Analyst warns against investing in football club Brøndby

Bröndby IF (CPH: BIF B) was in the news this weekend for all the wrong reasons. Newspaper Ekstra Bladet wrote citing analyst Martin Lykke from NPinvestor.dk, that if the ownership structure of the club does not change, it risks bankruptcy. He sees an unlikely entry into the Champions League or a complete management overhaul as the only potential way for an upside for outside investors.

Unquoted A-shares represent around 7% of the share capital but over 43% of the voting rights. Brøndbyernes IF Fodbold fond and Brøndbyernes IF idrætsforening together hold 38.4% of the voting rights. They strive to maintain control within the group’s amateur department. Some 30 years ago the club was split into professional and amateur department, with the amateurs consisting of youth departments and numerous volunteers.

Executive director and chairman of the board (and team doctor) Per Bjerregaard holds power in both professional and amateur divisions and thus exerts complete control in operations together with Vice-President Benny Winther. To add some fuel to the fire, sporten.dk highlighted on the dramatic increase of compensation that club executives and directors have enjoyed in the past 10 years. Although to be fair, they have also had to take a pay cut just recently on grounds of the club’s economic situation as Winther told B.T. tabloid.

Brøndby’s share price is down by 50% in the past year and around 90% from 2008 highs. The stock has retreated 6% today 1.5 hours before market close on low volume.