Let’s open this piece with a quick aside acknowledging that I pitched my services to Brera Holdings (BREA.Q) recently, and though we talked a lot and came close to a deal, they ultimately haven’t decided to use me for market awareness.
That’s just a disclosure, not a warning – I’m writing about them today regardless because, for the last few years, I’ve been extolling the virtues of sports investment and telling anyone I meet that my own personal investment in pro sports, an ownership stake in UK fifth tier club Altrincham FC three years ago, has been the best investment I’ve made in the that time.
Brera announced this month that they’ve locked in an agreement to make a ‘strategic investment‘ in an Italian Serie B football team, SS Juve Stabia, which celebrates ‘117 years of tradition’ this year.
Here’s what they look like.
If you dig in on the details, that ‘tradition’ stretches across several clubs in that time, all the previous of which eventually went bankrupt and ‘transferred’ their heritage to the next one, so let’s not get too carried away with the history, but a majority stake in a Serie B team is nothing to sneeze at.
Known colloquially as the Wasps, Juve Stubia is a Naples-based club, part of the third largest metropolitan area in Italy, playing in the shadow of the gian Serie A club Napoli. They turn out in a 12k capacity stadium, having worked their way up over the last decade from far lower divisional status, and the name roughly translates as Stabia Youth, being as they’re based in the resort town of Castellammare di Stabia.
Brera’s deal comes after they ran the rule over several other teams with deeper histories at the top level, and the final price of the investment has not been disclosed by the company.
Let’s dig in by exploring sports as an investment.
Sports organizations are all about media content. While it will take three years and $200m to make a feature film that will be watched over 90 minutes and never talked of again, the Premier League earns around UKP150m per round, and goes out to 3 billion people worldwide.
It’s the one content format that you can get kids to watch with regularity, even as appointment viewing, and with ads on the screen constantly but in a way that doesn’t offend fans.
Ads are in the foreground, the background, on the shirt, in the name of the stadium, on the field itself, and more, but fans are fine with it. The money rolls in.
For decades, American pro sports have been a license to print money, less because of the advertising and more because it’s a gated community. It costs billions to buy in, and you make billions on the other end through TV money, merchandising and licensing, and ticket sales, but the fat returns come on the way out. The lack of buying opportunities mean billionaires will pay way above the odds to get a piece, if a property ever becomes available to buy.
So folks just beneath that price level have started, over the last five years, to look for opportunities to get in on the growing world of womens sports, minor leagues, and sports on the rise like cricket, pickleball, and esports. Private equity companies have bought clubs around the world, but also entire leagues, and even national teams.
THE AMERICAN PROBLEM:
But the problem with almost all of those assets in America is they are where they’ll always be. If you buy the New England Patriots, or the Florida Marlins, or even the New Zealand All-Blacks, the best you can do in growing those properties is by growing the league they’re situated in because they remain in said league evermore.
The Toledo Mud Hens can be the best run minor league baseball team in the world, but they’ll mever get promoted to the Majors. They are, in essence, a license to sell hot dogs and beer while Major League-owned youth players practice.
In Europe, however, the gated community aspect works differently in as much as it’s not gated at all.
Sure, you can drop a few billion buying Manchester United, but where exactly is your growth plan in doing that? They’re already in the English Premier League, the top league in the world, and they usually compete in European competition, where the best clubs in Europe battle against each other midweek.
But where can they go from there?
If you bought United and they come second in the league, you’re likely disappointing the fans. And if you should buy, say, Everton and have a terrible season and end up in the bottom three places, your spot in the Premier League will be gone next year as RELEGATION is a thing.
In the US, teams take no punishment if they come last. In fact, they’ll get a high draft pick for their failures, and may even intentionally tank games – or entire seasons – as they retool for success in several seasons time without downward risk. This also means, for most teams, the interest levels are effectively over by 2/3 of the way into a season.
But in Europe, a bad season means genuine problems. It can mean the start of a multi-year slide down the divisions. Imagine the Oakland A’s moving down to AAA ball after a (typically) bad season in the major leagues, then AA ball after another. That’s European promotion/relegation-based pro sports, in a nutshell. Every game matters, right to the end.
Why would you buy into that if you could lose your investment through relegation?
