Stan Kroenke, His Los Angeles Adventure, & Arsenal's Future

[LMAO]

This could be made into a lengthy, intricate blog post, but that's too much effort right now. Basically, I'm doing a TL;DW (too long; didn't write).

A snapshot that explains Arsenal's recent dealings:
•Arsenal's most recent club value: $1.94B, with Usamanov's bid from a few months ago.
•Stan Kroenke's share control: $1.27B (67.05%)
•Kroenke's other teams' valuations:
....◦Los Angeles Rams (NFL): $3.00B
....◦Denver Nuggets (NBA): $0.89B
....◦Colorado Avalanche (NHL): $0.34B
....◦Colorado Rapids (MLS): $.11B
....◦Colorado Mammoth (NLL): ¯\_(ツ)_/¯ but basically negligible with sig figs
....◦Assuming 100% ownership in other owned sport teams minus LA Rams: $2.61B portfolio
....◦Assuming 100% ownership in other owned sport teams: $5.61B portfolio
•Kroenke is looking to secure a $1.00B loan for his Inglewood, CA football stadium.
•Arsenal's most recently disclosed cash reserves: $0.13B
•Arsenal transfers in: $67MM
•Arsenal transfers out: $94MM ($171MM with Sanchez)
•Net spend assuming no more incoming players and same wages as last season: $27MM ($104MM with Sanchez)
•Arsenal's assumed cash reserves after transfer window: $0.16B ($0.23B with Sanchez)

Notice anything?
Yup, Kroenke's shares in Arsenal are valued close to the loan amount he's seeking. In case Kroenke needs to sell, he can do so in order to cover the loan. Arsenal is nothing more than collateral for Kroenke.

Why are Arsenal's cash reserves important?
Kroenke will be able to secure a lower interest rate with greater cash reserves since cash reserves are more liquid than a football club. Basically, his portfolio can secure the loan, the cash reserves can secure a lower interest rate. Don't be surprised to see Arsenal's cash reserves remain the same or slowly decrease over the years as Kroenke uses some of the it to make loan payments. Remember: the cash reserves are for football-related activities. It's just a different type of football. Technicalities ftw.

What's Arsenal have to do with this Los Angeles stadium?
I believe Kroenke purchased Arsenal shares to prepare for the Rams' move from St. Louis to Los Angeles. He knew LA wouldn't completely finance the stadium with public funding, and his other franchises wouldn't be significant enough to cover a potential loan for a stadium in a few years time, with stadium construction costs ballooning year-by-year.

Sure, Kroenke could've never bought Arsenal shares and instead relied on the Rams and his other franchises, but what's the sense in that should something go awry? Now Kroenke can use Arsenal as collateral so that he doesn't have to touch his golden asset or his other franchises that are pretty much guaranteed profits through their respective league's revenue sharing.

What does this mean for Arsenal?
A bleak future since Arsenal isn't Kroenke's flagship asset. Sure, fans could boycott Arsenal to decrease the club's value, forcing Kroenke to sell. Don't expect that to happen, though, since Arsenal has become too big.

Kroenke has allowed the club to be run as self-sufficient without taking money out, save for consulting fees, but don't be surprised to see a significant reduction in spending in upcoming seasons as Kroenke focuses on nothing but his Los Angeles sporting complex. Before, Arsenal spent to maintain CL football. Now with increase PL TV money, the CL isn't important, and the EL will be more than good enough, with the CL as a bonus. Kroenke will obviously seek to increase Arsenal's value, but it can be done in a more natural way (PL growth) instead of forcing investment (huge transfer outlays).

The only way I can see Kroenke selling any time soon is if someone comes in with an offer that's too good to pass up (i.e., an offer that is >= Los Angeles stadium cost, which could be $3B by the time it's completed). That would value Arsenal at roughly $4.47B, so basically, it's not going to happen, unless someone wants to go full IDGAF about money because herp derp emotional investment. Even Middle East oil/natural gas money isn't that irresponsible.

TL;DR:
5th-7th place will be Arsenal's new level, unless other clubs push Arsenal further down the table. Unless someone comes in with a $3B offer, get cozy with Kroenke as owner.

[Angelito]

Great post. Very interesting analysis.

For me, Wenger agreeing to all of this is more sickening because, as bad as it is, I can understand Kroenke's perspective here. He's a bussinessman foremost. Sure, we're doomed as long as he is around, but Wenger? He could have left after the FA Cup win and cleared the scene. He shouldn't have been part of a businessman's dream. It's shocking to see a football man act as Kroenke's stooge just so that he can remain Arsenal manager. Kroenke is being loyal to his nature and profession. Arsene Wenger is not.

I do agree: top-6 is our level now. We'll soon be what Everton have been mostly in the PL era. The difference is that Everton were like that due to lack of resources; we, lack of ambition.

I'm happy that by the time Wenger leaves, his legacy would have burned down to ashes. So, that's a positive. Under Kroenke's vision, however, someone like Mauricio Pochettino is a lot more suited than Arsene Wenger.

