Stadium Development and Regulatory Oversight

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Remember, goats only trust goats because they're built different. And Messi only trusts Duracel. C P just following on from our West Ham podcast, we've looked at them in forensic depth. You've turned your eye on the on the numbers and the issues at West Ham this season, and we really felt given the events of the recent days that we needed to go back in and have another forensic look about what's going on in the boardroom there and what is the way ahead. for West Ham, United you are across all of these issues. What what is your take on the on the recent events? Well when we last spoke about this subject a few weeks ago, Henry, we talked about a deal that was widely briefed by the club that I called a power sharing arrangement, an arrangement where The gold family stake that's been for sale for some time following his untimely death in twenty twenty three. Basically carved up. Tinsky giving them both an equal of about forty percent, and for the first time. In many, many, many years having power being shared. Well the news for our audience this morning is it's quite clear now that that deal has been cancelled. In other words, we're back to square one. David Sullivan is the largest shareholder in West Ham with thirty eight percent of the club. Gold family remain a 25% shareholder with with with shares that they probably thought had been sold or were very close to being sold. Kratinsky at twenty seven, and I think that is a dramatic position for the club to find itself in at exactly the wrong moment. CP, take me into the boardroom. You say it's the wrong moment. Obviously on Saturday morning, David Sullivan, the the co chair, released a statement categorically denying the allegations that were to be made by the BBC and by the Times newspaper about His Alleged behaviour. Towards women. historic allegations and again the caveat that he denies all this. I think also we have to take a step back and listen to the testimony of the uh seven women who delivered uh evidence, testimony, made their allegations to the BBC and to the time. Seven of them made them anonymously, one bravely spoke out, and we have to absolutely keep them front and foremost in our minds in all this. This is a human story. as well as, obviously from our focus, a boardroom story as well. When that news then broke How does that affect David Sullivan? He says he's stepping away from the club and he emphasised in his statement. Yeah. any of these alleged events, it was you know, it was all pre West Ham. But how does that actually affect his influence, if that's the right word, on the club, given that he's been he's himself has uh has stepped away? Well I think that's a really important question because I must say that there are many owners of football clubs who have never been a director of the club, let alone carrying a A fancy title like chairman having an executive role. In other words, you don't need to be a director or have a title to be extremely influential in the way a club is run. And I would suggest Current. really I think two major areas that owners, directors and execs focus on. One. Spending money and saving money at a time when the club needs to be restructured. Two executive appointments, the appointment of key personnel. Those two key areas right now, today, as we sit here. would need to be agreed by three shareholder groups, none of whom have Control. And I think that situation is really, really, really damaging for the club right now, at the worst possible moment. And Whilst it's quite clear that David Sullivan has stepped down and and intends to be extremely busy fighting these allegations. Precisely how on earth could he credibly expect to be able to spend any time. West Ham, other than protecting his shareholding. So I think the focus now shifts very much to Daniel Kratinsky wants to do. It's quite clear. that he was not willing to go ahead with that transaction. could in some way, shape, or form. be seen as him getting into partnership with Getting further into business with David Sullivan given the serious historic allegations. I don't think the same logic applies if he were to decide to take full control of the football club. I think that is a route open to him, Henry. You you've spoken on previous podcasts about the Czech Sphinx about how he's quite stealthy in terms of his movements and in terms of how he actually uh takes over businesses and takes over clubs. But Surely now is the time for him to strike. I mean, talking to West Ham fans over the past of one, two, three years in terms of their campaign, the no B S campaign. No Brady. Caron Brady obviously uh left uh a couple of months ago. Um and now Sullivan has had to step back as you as you've just clarified and explained. The club has been relegated to they're likely to sell uh Fernandez, apparently eighty five million pounds. Jared Bowen, we know all the financial huge financial implications of relegations. The people within the building who are facing redundancies. It is a time for a strong leader. Surely now is the time for Kretinsky to make his move. I spent many years as a private equity investor before I got into football and I and I suspect that I look at businesses in a very similar way. Daniel Kratinsky would apply and he will see right now. at a moment of intense pressure on the football club. We how we outlined in the our last episode, Henry, that the club, even pre relegation, required significant capital to be injected this summer. That's what the auditors told us was required. We know that moving into the EFL with new financial regulations in place, they're called the squad cost rule. where you have to have a certain percentage, eighty five percent of your revenue. Being your total spending on players. Their revenues are