Investing your money in football clubs has a somewhat mixed record in Britain where a club's share price can fall through the floor if it loses games or sell a particular player.
Despite this background, League of Ireland club Waterford United is embracing the concept eagerly and has become the first Irish club to offers shares to its own fans at an affordable rate.
It is offering one million shares at £1 a share in an attempt to raise much needed capital which will be spent on new players and the club's facilities at the Regional Sports Centre in Waterford.
The club does not know how high the takeup of the shares will be, but is hopeful of raising £500,000 through the offer.
The chairman of the club, Mr Michael Finnegan, points out that while he hopes many fans get involved in buying the shares, it is not a risk-free venture. Like shares in any football club, what happens on the field is what will ultimately decide their value.
In the case of Waterford United the test of this is whether they stay in the First Division, to which they have just been promoted. A bit of extra silverware in the trophy cabinet would also help to put some extra value on the shares.
"While it is risky for all those who buy the shares, the club is not depending on the capital raised from the share issue for its day-today income we get that from the usual sources, gate receipts, sponsorship and so on," says Mr Finnegan.
He says offering the shares helps fans have a greater say in the running of their club and might make a few pounds as well.
The club is now a public limited company and the one million shares are divided into 200,000 preference shares and 800,000 ordinary shares. It will publish annual accounts, will hold an a.g.m. and has already appointed Ernst & Young as auditor. Mr Finnegan is taking the risk himself and along with the two other founding directors, Mr David Flynn and Mr John Delaney, is taking up 60,000 preference shares.
The shares can be purchased by almost anyone and the ordinary shares entitle the holder to voting rights at the a.g.m. The preference shares are designed for corporate buyers and do not carry voting rights.
"We would never be able to raise this kind of money any other way so it has given us a chance to change the whole future of the club," says Mr Finnegan.
He says interest so far has been intense and interest from fans has been matched by companies, some from outside the city, looking to invest.
Mr Finnegan says the company is not opening itself up to a takeover bid at a later stage. The re-selling of shares needs the approval of the board.
While the board is unlikely to award a dividend for some time the shares may appreciate if the team does well. This may happen if the capital raised through the share issue allows the club to buy a large group of skilful players. Anyone who wants a prospectus should phone 051-853222. The offer is due to close on August 31st, 1998.
