure that they'll win the Champions League again -- and then there's no money left."
No other team has followed Manchester United's practice of diversifying in order to make them less dependent on on-the-field success. In addition to offering financial services, the club was one of the first to expand their brand into Asia and the United States. This summer, they'll do a tour through Asia, where they are one of the most popular clubs.
Dortmund's futile attempt at the Asian market involved opening up a fan shop in Shanghai, said Peter-Thilo Hasler.
Dortmund (yellow), like other clubs, tied their stock performance to on-the-field success, which hasn't been great as of late
"They thought they would then sell a million jerseys," said Hasler.
Germany makes it difficult
Clubs in other countries can sometimes count on a rich investor to right the ship. When Lazio had financial problems in the late 1990s, Claudio Lotito stepped in and bought up 32 percent of the shares for 21 million euros.
But German clubs can't do the same. A German Football League (DFL) rule forbids a rich investor from taking over a club, something Hasler calls an "absolute nuisance."
"You can do it in every other country," he said. "No one at the DFL seems to know anything about economics."
The key? Watch the ball roll
No one at Dortmund seems to either. The club has amassed a debt that will reach 134.7 million euros in 2006. Though good news has come recently with the decision by the company that has a majority stake in their stadium to allow lease payments to be deferred, Dortmund's stock remains rock bottom.
The only way back, said Gerke, is success on the field, something almost impossible to predict. "There's a nice (German) saying for something like that," said Gerke. "The ball is round," or, in English, anything can happen.