Tottenham Hotspur Plc. Harvard Case Solution & Analysis

IntroDuction:

The report presents a case about Tottenham Hotspur Plc., which is one of the old and leading professional football club and a member of the English Premier League (EPL). The management of the club was considering different possibilities to take the club to the upper echelon of the English Premier League (EPL), so they considered to adopt new strategies by building new stadium and signing a new striker.

The new stadium will increase the attendance revenue by 40% and sponsorship revenue by 20%, with an increase in operating cost by 14%. Further, the investment in stadium will increase the fan capacity from 36,500 to 60,000 and the new striker will increase the net number of goals per person by 12.

The equity value of the club is determined as £19.91 million, which gives a share price of £2.14 whereas the current share price of the club is £13.8, so it indicates that the current share price of the company is overvalued. Further, the NPV of new stadium provides a negative NPV of £96.59 million, which indicates that building a new stadium will not be financially viable for the club whereas the NPV of the new striker provides a positive NPV of £2.27 million.

Tottenham Hotspur Plc. Harvard Case Solution & Analysis

Business Analysis

This part of the report presents a business analysis of Tottenham Hotspur Football Club, which was one of the oldest teams in premiership. The club had enjoyed a tremendous success over the past six decades and had become the first publicly-owned football club in England and was also the first to introduce the corporate hospitality boxes at their stadium.In early 2008, the chairman of the club was considering a bold move for the organization and was also considering to increase revenue for the club through the development of new stadium.

The current business model of the club is very impressive. The club generates revenue from four major sources that include: attendance, sponsorship rights, merchandise sales and broadcast rights. Further, the club has created a “One Hotspur Membership” to attract their 70,000 fans, which has been offered at varying level of benefits from insider team updates to occasional ticket packages to full season ticket packages in order to further expand and enhance their brand image.

The investor’s base of the club comprised of ENIC International Ltd., who had acquired a combination of 82% beneficial interest in the club and was the only shareholder with a 3% stake in the club. Further, the management team of the club includes Daniel Levy, partner at ENIC, who had previously served as a director of Scottish football club but had been elected as the chair person of Tottenham Hotspur Plc. in 2001.

The value creation feature of Tottenham Hotspur Plc. was the ranking made according to their win-tie-loose record by the end of 38 game season because the high ranking team would generate higher share of league television broadcast revenues and each move up in the standings worth an estimated £760,000.

The major risk driver faced by the club is the loose of key players because it will threaten the performance of the team and would enable the team to report a lower ranking, which will ultimately result in a loss of broadcasting revenue. Further, if the club loses its key players then the club will be required to sign new players; which will ultimately require high cost to purchase rights of the player and will have to pay his salary on a continuous basis...............................

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