going to drop by 100 million pounds. They've got to get their wage bill down to 85%. Maybe a hundred and thirty million pounds. That is a huge project in the next three months. needs management and leadership. It doesn't need A vacuum, it doesn't need confusion, it doesn't need anyone in the building wondering who is in charge here. So if I was Kratinsky, I would be looking at this and saying What's the quickest way for me to get control? I've read people speculating. that David Sullivan will now sell up. I'm not sure that's a logical conclusion. There's nothing in his historic behaviour. Business to suggest. he's gonna be pressured to sell quickly at a low price. by a minority investor from from Czechoslovakia, from the Czech Republic, excuse me. Easiest way for Kratinsky to get control of the club. To move from twenty seven percent. would be if he were to buy out the gold estate shareholding in full. That would take him to About fifty two percent. that point he would now be in control of the club. There would be no decisions that could be really blocked. To buy shares from another shareholder, but to actually improve the finances of the club, he could do so. And that would dilute David Sullivan's shareholding over time. And I've seen that device used by many investors to gradually take full control of a club. That's what I think he could be looking at doing. Buy gold. I can see the uh the the headlines and the and the shouts now. J just on that Could Sullivan, if you're saying that he is of a mind not to walk away. Could he buy gold's shares? He could, he could. Um anyone could buy gold shares. I think it'd be very unlikely for a third party to step into a situation where, as I have laid out and laid out as well in our prior episode, club is in a serious financial difficulty, it requires probably well over a hundred million pounds of liquidity this summer. And so it'd be very unlikely that someone would buy a non controlling minority stake right in the middle of Kratinsky and Sullivan. with that being the first thing on the agenda. And I have to say, and I did read the statement that you referred to at the top of the show. Um it it it is very, very clear that Sullivan's heading off and has much, much bigger issues to deal with right now, for sure. So I do not think it's credible that he would be increasing his shareholding in West Ham. I'm simply saying that people who hope and believe it's he will be easy to deal with in selling his steak, I'm not sure that's logical. We've said before, this is a low point in the club's fortunes. It's been relegated. It requires an equity injection. It's gonna be trying to comply with financial rules. in the EFL that are going to be very difficult. That's not the time to sell your shares unless you have to. And as I say, I don't think it's a time to have a complex, tricky adversarial negotiation between Sullivan. easy way forward is we have a willing seller. The gold family thought they had sold most of their stake. Very recently. Deal's been cancelled, I understand why it would be cancelled. The logical step for Kratinsky is to take control, and that would be the way to do so. Then the next thing I'd be doing is getting my people in to run the football club. We've talked about this before, H. The club needs strong management, not just in managing maybe an eight, nine, ten footballer out and footballer in, but Football program for the summer. But as you've also alluded to, behind the scenes significant requirement to reduce cost in the business and get the finances under control. If I was Gratinsky, I'd want my people doing those jobs and I'd want it as quick as possible. So that's another rationale for taking control. Well, there's so many positions that need to be filled. I mean, David Sullivan himself would often get involved in the uh the the recruitment or the the landing of players and all that side. I mean that's a separate debate in itself. Does he have the expertise, but absolutely they need to uh work on their recruitment, scouting Player ID, talent ID, they need to work all that. They need investment in the training ground as as well. Just you look at things very much from a a sort of pragmatic, unemotional, cold eyed, financial, forensic level. But there's another emotional um issue in all this. In that Sullivan's plans, and I think he's he's talked about this in the past, that he wanted to to leave the club and the running of the club to his two sons. Where does that leave them apart from the optics? Can he almost pass it on to to to them, so they continue the Sullivan connection with the club, which obviously will be anathema to the fans. I think that's highly unlikely. Um W just in terms that he wouldn't, or just the optics of it, or the the the financial ramifications of it? The statement makes it quite clear that he is walking away from all executive involved. certainly in senior decisive positions. What's been very interesting, and particularly from sort of my perspective as someone who works with a lot of sort of trusts around the the the country, the the supporters trusts. And I know y you know, it's you might not think it's a boardroom influence, but I think the fans have had a very important part to to play here. We must acknowledge that. You know, there's a debate about the constitution and the effectiveness of fan advisory boards, but I think in West Ham's case, I think they've had a a definite influence. I couldn't agree more, and uh I happen to think that um I'm glad you mentioned that because if I was d you've asked me about this in in the past. If I was Daniel Kratinsky, That would be right at the top of my agenda. Because I think taking control working with those fan groups in a completely different mindset. I think is an obvious too. And I think there are areas And these are not short term priorities, as