Are investors souring on elite soccer assets?

The Premier League has been a rich hunting ground for Americans over the past two decades, with almost half the 20 clubs under their control as it started a new season. The interest was turbocharged when a group led by billionaire Todd Boehly acquired Chelsea two years ago.

But they’re now souring on English football, according to seven people involved in buying and selling teams. And interest has particularly waned amid Chelsea’s struggles, some of those familiar with the market said. That’s despite spending more than £1 billion ($1.3 billion) on players.

The group — a mix of advisers and investors in the US and UK — said financial losses and little progress on limiting overspending on squads has turned US investors off what’s often considered the world’s most popular sports league. There’s also the risk of not qualifying for lucrative European competitions or, even worse, getting relegated to the second tier.

Meanwhile, putting money into US sports is becoming more attractive, the people said. They asked not to be identified in order to speak freely.

“There’s no cost control, and you have irrational competitors like Todd Boehly who distort the market,” said Roger Mitchell, who runs Albachiara Group, a consultancy focusing on the value of sports investment. The English Premier League has a “great product, but it’s not a business,” he said.

Boehly said that there's "nothing irrational" about Chelsea's approach, which he described as "laying a long-term foundation, establishing a great leadership team and responding to the environment." The brand power of big clubs, such as Chelsea, also can't be replicated, giving them potential to grow globally, he said.

Historic clubs such as Arsenal and Liverpool have also fallen under US ownership as investors flocked to England. It’s not just the biggest teams. More than 30 in total, down to Carlisle United in the fourth tier of the English football pyramid, are owned by US entities.

But the clamor has definitely cooled. Premier League teams such as Tottenham Hotspur, Brentford, Crystal Palace, Wolverhampton Wanderers and West Ham United have been trying to sell minority stakes for months, so far without success. Relegated Sheffield United, a team that Bloomberg reported was up for sale a year ago, is still looking for a new owner. Everton has now been up for sale since at least January 2023.

Adam Sommerfeld of Certus Capital, who advises high net worth individuals on investment in sports, says many of these assets have been over-marketed and over-priced. That’s pushing more clients toward women’s teams and niche sports such as padel. The NFL is also expected to soon allow private equity. 

“The American investors we are dealing with like being presented with a unique opportunity,” Sommerfeld said. They want the “possibility of making a short-term impact with a similar sized investment.”

One representative for a large American sports fund said that the Premier League had become so competitive it was hard to contain costs. In addition, there are signs of less competition for media rights, which has led to a flattening of some recent deals with broadcasters.

An executive for a US sports group said he believed most Premier League teams will keep losing money unless they get lucky on the sale of players. It’s difficult to see tough restrictions on player spending, like a hard salary cap, coming in, he said.

Collectively, the Premier League’s revenues, boosted by packed stadiums and the most lucrative television deals in Europe, have jumped to almost £7 billion a year. Yet the most recent set of filed accounts showed that only four out of 20 teams made an operating profit in the 2022-23 season.

Those losing money include Fulham FC, which is controlled by Jacksonville Jaguars owner Shahid Kahn, and Aston Villa, part-owned by US billionaire and private equity investor Wes Edens. At Chelsea, the loss before taxes was about £210 million for the past two seasons combined.

The league has become an “arms race,” said Peter Grieve, a former Goldman Sachs Group Inc. banker who heads a company looking to invest in football clubs. “You have to give the clubs a chance to make money to sustain themselves.”

A new set of spending regulations this season is being tested, and Richard Masters, the Premier League’s new chief executive officer is hoping that the competition will move toward a more profitable future. He told a recent press briefing that the “perfect state” was to have a model that fosters competition but also sustainable finances.

For sure, some US sports funds still rate the league highly as an investment. Ares Management Corp. sees the allure of historic clubs, loyal fan bases and increased demand for sports content, said Mark Affolter, partner and co-head of its sports, media and entertainment strategy.

“We believe in the long-term value and growth potential of the English Premier League,” said Affolter, whose firm backs Crystal Palace via Eagle Football and is also a lender to Chelsea, Bloomberg reported last year.

But in the short term, sales are proving tougher. Earlier this month, US sports investor Marc Lasry bought into newly promoted Ipswich Town alongside English musician Ed Sheeran. Before that, the last team to attract an external investor was in December when investment company Atairos bought a stake in V Sports, a joint venture of Aston Villa’s owners.

Exchange rates have also lowered interest, according to Christina Philippou, a lecturer in accounting, economics and finance at the University of Portsmouth. The US dollar has lost ground against the British pound since nearly reaching parity in 2022.

“A few years ago, valuations were more favorable for American investors,” Philippou said. “But people are holding out for big prices, and there are fewer and fewer investors willing to pay for an asset that is increasingly loss-making.”

Boehly and Clearlake Capital Group, a California-based private equity firm, acquired Chelsea in a deal worth £4.25 billion in 2022. It had been one of the top clubs in the world for years as Russian billionaire and former owner Roman Abramovich spent lavishly on players.

The year before Abramovich was forced to sell because of Russia’s war in Ukraine, Chelsea beat Manchester City to win the Champions League, the pinnacle of European club football.

But City has since continued to distance itself as the team to beat, while serving as another example of the league’s flawed model. The club was an also-ran until being acquired in 2008 by a company belonging to UAE Deputy Prime Minister Sheikh Mansour bin Zayed Al Nahyan.

Those deep pockets unleashed a spending spree that quickly turned City around. It has won six of the past seven Premier League titles. But the last came as the club is being investigated for more than 100 breaches of financial rules dating back more than a decade. It denies all wrongdoing.

When Chelsea hosted City on Sunday, the London club unveiled another crop of new players. City won the game.