Date: 20th November 2012 at 2:06pm
Written by:

The PST prospectus is out, a takeover is moving closer but Pompeytim is looking for questions to be answered.

I have just got back from a short break & have just downloaded the much anticipated trust prospectus.

This is a potentially momentous point in our history, and we need to proceed, as the prospectus says, as a ‘Club that is transparent and accountable to its supporters’.

I commend the PST on their hard work, and the “glossy” nature of the prospectus.

However, as Mike Hall showed recently, transparency is paramount. There should be no sacred cows any longer. No more benefit of the doubt for anyone. Let’s say it as it is, and like Mike says, “shine a light” into all of the potentially dark corners, just to make sure.

I am being asked to put in money, as the rest of us are, so it is only fit & proper to ask questions. I have a few of my own & I expect others have more too.

I wonder if someone from the PST would be happy to answer them?

Q1. Page 4 claims that PST ownership will deliver “a new level of appeal to sponsors, increasing attendances and match day spend”. What % increase in each of these core revenue streams has been built into the budget? (See Q10 below)

Q2. Page 6 says that “The majority of the PST Board are elected by the membership”. Why not fully elected? Is this to be the case going forward?

Q3. Page 6 says “We want to recognise the individuals who purchase shares by giving them benefits at the club.” What “benefits” do you envisage? If these are discounts, have they been built into the financial model? E.g. if 20% discount on season tickets, then has 20% been taken off 2,000 season tickets?

Q4. Page 6 indicates that it is possible that the club will be majority owned by “the Presidents”. How could such a scenario be described as a “community club”? Isn’t this just a consortium of local businessmen purchasing the majority shareholding with the PST simply helping them to get the keys to the boardroom?

Q5. Page 7 says that the sale & leaseback arrangement contains a “secure option allowing the club to buy-back the stadium in the next five years.” What does the contract say if the 5 years elapse? It is conceivable that funding won’t be available within 5 years to purchase outright, as lenders may be reluctant to lend against a football ground (ultimately it isn’t a very liquid asset).

Q6. Page 7 says that “The ethos of ‘one member, one vote’ will remain at the core of PST’s activities.” How can this be the case when the business model is that c.50% of the equity & a minimum of 50% of the seats on the board are being given away to wealthy people?

Q7. Page 7 says that the Presidents will have 3 seats on the board of the acquisition company (Portsmouth Community Football Club Ltd), plus a seat for anyone putting in more than £200k. Page 10 says that PST (i.e. the £1,000 brigade) get to elect 3 seats on the board. So the best the £1,000 brigade can hope for is 50% of the seats on the board, but more likely, less than 50%. If the Presidents are as altruistic as we are lead to believe (to quote Mike Hall – “they are saving your club”) then why do they need a seat on the board?

Q8. Based on the answer to Q7, page 10 says that the board can allow for more shares to be sold to the Presidents. If the board is more than 50% controlled by the Presidents, then would the PST not agree that it has very limited power to actually regulate this process, and the Presidents could quickly, and relatively cheaply dilute the PST? The PST would not have funds to do anything about this as it would need to match the money going in to retain % shareholding.

Q9. “Shares can not be transferred or sold”. Presumably this is shares in PST, not in PCFC Ltd? I.e. the Presidents are still able to do what they like with their shareholding, but not the £1,000 brigade?

Q10. Page 8 shows a 19% growth in revenues between the 2013/14 & 2014/15 seasons. What is driving this growth? Considering that it is likely that we will be playing in League Two, with no guarantees of promotion back to League One, how is it considered prudent to show such growth?

Q11. Following on from Q10, if the revenues were to stay the same as they are in 2013/14 for the next 3 seasons in the model, then revenue would be a total of £2.97m lower across the 3 years. Taking the margin of 10.2% shown for 2014/15, then this would mean cash would be £300k lower overall. Indeed, it would mean that the model runs out of cash in 2015/16 (£100k lower in 2014/15 & £100k lower in 2015/16 means negative cash at end of 2015/16). This means that the assumptions behind this strong revenue growth need to be clearly understood.

Q12. Page 9 says “More detailed financial analysis can be found on”. I don’t seem able to find it? And the FAQ section is being “updated”. When will we get to see this?

Q13. What happened to the difference between having the pay the former players the £9m and the fact that the PST had only put aside c.£3m? Has this renegotiation been scrapped? If yes, how has the gap been bridged?

I do applaud the work done to date, but am a little “nervous” about the power that the “Presidents” have the ability to wield, and am nervous about the PST being driven out / side-lined by these chaps.