I've said to you. Short term priorities are club needs cash. Club needs to fix its balance sheet. Club needs to get players out. Wages down. Clients. The probably the single most destructive issue in the relationship between fans and ownership at this football club. I don't think there's any debate, actually. The most destructive issue has been the stadium, the move, and the stadium they now play their football in. And there have been many thoughtful people and I've read lots of this stuff that intriguingly are points to a possible radical approach to that going forward. Radical approach, I mean, to the property issues at West Ham. Whether or not that site, that huge site could be completely reconfigured, whether a proper football stadium would make more sense, relocated, put in a sensible piece of real estate within that overall site, and that value could be created if the rest of the site was used, for example, for residential. So a complete rethink. That site. For somebody with unlimited capital focused on creating long term value and creating a very successful football club. And as you know, Henry, my passion has always been You can't have a successful football club without happy fans. Only a certifiable idiot runs a football club contrary to its fans' needs, desires and requirements. So again, if I was Kratinsky. Not only would I be looking at fixing the football, fixing the executive management team, fixing the balance sheet, But in the medium term, I think there's a genuine opportunity to rethink the property issues at that. Get a proper pup football stadium, get it properly located, and then liberate a bunch of space that can probably be sold for property development and create value. That's the way I would be thinking if I were him right now. CP, it's like talking to one of the uh the hardcore West Ham fans with you talking about the stadium. You're completely right, it needs to be reconfigured into a uh a football stadium and as you say, uh maximise the uh the the the commercial elements which can then be uh invested into the team. One final thing that we haven't really uh discussed, and obviously there's a new player in town, a new sheriff in town, some are are calling the the independent football regulator who do have these whether you want to call them backstop powers. They do have, um because of law now, they do have quite strong plans. And they they possibly could have moved slightly quicker on Sheffield Wednesday to help Sheffield Wednesday fans out, but that was partly because the that you know it was coming into law in terms of their powers. But the i the independent football regulator do have powers, don't they? Can you explain them to me from the boardroom perspective what the IFR could do? Well I was hoping you'd do the same thing because it's obvious Completely new territory, but what you're referring to is the that the the Hottest potato in English football from a governance standpoint over many years has been the so called owners and directors test, this notion that football authorities get to decide before a football club is taken over whether an owner is suitable. under the new independent football regulator buried in that b bill, uh which is law, one of the four areas that the IFR are going to take over from a combination of the Premier League and the EFL, is the issue of approving owners. And it isn't just new owners. What you're referring to is the fact that almost every year They get to take a look at the lineup of people owning a club? directors of clubs and senior executives of clubs. and decide whether they are suitable. And as you've also referred to your phrase backstop, what you mean by that is that Under whole series of checks and balances where in effect the regulator can say, I'm a little bit unhappy about what I'm hearing about this person at this club. Please give us some information we'd like to know more. to and fro process. It's very unclear how long that could take. Ultimately, ultimately, after lots of checks and balances where where the club or the executive or employee in question can provide counterarguments, can provide countermeasures. Ultimately, in principle, they can say, you shouldn't be a director, you shouldn't be an employee, or in the case of an owner, you shouldn't own the club. I've read, in the last couple of days, that I'm not sure it's true, but I've read the suggestion that the IFR, in principle, could make David Sullivan sell his shares, and that would change the equation I've described earlier in this show, as I say, I've worked on the basis that'll be an open market negotiation. ultimately with Daniel Kratinsky. But if a third party regulator could make him sell, that would change the game. I think we are in completely, ut and utterly uncharted waters. It's never been done before. Making somebody sell shares in a private company is Truly, truly tricky legal waters. I certainly wouldn't be hanging my hat on it as happening easily or quickly, and I'm not sure in law it will actually be feasible. But that's not my problem, thank goodness. Yeah, well it's a test for the uh the regulator, as you say, how strong that their powers are and how you define suitability. I think uh many West Ham fans would certainly uh uh have a a very strong say on that. So, CP, I think this is a subject that we are gonna revisit again and again because it's not simply about the boardroom. It's about fans. It's about in a way, leadership generally in the game. It's also one about one of our great football club that finds itself in a terrible mess. Let's hope that uh cool heads prevail here and we see a sensible way forward. And just one final thing, obviously Sullivan. denies the allegations which have been thrown against him, but also we must very much bear in mind The the fact that there are eight victims in all this as well.