Italian football club Juventus has ploughed ahead with its €400m rights issue even after a police raid on its offices linked to an investigation of alleged false accounting around player transfers that could drag in some of its top executives.
Subscription on the capital raise began as scheduled on Monday morning, just hours after the raid by investigators from the public prosecutor’s office, who are looking into the issuance of invoices or other documents linked to non-existent transactions.
The club said its chairman Andrea Agnelli, former midfielder, Ballon d'Or winner and current club vice-chairman Pavel Nedved and chief financial officer Stefano Cerrato are all being investigated for possible breaches of Italian law.
The green light to the rights issue came after the club said it was also being investigated by the Italian market regulator Consob for information concerning revenues from players’ registration rights that was published in the deal prospectus and in previous financial accounts.
“The company is cooperating with the investigators and with Consob and trusts that it will clarify any aspect of interest to it as it believes to have acted in compliance with the laws and regulations governing the preparation of financial reports,” the club said in a statement.
Underwriters unruffled
The billionaire Agnelli family, which founded carmaker Fiat before going on to acquire rivals Ferrari, Alfa Romeo and Chrysler, owns 63.8% of the club and has already committed to exercising its rights in full. It has already made a payment for €75m of its €255m contribution.
The remaining €145m of the deal has been underwritten by a syndicate of banks comprising Goldman Sachs, JP Morgan and Mediobanca. Bankers on the deal said the investigation had already been flagged in the prospectus, and the raid was just part of that process.
“Do I think that derails the rights issue? I don’t,” said a banker from one of the three underwriters. “I can’t conclusively tell you that nobody will turn around and say ‘I’m not taking up my rights’, but if you look at the stock, it's well above subscription price.”
While Juventus shares fell by around 10% to just above 41 cents in the days after the raid, that was still above the 33.4 cent price of the new shares. “If there was any expectation that this wasn’t going to be going ahead, the stock and rights would be trading below,” the banker added.
The banker also downplayed the allegations. “This is more of an accounting question and about how they’ve classified [invoices]; it’s not that they’re hiding anything," he said. "It’s not just Juventus; other Italian clubs are being investigated for the same thing.”
The rights issue is critical to steadying the club’s finances following the bruising impact of the pandemic. Juventus played all its games behind closed doors last season, losing out on vital ticket sales as a result. It made a loss of €210m, its worst financial performance ever.
But, like many clubs across Europe, financial problems have been building for years as revenues haven’t kept up with spiralling wages. Since its €143m Milan IPO at the end of 2001, Juventus has lost a cumulative €560m, posting annual losses in 14 out of the 20 seasons.
Its status as a public company has given it better access to capital than most other European football clubs. This will be the fourth time since listing that it has done a rights issue – it raised €100m in 2007, €120m in 2012 and a further €300m in 2019.
It has also made a successful foray into the public bond market, with a €175m five-year offering in 2019 that was also the first investment-grade public bond from a football club. Once debts to banks and suppliers are factored in, the club has liabilities of around €400m.
Governance issues
The ongoing investigation and the club’s poor financial record won’t help the prospects of other clubs eyeing public markets as a way to boost their finances. Club Brugge ditched its own attempts to go public earlier this year after poor feedback.
After a rush of clubs went public in the 1990s and early 2000s, there have been few listings in recent years. Public investors have baulked at putting money into football clubs – due to their poor financial track record, poor governance, and the ever-looming threat of relegation.
Many club IPOs have needed to rely on a retail fan base. The Juventus listing is a case in point: the retail tranche was only supposed to be 35% of the deal but ended up being allocated 60% due to lacklustre interest from institutional investors.
Those retail investors are now sitting on deep losses, raising questions about the club’s fiduciary duties to its investors. Juventus' shares have fallen 90% since the IPO.
“If you look at what the public float on these teams are versus the potential value, it just doesn’t compute,” said another banker close to the club. “Issues of governance and the like are going to come much more into play.”
During the club's entire period as a public company, the Agnellis, who listed the club partly in order to raise money so that it could subscribe to its rights in a separate capital call at Fiat, have had majority control of the club and its decisions.
Additional reporting by Lucy Raitano