Regardless, I don't think Kroenke will be Arsenal owner in 5-7 years time. Arsenal isn't a long-term project for him. After Wenger, all the hatred would be directed towards him and unlike Wenger, Kroenke doesn't like negative press - especially not from a country where the sporting culture still baffles him. He will sell eventually, but not within 5-7 years.

[Denis_E]

Great post. Very interesting analysis.

For me, Wenger agreeing to all of this is more sickening because, as bad as it is, I can understand Kroenke's perspective here. He's a bussinessman foremost. Sure, we're doomed as long as he is around, but Wenger? He could have left after the FA Cup win and cleared the scene. He shouldn't have been part of a businessman's dream. It's shocking to see a football man act as Kroenke's stooge just so that he can remain Arsenal manager. Kroenke is being loyal to his nature and profession. Arsene Wenger is not.

I do agree: top-6 is our level now. We'll soon be what Everton have been mostly in the PL era. The difference is that Everton were like that due to lack of resources; we, lack of ambition.

I'm happy that by the time Wenger leaves, his legacy would have burned down to ashes. So, that's a positive. Under Kroenke's vision, however, someone like Mauricio Pochettino is a lot more suited than Arsene Wenger.

Regardless, I don't think Kroenke will be Arsenal owner in 5-7 years time. Arsenal isn't a long-term project for him. After Wenger, all the hatred would be directed towards him and unlike Wenger, Kroenke doesn't like negative press - especially not from a country where the sporting culture still baffles him. He will sell eventually, but not within 5-7 years.

Like you say aptly, no one forced wenger to be an accomplice in kroenke's pillaging of this club

He has more money than he could spend in 10 lifetimes by now. That means he doesn't have to worry about a career anymore or burning bridges.

He could have left after the fa cup, released a biography to get closure and blame the true other culprits upstairs if that's the case

No, he made his choice as he has for years. I hope his last moment on this earth he feels disgrace

[Alexis]

Someone go and start burning down his houses and ranch.

Looks like this man won't understand unless we take things to the extreme

[Royal Gooner]

Someone go and start burning down his houses and ranch.

Looks like this man won't understand unless we take things to the extreme

Burning down the property of someone who is blocking your club's ambitions a T*ttenham tactic in my opinion.

[EliteKiller]

Amazingly accurate prediction from last August ... well posted sir

FYI - Latest costing of the LA ventures are now 5B .... that's 3B for the stadium and 2B for the rest of the site .... wonder if he even knows we exist anymore?

[PairyGrows]

Amazing post. You've laid out everything I've come to realize over the last five years or so. Each passing year has further confirmed my suspicions. My apathy has grown to the point I've not watched the games since last October.

Why? Because it's very difficult to feel any passion toward a business venture. I'm a football fan, and I don't stand to gain anything from Kroenke lining his pockets. Why bother?

[Lucky7]

Not disagreeing with the hypothetical scenario here but when Kroenke bought Arsenal they were worth about half of what they are now. Was his plan to double the value of the team to cover this loan, or are you saying that he was always going to use his ownership to fund a stadium at whatever value they were and it happens to be 1bn?

Here's the biggest issue for me here....If this truly is the case...He will not sell Arsenal until the LA stadium is paid off or the loan is renegotiated with new collateral (unlikely). He would never pay the loan early as it makes much more business sense to carry the debt at a small interest rate and let his value in Arsenal or any other investment grow at a much higher rate.

This would mean that we could be locked into Kroenke ownership for 30 years.

[EliteKiller]

Not disagreeing with the hypothetical scenario here but when Kroenke bought Arsenal they were worth about half of what they are now. Was his plan to double the value of the team to cover this loan, or are you saying that he was always going to use his ownership to fund a stadium at whatever value they were and it happens to be 1bn?

Here's the biggest issue for me here....If this truly is the case...He will not sell Arsenal until the LA stadium is paid off or the loan is renegotiated with new collateral (unlikely). He would never pay the loan early as it makes much more business sense to carry the debt at a small interest rate and let his value in Arsenal or any other investment grow at a much higher rate.

This would mean that we could be locked into Kroenke ownership for 30 years.

This ..... if Kroenke has leveraged his holdings to cover LA then it makes business sense to let those loans (bonds, credit notes, whatever) play out over 20-30 years ... the only way that changes would be if selling an asset (AFC) makes an appreciable profit over the cost of early settlement and the assets value ... you might do this on a depreciating asset, but unless the football market collapses (and that ain't happening anytime soon) we're an appreciating asset ... only a fool would sell without a massive premium ...

The Kronke family are here for a long time ... what the CEO / Manager / Fans need to do is pressure him into investment ... calling him a 'money grabbing c***' on a daily basis, whilst true, will probably not achieve that goal ....

The club's basically screwed, we've got an owner we don't want, but he's got an asset that he needs .... c'est la vie ....