There were still hints of disbelief floating around the footballing world as one of the greatest players ever stepped off a private jet and onto Turin soil. Even the sight of the thousands jostling to catch a glimpse of him arriving in their city failed to encapsulate the remarkable nature of the transfer.
In the words of the legend himself, Cristiano Ronaldo should be playing in China, squeezing the last few coins out of his career through reputation alone. Players his age aren’t handed the keys to a veritable bank safe.
Ronaldo, as he never fails to remind us, is exceptional. This move to Juventus is more than shirt sales. His new behemoth pay cheque is €120-million spread over four years and he’s earned it.
His move has afforded us an interesting opportunity to survey the effect a supreme reputation has on a club’s stocks. Juventus rose sharply as the Ronaldo rumours began to turn into reality, piquing the interest of many non-financially inclined fans and prompting them to look into the inner workings of teams that have decided to go the route of an initial public offering (IPO).
Why list a football club?
Modern football has long since crossed the Rubicon into the realm of the commercial world. Listing on a stock exchange is the next move.
Clubs would opt for an IPO because it provides an opportunity to generate income that can be repurposed — often to pay off debts or to finance new players and contracts. Manchester United, for instance, was put on the New York Stock Exchange by the Glazer brothers in 2012 to generate cash and reduce their debts.
Fan reactions over such moves vary. Some decry what they perceive to be a sell-out, while others revel in the opportunity to purchase a slice in their most beloved institution.
Serious investors don’t share any of that sentimentality. The club is now a company, a business.
“Modern football clubs are said to be run like businesses but the listing aspect means a club is a business,” reiterates Joe Tweedie, an investment and trading director and the editor of football site Plains of Almería. “Once the additional layer comes into play, the commercial side of the club grows exponentially in importance. Clubs may target well-known players that go against their scouting model, because of the financial implications. Ultimately the club must look to continually improve its dividend growth.”
Teams become beholden to their investors’ bottom line. The result is they cannot act with impunity — no reckless diving into the transfer market, for instance. Contrast this with an owner like Roman Abramovich who, from 2004, was able to throw his money around willy-nilly until it landed on the right players.
For the love of rumour
Ronaldo’s surprise move to the Old Lady was not haphazard. It was a considered coup to acquire one of the planet’s supreme athletes and sporting personalities. A steep rise in stock price is good evidence of that.
For four months from March, it had remained stable, hovering around the €0.65 mark. Then, in July something curious happened.
Portugal had barely walked off the pitch after their World Cup elimination to Uruguay when one question barged in demanding attention: Is Ronaldo staying at Real Madrid, the same club he’d just guided to a third consecutive Champions League place? Rumours began to circulate about his next destination: Back to United? Perhaps he will retire in Qatar? Even Arsenal?
As the Juventus rumours became stronger the stock price latched onto the hot current and glided steadily up. Between July 2 and 5, it increased by 20%; a day later the price reached its 2018 high of €0.88. It hovered in that region until July 10, the day Madrid confirmed the move, when it briefly touched €0.90.
Those hoping to ride the swell a day prior to the official affirmation were left on the shore as the price stagnated. If the worth of Ronaldo is so great, why did it not rocket when the move became official?
“It was an increasingly typical market move,” says Tweedie. “Rumour drives prices one way or another and as soon as speculation started to become more concrete, it would naturally cause the share price to increase … Essentially, the price rises on rumour and crystallises on actuality.”
The wrong narrative can ruin a bank but the right one can prop up a football club. At the same time the oft-spurious musings of sports journalists have the power to sway the financial world.
It’s all about the image
Ronaldo’s move no doubt caused the jump in Juve stock price. But why? He’s a five-time Ballon d’Or winner and an invaluable addition to any team but is that the reason investor confidence shot up?
There is a correlation between on-field success and a rise in stock value. Across the majority of European leagues, finishing higher slices the TV rights deal in your favour. Going far in cup competitions extends your time on the screen, not to mention the potential prize money on offer. Qualifying for the Champions League is heavily significant.
In the case of Ronaldo, however, it may be less about his dominance on the pitch and more the ubiquity of his brand.
Sports lawyer and regular follower of football finances Jake Cohen argues that those backing Juve in the market are betting on them becoming a more complete global entity in the coming years. “If Juventus is able to capitalise on his image,” he says, “the signing instantly positions Juventus as a more attractive commercial entity to sponsors and the value of those sponsorships over the next couple of years will reflect that. Expect Juventus’s commercial revenues to increase significantly over the next few seasons.”
The logic is that the CR7 brand is so big that it will take its new home to unseen levels. Already a huge club, Juventus has a shirt sponsor and a kit sponsor. As it grows in worth, it may begin to attract deals from companies that previously wouldn’t have thought to marry their product with the team.
Following the signing, pundits have been quick to speculate whether the Portuguese is the missing element that will finally snatch that very elusive Champions League trophy. Given that the serial winner is a five-time champion it hardly seems an unfair prediction. Has that had no influence in the mind of investors? “The increase in the stock price in the lead up and shortly following the club signing Ronaldo had little to do with the increased chance of winning trophies,” answers Cohen. “In fact, Juventus regularly win trophies already.”
It’s that pre-existing success which is key in this equation. The Old Lady has already been successful. Series A champions every year since 2012, they need little help in that regard. On the European stage they have made two finals in three years and are routinely the longest-lasting Italian side — meaning they receive the biggest chunk of the TV revenue allocated to their country.
There is not much more they can achieve, in a financial sense anyway. Should Juve go on to lift the 2018-2019 Champions League, the bump in prize money, compared to what they’ve already been receiving, will not be big enough to make a splash on the books.
It’s hard to overstate the enormity of Ronaldo’s image. Compare when Paul Pogba moved from Juventus back to Manchester United in 2016 for a then-world record £93.2-million. The French midfielder was young and in demand, yet we barely saw a nudge on the stock price of either club. That’s a huge transfer between two European giants positioned on two different platforms — one listed on the New York Stock Exchange and the other on the Borsa Italiana — and investors clearly didn’t even glance away from their spreadsheets.
Alongside professional nemesis Lionel Messi, Ronaldo has stalked the world’s pitches as a god among mortals. Almost every conceivable milestone and achievement has fallen in his wake. Perhaps it was inevitable that some of the world’s biggest financial institutions would be charred by the aura of his presence. His effect on Juventus’s stock price is unprecedented and a demonstration of his colossal stature.