The Jags Foundation welcomes the substantial new investment that has today been made into the Football Club. We thank lead investor Donald McClymont, and his fellow investors, who have between them injected £500k of new capital into the Club.
Why this investment is needed
This investment was necessary because of the erosion of reserves suffered by the Club in recent seasons (most notably in 2021-22 and 2022-23). We have commented on the scale of that and the responsibility for it previously.
We are grateful to those who intervened to alleviate the immediate pressures towards the end of last season, and to the fans for stepping-up their fundraising support through TJF and other initiatives including excellent season ticket sales.
First and foremost, what this investment does is begin to restore the Football Club’s margin of safety, so that it can operate without any immediate risk of financial distress over the current season.
Secondly, it provides the Club Board with the breathing space to restructure and improve off-field operations, so that they are more efficient and raise more revenue. This investment, on its own, does not guarantee the Club’s longer-term sustainability.
The financial position inherited meant that outside capital of one type or another was essential because the hole to be filled was much bigger than we could reasonably expect fans to fill in the available timeline.
However, fan fundraising remains an essential component of the income that underpins the operating budget, and these vital contributions will be required to continue into the future despite the investment. That is the price of fan ownership and the controls and protections that brings us as fans.
Future investment and crucial safeguards
To be completely candid, longer-term development at the Club, to get us back to being an established top-flight Club with appropriate facilities, will require additional investment in the years ahead.
The deal that has been signed allows some flexibility for further investment further down the road along similar lines. This forward planning is prudent and we welcome it.
However, as part of the update to our company documents required by the investment, it has been enshrined into the company articles of association that the position of the PTFC Trust can never be diluted beneath 51% (commonly referred to as the German model). Therefore, whilst forging an essential partnership between fan ownership and private capital (as other fan owned clubs have done), this also protects and strengthens fan ownership into the future.
The TJF Chair, Sandy Fyfe gave the following reaction to the investment:
“Having been fortunate enough to meet Donald, I am in no doubt of his love for our football club and his positive intent. Similarly, I have no doubts as to his commitment to fan ownership. Finally, his business skills and contacts bring opportunity to our football club. TJF look forward to sharing this journey with Donald and his fellow investors, and to all working together to create a sustainable successful fan-owned football club.”
The Small Print
There are important trade-offs that come with this investment, and this is where fan ownership requires openness and honesty with supporters.
This deal involves the issuing of new “preference shares” to the investors. This has certain advantages over debt-based investment, as the Club will not (as it did in the past) have to pay interest on a borrowing facility.
The terms of these preference shares means that, if the Club’s financial position very drastically improves (to cash reserves in excess of £2 million for an entire year) some of that money will be used to repay the investors. As those shares are gradually “redeemed” the preference shareholding will reduce.
The preference shares are also voting shares. This means that the voting share capital in the Football Club, including the shareholdings of the PTFC Trust (of which TJF is a trustee) and The Jags Trust, have been diluted. Whereas previously the PTFC Trust had a 74% shareholding in the Club, this has now dropped to 67%.
This remains a higher ownership percentage than is the case at fan-owned St Mirren. However, it does mean that the combined shareholding of fan bodies is now less than 75%.
The PTFC Trust remains the majority shareholder, but this dilution, and other terms in the investment agreement also place some constraints on what the majority shareholder can do. For example, the new investors are guaranteed a place on the Club Board (or an observer, if preferred) and certain company decisions cannot now be taken without their agreement. These are protections which are common to investment agreements, and by protecting the investors, they are also protecting the Club generally.
In an ideal world, TJF would have preferred that the shareholding of the primary fan ownership vehicle remained at the level it was before. But we are also realistic: football clubs are businesses, and investment is seldom unconditional. Other clubs have sought the flexibility to combine fan ownership with private capital before, and have used similar mechanisms to bring that about.
It was non-negotiable for TJF, and the other trustees, that both the Investment Agreement and the Club’s new Articles of Association enshrined the position of the PTFC Trust’s majority shareholding in a legally binding way. We are pleased to say that the investors and the Club Board were receptive and agreeable to this, and it is on this basis that we were prepared to vote (as a trustee) to approve the deal.
This means that, even if further shares are issued for new investment, the PTFC Trust’s shareholding will not fall below 51% as mentioned above.
Fan consultation going forwards
This initial investment has needed to be done at pace, because of the well trailed cashflow challenges faced by the Club. The PTFC Trust therefore had to act quickly and decisively as representatives of the fan ownership vehicle to scrutinise and eventually approve the deal.
All are committed to this approach being the exception rather than the norm. Where further investment is proposed, there is a commitment to ensuring that the fans are consulted, as the beneficial owners of the Football Club.
TJF are committed to working with, and supporting the investors into a strong fan-owned future for our Football Club. Finally, we would like to recognise the efforts of the Football Club Board to deliver this investment.