Editor’s note: This article came from a conversation with a few other Spurs fans in a privateTottenham Hotspur Discord channel. The upcoming Europa League final between Tottenham andManchester United is a MASSIVE match from a financial perspective, with the winner gettingChampions League football next season and potentially netting as much as £100m when all is said and done. The initial idea came from Joel Wortheimer, who wondered, considering the vast amount of money at stake, whether the two clubs would ever consider coming together to make a mutually beneficial hedge that would lower the winners’ overall haul, but also make sure that the loser doesn’t necessarily walk away empty handed.
It’s a fascinating idea, and Discord member/Carty Free lurker DanielR1983, who works in finance, pitched it to me and said he wanted to write it up as an article on Carty Free. I agreed as I thought it would provoke some fun discussion. This piece is the result. Hope you enjoy it.
Let’s talk about the finances of this Europa league final. As a way of a quick introduction. I’m a finance guy. I became a Spurs fan when I was an MBA intern at an investment bank in London helping big multinational corporations manage their credit risk. As a big sports guy, I figured I had to have a team, and well, here we are.
It’s been a general trend over recent years for football guys to try and moonlight as finance guys. You would think I would love that, but actually I don’t. I think it’s horrible. It takes away from the fun of football games and tends to focus on the worse parts of finance (the accounting). Getting sucked into PSR rabbit holes, and wondering if you should sell the club’s best ever striker or your 23 year winger who leads the team in scoring is just generally not much fun at all.
However, a European final worth potentially £100m to both United and Spurs? That’s the stuff finance guys dreams are made of. So, let’s talk about what Spurs (and United) should do financially in this situation.
To me one of the cool things about finance are the stories it tells, and how creative it can get. So, let’s start by imagining we are in an Iowa cornfield in 1848.
Yeah, really. Stay with me here.
Close your eyes and imagine you’re an Iowa farmer. You’ve just come out of an awful, no-good year. Your two best farm hands who you depend on for everything pulled a hammy a month into the planting season. As a result you had to deputize your 18-year-old son (who you have high hopes for), and an unproven guy from across town to keep the train on the tracks... and well that didn’t happen.
The train fell off the tracks, rolled into a ditch and then burst on fire.
Maybe you should have seen that coming, but you didn’t. So here you are: struggling to get by, with nothing going right. Every day everyone tells you to give it up, it’s not been good enough. There’s no way you’re going to get a good crop this year. Nevertheless, you keep grinding it out as best you can and get everything planted.
You and your spouse sit down and look at the ol’ handy farmers almanac and realize that you’re looking at an unprecedented favorable outlook for rain. You also get news that a few of the big farms down the road have had equally bad years, so you think maybe, somehow the corn will go for a good price. If the rain actually hits, and you actually got the seeds in the ground you might somehow, someway, despite everything that happened, be able to pull out with a windfall that might save the farm.
Before long, you get word that your rivals down the road actually might have figured things out too. This would be calamitous as two big harvests mean the price of corn will drop and you’ll lose your shirt. You’ll have to let those farm hands go. You might even be forced to sell your best Rolls Royce plow to keep food on the table next year.
So what do you do? Do you sit there hoping for the best in a year when everything has gone wrong? No, of course not.
Instead, you take the train up to Chicago with a few of the other farmers who had a bad year. You gather up as many of the corn buyers in the big city as you can and you give them this pitch:
“Hey, it’s been a rough year for all of us. If things go how they’ve been going you’re looking at paying $200 a bushel of corn which we know would be bad for you. So how about we just agree here and now for you to buy all the corn you can for $75. You get a decent if not great price, and we get a little peace of mind that we won’t go out of business”.
The buyers, not wanting to take the risk, eagerly agree. In fact, they say This is such a good idea! We should do this all the time!
Congratulations! You just invented the modern financial market.
Spurs and United now find themselves in a similar situation: locked into a one game European final match that can either save their season, or lead to financial ruin. Both teams have had awful, no good years. Both teams have owners who have warned of the implications of failing to get the revenue associated with winning the Europa league. Both teams, like those farmers and Iowa can’t sit back and just hope for the best.
You can’t hope Maddison’s knee holds out [Ed: this was written before Maddison and Deki actually blew their knees out]. You should know better. Does Brennan have a few more tap-ins in him? Probably? But maybe not?
You gotta make a deal. You need to implement a hedge.
So what can that look like? Here’s some ideas:
Option 1: The Paratici Special™.
Offsetting options: United agree to an option to buy Dane Scarlett for £45m. This option becomes mandatory if United win the Europa league.
At the same time, Tottenham would agree to an option to buy… whoever might be a good squad player from United for £45m pounds. This option becomes mandatory if Tottenham win the Europa league.
If either team wins Europa, they get Champions League football and the windfall that comes with it. Sure, with the hedge that team may overpay for a prospect who may or may not come good, but who cares – Champions League, baby!
And the losing team? Well they get to sell a prospect for a really, really good fee. You’re not out of the woods totally, but at least you don’t have to sell your best plow. You hold on to your guys, and go again with one game a week the following season. You live to fight another day.
Option 2: The Harry Kane Special, aka the Gentleman’s Agreement™.
You’re probably thinking all of this is counter to the sporting integrity of the game. But what if I told you that in fact there’s already a precedent in English football?
In 2002, Birmingham City and Norwich came to a “gentlemen’s agreement” which said the loser of the match would be able to keep the gate receipts for the Championship play-off final. The winner got to promote to the Premier League, and the loser got a decent boost of cash from playing a final at Wembley.
This tradition has been repeated enough times that many people believe it to be an official policy. It’s not though – it’s just two teams coming together to make prudent financial decisions for the sustainability of their clubs.
The potential revenue for Champions League goes far beyond the amount of gate receipts you’d get from the one match. So to really hedge your bets you’d need to do something more substantial. Here’s what a potential package could look like:
Loser keeps the prize money or the Europa league final: ~£10.9m
Teams agree to split gate receipts for their respective European campaigns for the next year: ~£10m+.
Teams agree to a series of team friendlies with the Europa League runner up keeps the gate receipts: ~£5m+.
At the end of the day, there’s no real reason for United and Spurs to sit there and just wait and see who has the worse luck. This allows both teams to stave off the consequences of their no good, rotten, horrible seasons (just please don’t let United ask Harry Kane what he thinks about Daniel Levy and “gentleman’s agreements,” that could go poorly).
The main point is that if we’re going to force ourselves to learn financial models to enjoy football we might as well do the fun and cool stuff rather than the skullduggery of “amortization” or “depreciation”.
Also, we really really can’t afford to sell Romero, and we really really could use another #10 next year.