I have worked on enough start-ups & business deals to know that you have to make concessions, but let’s be very clear. If the Presidents are “saviours” and just normal fans, then why do they need a majority of seats on the board?

I really want this to work, so don’t want us to set-out in the wrong manner.

Answers very much welcome!

Written by Pompeytim and initially posted in the forum – click here.

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12 Replies to “Questions for the PST”

  • thanks Tim for your insightful questions – certainly for me its a case of not knowing what questions to ask. While I do accept i will be risking the £1000 and that it is a risk i’m prepared to take given my passion for Pompey – it does make me a bit nervous. One question i have is, given that the High Court will decide the value of FP and whether Portpin are forced to sell it, what happens if I part with my £grand and then the case doesn’t go our way, and the whole deal falls through? And given that the £grand is non-refundable, would I be a fool not wait until after the case has been heard? Or, if everyone did this, would it jeopardise the whole thing, meaning we need to take the risk anyway? (that might be 3 questions).

  • Don’t agree, we always new that the wealthier members would be required, unless the club was to sink to non league. Same as property investors, everyone must know we have to use one eventually as the FA would DEFINATELYthe impose more grief to to poor ground etc so why not now, while we are able to ensure a bit of safety on who we partner? And as for transparency, no one surely expects 100% transparency? Some things have to be dealt with in a board room.

  • So its not reasonable to ask questions of the role of the “Presidents” then Midge? Haven’t we tried the “let’s give them the benefit of the doubt” approach before? Didn’t seem to get us the best results.

  • Like Pompeytim I wish PST all success but the questions are legitimate and need an answer. I have one further worry. I have always assumed that PST would have a majority share, but the prospectus leaves open the possibility (to put it no higher) that the Presidents might be able to outvote the fans. I would like to see some guarantee that PST will have a “golden share” that would enable us to veto any proposal that we consider to be against the interest of the Club. Is it too late to write this into the constitution? There should be no good reason why the Presidents would resist this. Also, when will the detailed financial projections and the FAQs be available on the website (as promised). I hope this is not all going wrong. Please will a PST spokesperson give some reassurance? How about a PST meeting to thrash it out?

  • Tim – thanks for reading the prospectus and setting these questions. I am certain the Trust will pick this fairly quickly but if not I will email Colin Farmery the link tonight.

  • Well done Tim, and well done for picking up on the forecast figures for the next few seasons, now i’m no accountant, but even I couldn’t see how on earth they can give these forecast figures. Now it’s no secret i’ve been a doubter from the off, but I have to say from the bottom of my heart, I found absolutely nothing in the prospectus to make me part with a penny or give me any confidence for the future. There is no doubt that it’s well intentioned and it’s beyond refute that alot of hard work has gone into the proposal, but there are far to many doubts and niggles for me. (I will say again, i wasn’t for Chanrai either) I hope they manage to answer your questions Tim, they need too, theres too much at stake. I do agree with your assumption that the Presidents seem to be buying the club with thousands of others help, I don’t like it at all!

  • erithacus rubecula the “Presidents” will outnumber the PST on the Board and also the prospectus says “The Presidents, and anyone wanting to become a President, have the right to apply to buy shares in the club. If this happened, a decision would have to be made by the board of the Club by reference to the best interests of the Club, taking into account, for example an urgent need for working capital. The directors appointed by PST would have a vote but, in the event of a disagreement, would not be able, acting on
    their own, to prevent shares being sold”. So regardless of the initial take-up by the PST, eventually the ‘Presidents’ can take control of the club.

  • PFCblue – Not if we have a “golden share”. BTW I think you will find that normally in a company, voting strength relates to the proportion of shares held – not the number of directors. But I do agree that down the line there would be an enormous temptation to dilute the PST voting strength in order to attract more equity capital e.g. to buy the ex-Gaydamak land.

  • Further to this a “golden share” is defined at as “a share with special voting rights that allow the holder to outvote other shareholders, usually in restricted circumstances. It may also give the holder other special rights……
    ….Golden shares may also be used to protect a company ethos, values or social commitments. This, again, relies on the golden share being held by trustees or a non-profit organisation that will use the special powers of the golden share to balance the powers of the ordinary shareholders when necessary. ” Could this be part of the solution?

  • Like I say, and just to clarify my position – I am pro-Trust in this. Just don’t want any nasty shocks down the track! If I know what I’m going into, then I can’t complain if I don’t like it further down the track.
    A golden share is a very good idea, and there may already be something in place, it just isn’t clear from the prospectus.

  • Just to confirm I have asked the Trust to respond and as soon as they do we will publish thier answers both here and in the forum.

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