A Rights Issue is Top Priority for the Board
This week could be a monumental week in the history of the ownership of Arsenal Football Club.
At a board meeting this week, the directors will discuss, amongst other matter the option of raising additional capital.
Alisher Usmanov has sent a letter to the club formally offering to under-write a £100 million rights issue. Such a move cannot be ignored by the directors as it will be a dereliction of their duties. What Alisher is saying is that any shareholder who does not wish to take up his or her rights, he will buy those shares.
The purpose of the rights issue is to free-up £100 million of cash that the club has, but is needed to payoff the loan of the Highbury Square development. Through a rights issue the club will receive the £100 million.
The club currently has 62,217 shares. The shareholding is as follows:
Stan Kroenke 17,613 28.3%
Alisher Usmanov 15,554 25.0%
Danny Fizsman 10,020 16.1%
Lady Nina Bracewell-Smith 9,893 15.9%
The Arsenal shares would be valued at £8,500 each, so to raise £100 million, Arsenal launch a 6:1 rights issue, meaning that for every 6 shares you currently hold, you will be entitled to one new share which will cost you £8,500. This is the crux of the matter. For Danny Fiszman, who recently sold shares to Stan Kroenke, he would need to invest in excess of £14 million as would Lady Nina Bracewell-Smith, I doubt if either would wish to invest further sums into the club. All small shareholders would have to find £8,500 for every 6 shares they own. This would leave only Stan Kroenke and Alisher Usmanov with the financial muscle to take up their rights and the rights of the shareholders who have not take up their own rights.
The board’s fear is that this will allow Usmanov to acquire at least 28% of the club, if Kroenke only took up his own rights, then Usmanov will have 31% of the club and will be entitled to a seat on the board. This would be too much to stomach for certain members of the board.
A rights issue is the only way the club will reduce its debts in the short term and release much needed capital for Arsene to invest in the playing staff. It is time the board stopped fiddling whilst the club sunk further back from the competition, they are mere custodians of the club and should in the best interests of the club, not their self centred interests.