- Availability. There are 20+ levels to the UK football pyramid, going all the way down to beer leagues, and with the FA Cup tournament, every club at those lower levels is able to, by luck or talent, find themselves facing Premier league competition on occasion. There are over 300 pro clubs in levels 1 to 8, and some 7000 teams across the top 20 levels. That brings a lot of buying options at every price range.
- Promotion: With the system allowing for clubs to work their way up the system, as well as down, a cheap buy at level 10 can realistically work its way to level 5 over a decade or less, if properly run.
When I bought into Altrincham, they’d been promoted twice in three seasons, from level 7 to the current level 5. In the time since, the club has gone from part time to full time, invested in a new pitch, a sponsors lounge, a fan zone, a club shop, hung onto the best management group in the division, sold players at a club record price, built a good young squad with a youth academy, and improved its league position every year with responsible growth and long term planning. A recent financing brought in another UKP 1.5m and strategic investors that have helped the team in many ways outside of pure capital. Last year the team made the playoffs and were a whisker from being promoted to EFL Two. Luton Town managed to climb from this level to the Premier League in nine seasons.
The valuation when I bought in was 600k. The most recent financing was a very fair (in my opinion) 2.6m. Crowd financings in lower leagues have been priced as high as 24m, though crowdraises always jack valuations and charge fans an accessibility premium because they tend to buy out of pride, not profit motivations.
My feeling is Altrincham is worth around UKP 6m today, and if the club can get promoted, you could double that without a problem.
I’m holding on to that investment, boi, and have a hairy eye open for another one with similarly good bones.
THE BRERA STORY:
Brera Holdings is, to my mind, a weird one. While goofy me was coming out of covid buying into a UK club all by myself, Brera has been busy buying clubs at lower levels in some very odd places while sitting on the NASDAQ.
- March 2023: Established Brera Tchumene FC in Mozambique, which rose to the First Division after winning its post-season tournament. Rough valuation by my count: $100k
- April 2023, Took a 90% stake in the North Macedonian first-division team Fudbalski Klub Akademija Pandev, now known as Brera Strumica FC. Rough valuation: $1m.
- June 2023: Brera made a strategic investment in Manchester United PLC. Unknown value, but Man Utd stock is available as it’s a public company.
- July 2023: Acquired a majority stake in UYBA Volley, an Italian women’s professional volleyball team. Rough value, $2m.
- September 2023: Assumed control of Bayanzurkh Sporting Ilch FC, a Mongolian National Premier League team, which became Brera Ilch FC. Rough value: $100k.
- June 2024: Established a joint stock company for the North Macedonian women’s football club Tiverija Strumica, now known as Brera Tiverija FC, a wholly-owned subsidiary of Brera Strumica FC. Rough value: $100k.
The Juve Stabia deal is the first one where Brera has stepped up to a significantly bigger spotlight. That club was estimated to be worth UKP4m by some early in the year, but accrued a 10m value after it was promoted to Serie B. Its current position in the league means it has a solid chance to get promoted again, this time to Serie A, which would jump that value up considerably. I know BREA was talking about raising $11m to buy the club and pump resources into it to help it grow, earlier this year, and that seems about right.
Currently, Stabia are positioned fourth at nearly the halfway point of the season, in good form, and surrounded by larger clubs who have a recent Serie A history. There are others, such as Sampdoria and Palermo, that linger mid table despite being among the larger clubs in the country. Bari, in 7th, play in a 58,000 seater stadium. Juve Stabia’s stadium caps at 7,000 and they average 4000 attendees.
I understand the move for Stabia. It’s possibly overachieving right now, but it’s in a good place and has room for growth and if it can elevate one level, the sky is the limit.
But, if I’m honest, I’m not sure I see the value in holding a load of clubs that sit around the equivalent of the UK 6th to 8th level in terms of revenue and prominence, but can’t be promoted much farther from where they are sitting currently. A club in the North Macedonian first division CAN play in European competition, should they qualify, but won’t likely stay alive in said competitions for long and thus won’t earn a lot of dough doing so.
Mozambique? Mongolia? I’m not sure I see the value in those, outside of maybe some news releases if they do okay in domestic competition. They wont make enough revenue to bne important, and they don’t offer development options for players owned by other clubs in the Brera group.
