Tottenhame Case Study Write UpEssay Preview: Tottenhame Case Study Write UpReport this essayExecutive SummaryThe following analysis explains methods used to determine what decisions are in the best interest of the Tottenham Hotspur Football Club. Traditional discounted cash flows and the method of multiples, both explained in the paragraph below, show that the Tottenham Club is currently overvalued at 156m pounds. This means that the stock price is currently too high and does not represent the team’s actual earning potential, which should soon lead to a drop in price. Determining the value of increased revenue from a new stadium and a new striker, when adding one without the other, results in a loss of money. However, with the decision to add both the new stadium and the new striker together, the team should increase revenues as well as overall value.
Traditional DCF & Method of MultiplesThe traditional discounted cash flows method takes all future expected cash flows from revenue, then discounts them back to what they are worth right now. By doing this, I can conclude that the team is worth 115.29m pounds. According to the valuations, Tottenham currently reports that they are worth 156m, which I find to be highly overstated. Their stock price is too high and the earnings potential is misrepresented. After calculating the averages of points and revenue in relation to each of the bottom four teams’ enterprise value, I can support my argument that the Tottenham team is overvalued. I will now use the 115.29m value as a base to compare how much additional revenue the new stadium and striker can bring to the club.
New StadiumThe decision to build a new stadium relies heavily on the question of whether the potential increased attendance and sponsorship revenues outweigh the 250m pounds of construction costs along with increased stadium operation expense. Adding in all additional revenues as well as expenses, I can now value the company at 86.19m pounds. This is a 29.10m pound decrease from the club’s value without the new stadium. This means that building the new stadium without acquiring players will not increase the overall value of the club and is not advised.
New StrikerObtaining a new striker can greatly benefit the Tottenham Football Club and potentially vault them into the English Premier League, but is very costly. While there is a set 20m player transfer fee along with the player’s salary, there is no easy way to determine the exact value they will bring to the club. To estimate the value a new player will most likely bring, I ran a regression in excel. The regression used each team’s overall points in relation to the revenue they made, and gave an output based on that relationship. From that output, I can estimate that a new player will increase Tottenham’s overall revenue by 19.32%. When I input all variables to produce a new company
, the results become a lot simpler.
Our team is in the Premier League since 2010
A new player will increase Spurs’ revenue by 19.32%. In a regression, these numbers are then multiplied by the total market cap of Spurs football club. With the new salary you have to estimate the value of the new player as well as his cost to Tottenham football club. To get a better sense of the true value of a new signing, take a closer look at our company information:
When I enter our contract information into the spreadsheet, it looks something like:
Our firm’s net revenue has increased 13.32% over the past two years. During this period, the market cap of Tottenham football club has grown to $5.1 billion. Based on our analysis, we can estimate: the market cap growth of the company increases by $15.1% of all revenue that we generate.
Your sales, revenue, and profits increase by 20.32%
You will pay 20.32% of our sales, revenue and profits over the 12-month period. You will not pay any further profit growth in this period. The total revenues raised per person during this period would be 40% below our 2015 revenues
We are your customers and you are your shareholders. Our company is in the English Premier League since 1970. The value assigned to each of the team members has been paid to provide income in accordance with the team’s operating model, business and player compensation plan. We believe the team’s values are best served through the transfer agreement given in the 2016-2017 season when the club reaches to the end of their current contract. During this period you will not pay any further income from your contract. Under our contract agreement you will get one more season in which to sell your club.
This has made some people unhappy. As soon as I was forced to pay ÂŁ20m for a player it took more than one season to finish my contract under our operating model. Over six years I have been told by many that I can’t sell my club, and that our business model is fundamentally flawed, because I had to do so many years of work for the club as a whole and not get anything for my earnings. The truth is that we have been unable to invest in the club, and there do exist some who would be proud and consider me their future owner or an asset. However it may not be completely clear to many of our financial managers how a small percentage of our money raised from the sale of our club will be spent