Making a killing from Norwich City shares?

[T 190]

Mr Carrow - you have obviously given this some thought and I don''t think we are far apart. I do get the impression from what you say that we have invested more in infrastructure than other clubs which has not helped our performance on the field in the short term although we don''t have the figures for other clubs. I suspect some of that would be catch up work to get the facilities to an an acceptable standard.eg the South Stand Hopefully this means we need to spend comparatively less going foward and I hope you are right that some of the commercial investment will help produce growing income to fund the football side in the future. I also agree that I would not be surprised to see costs fall, partly as a result of some tiering in the contracts and the loss of some more costly players but not sure it will be suffecient. I suspect that they will make a profit on the transfer market this year and these will partly offset the operating losses but I can''t see a lot of transfer profits going foward. I agree there is a big potential windfall on promotion but it is a bit like the pyramid selling principal in that only a few clubs will win out. In conclusion I still do not believe that a championship football club is a good financial investment looking at our figures and the deloitte report. It is a hobby and financially we are all better off sticking to the stock market. I think they would be doing well to get their money back. What you can not do is is make money simply be changing the price written on a share certificate and what the club did has absolutely nothing to do with insider trading. I just hope the speculation about new investment is true as you have to be seriously wealthy to compete financially with the other clubs. I want to see the club compete again. I''m just of the view that it is a lot easier to sit on a message board and criticise than it is to get promoted from the championship.

[yellow hammer 0]

[quote user="T"]

For my sins I work with private equity houses and large corporates buying and selling buinesses. A basic tenet of economic theory and business valuation is you look at the present value of the discounted future cash flows of the business not the historical sunk costs repesented by the net asset value. i.e. what you should pay for a business depends on what cash you will get in return in the future after allowing for the interest cost of money not what was spent in the past. Therefore increasing the assets of the business is only any good if it increases the future cash flows of the business. So you can have all the assets you like but if you can not generate any cash out of them it does not help. I would be interested to see the accounts but to be honest a valuer looks at the future business plans and the evidence to support them and spends very little time looking at the accounts as the accounts relate to the past and a purchaser is buying the future.  Quite simply as someone said earlier the profits are now minimal (including the 7m ) and therefore the shares are not worth much.

[/quote]

T, this assumes that the business is there to be run as a going concern. Have you heard of asset-strippers? People who see the underlying assets of a company are greater than the current value and make money by selling off those assets, regardless of whether the business continues as a going concern.

Likewise, the value of your home does not increase because of the amount of income that you generate by living there. Assets do increase in value by the methods you describe, but also by speculation (expectation of further asset increases), by demand and supply, and by changes in the money supply.

Smith and friends are falling into exactly the same trap as Chase, using the clubs resource to finance propery speculation, while running down the footballing side of the business.

 

This is what makes the fans so angry.

YH

[T 190]

YH -  I looked at Portsmouth for a potential acquirer who was clearly only interested in the land so it can happen. I''m not sure we have much saleable assets left anyway. You are clearly right that you can make money by trading assets but a set of football stand and a football pitch are hardly much use without a football team so I don''t believe is is a separate tradeable asset which you can asset strip or buy and sell like a house. As I have said before the best way is to make money is to get promoted. The fans are angry because we are 20th ard looking for someone to blame and a reason to blame them. It is entirely sensible to seek to raise additional money from the club by the property deals that has happened. Just because people don''t understand something doe not mean it is bad.

[canary cherub 1]

[quote user="YankeeCanary"]

What I find interesting MM is that you appear to have the ability to articulate very well while, at the same time, reason so very poorly.

[/quote]

Just spotted your post Yankee.  What you say is very true.  I am far better at using intuition than reasoning ability to interpret facts.  Something draws my attention then the picture gradually becomes clearer and sharper, like an old fashioned photograph in a bath of developer.  But in order to communicate it''s not enough to leave it at that, otherwise people will understandably respond "batty old bird" - Mystic Meg gazing into her crystal ball.  I have to try and back up intuition with evidence (I''m OK on facts) and reason (not my strongest suit).  It can be frustrating to have to use an old banger (reason) when there''s a private jet (intuition) at my disposal. 

The upside of all this is that it''s easier to see the wood for the trees if you don''t let reasoned argument get you bogged down.

To take this particular example.  The precise ins and outs of why D&M have increased their shareholding and intend to raise the share price are beyond my capacity to fathom out.  To use another analogy, if I''m Darren Eadie it''s not my job to go for high balls, if Iwan Roberts (Mr Carrow) is around he''s much better equipped to do that.  But no doubt you''ve read JC''s thread "There are no local investors - yes there are" by now.  Am I on the right track or not?