Bigger ownership groups, outside of the public markets and with far fatter bank accounts, have taken the multi-club ownership group model to an extreme, with some owning dozens of teams around the globe, and ‘loaning’ players between them rather than relying on buying on the transfer market.
This has led to mixed success, with problems of conflict when clubs owned by a single group are due to play against one another, and sports ownership, while a great way to accrue value over the long haul, does often require ongoing capital inputs to stay competitive.
Altrincham, as an example, was attractive to me as one of the few clubs positioned between the English Championship (lvl 2) and our level 5, that have been break even of better over the last few years. In the Championship, everyone loses money as they clambour for promotion at any cost, and when owners run out of the capital needed to compete, relegation (or bankruptcy) beckons.
The risk of relegation is not small. NFL legend QB Tom Brady bought into Birmingham City last year, spending a bunch of cash and pumping in more, just before they collapsed to the third level. They look likely to be promoted this season, but others haven’t found their footing so quickly. Swindon Town used to be a Premier League club and right now look destined to get dropped to lvl 5, having fallen on hard times. See you next season, boys!
SO WHAT’S BRERA WORTH?
The current market cap is a petite CAD $2.7m, which, considering their announced plans, is an interesting buy in level. Raising the money to buy into Juve Stabia will take a fat raise and dilution, and the stock action since their announcement hasn’t been a revaluing event at all but, by my valuations listed above, the current assets should present a value of around $3.3 million, not including whatever they put into Man Utd stock.
If I’m honest, I’d be looking tounload some of those other assets to beef up the Stabia deal, as valuations on all sorts of teams and sports have been rising.
The BREA share price has had some big moments over the last few years, but only moments, as every time they’ve got some lift for a minute, selling has kicked in.
What they’re lacking currently is fan accessibility.
If I become a shareholder of BREA, I’m simply not going to be watching the North Macedonian club on a Saturday. I certainly won’t be watching their Mozambique team and, if Stabia gets to Serie A, sure I’d take an interest.
But not just now. Right now, the thrill of having a piece of a team (and trust me, it is a thrill) comes mainly from when you can turn on the big screen on a Saturday and watch your team actually play.
- Year one as an Altrincham investor meant listening on an audio stream.
- Year two meant buying a subscription to the Vanarama Non League TV platform to see games wqith poor camera work.
- Year three: The games are broadcast internationally on DAZN.
Here’s what that looks like:
In contrast, here’s Brera’s Tchumene FC on Youtube:
Sitting on the couch with my son watching OUR team play, and talking about which players might be sold or brought in, or who’s trying to lever the manager away from us, or what’s next on the stadium refurb list, that’s the real juice in sports ownership, outside of the elite billionaire levels.
And that’s what Brera is missing at the moment.
It may not be that way forever, but right now they need to be either buying into a team with an international fanbase, or turning an international fanbase on to their teams. And right now, they’re not. That’s why it’s cheap.
But a cheap buy-in isn’t necessarily a bad thing.
For mine, BREA *should* make a move to buy a lower league English club. They’d pay a premium – comeptition for good teams is fierce right now – but you could pick up a 6th level team for a few million, and have plenty of room to grow, in a country with a big population, that has a conceivable road to the Premier League attached, and with games on a prominent streaming platform. A Scottish side could be a cheaper option, as trhere are plenty of those in financial struggles right now, but *the road to the Premier League* is where the real value lies with the common football fan.
I do think a public sports ownership company makes a LOT of sense, because people will buy into the club they love, and others will love the club they’ve bought into, but there has to be an easy way to follow along. I bought into a third division swiss side a few years back and got out as quickly as I could when it became clear I’d never see the team actually play. I’ve since bought into a crowdfunded team in Portland, another in Oakland, and inquired about teams in the Canadian Premier League, only to find that a closed shop of pals selling teams to each other in a league nobody cares about. I also started a professional wrestling promotion, so this sports ownership thing is kind of my bag.
My advice right now is, add BREA to your watchlist and look for a moment to know they’ve elevated. Maybe take a nibble now and look for chances to get more at a discount.
There will be a sports ownership pubco that will light shit up. It may not be this one, but they’re first cab off the rank and, as such, worth your attention.
— Chris Parry
FULL DISCLOSURE: No commercial connection, but you never know, and I’d be open to an advisory arrangement if there was ever an interest. Shrug.