WHY FAN TOKENS SHOULD NOT REPRESENT OWNERSHIP

In launching our Socios.com platform, a new category of token has emerged — the Fan Token. Once onboard the Socios.com platform, our (yet-to-be-announced) club partners host what we have termed a Fan Token Offering (FTO). Fans must purchase $CHZ via a cryptocurrency exchange in order to acquire Fan Tokens. These tokens — which are specific to a team or club — are a finite, digital asset that provide access to an encrypted ledger of voting and membership rights ownership.

While Fan Tokens offer a fantastic opportunity for football clubs to engage and secure additional revenues from their fan bases, the Tokens do not offer ownership, part ownership equity or shares in football clubs, for very good reason.

Selling shares in football clubs is a complicated business. Aside from the regulatory and legal restraints, in offering shares, you are offering Securities, and that means that you need to educate the fans about investment risks, because let’s face it, educating fans that they can expect an ROI from investment in their football club is dangerous.

Buying into football clubs is not a particularly sound investment. In 2003, when Roman Abramovich arrived at Chelsea, his intent was to rapidly grow the club in order to make them a powerhouse of English football. However, the playing field has since been levelled, with the introduction of the new Financial Fair Play (FFP) rules in 2011, which restricted how much teams could spend as a proportion of revenue income. This had a huge impact on football clubs as an investment opportunity.

The running costs of a club are huge. The assets (namely the players) are the biggest liabilities — they cost a lot to buy, their salaries are colossal, and their performance is unreliable. Other assets — a stadium for instance, costs a lot to buy/rent maintain and light; West Ham for example, pay an annual rent of £2.5m. TV deals may deliver much needed funding, but performance on the pitch is everything, and has a direct correlation with matchday and merchandising revenues.

In recent years, many clubs have attempted flotation on the stock market. Whether it was to help fund new stadiums or to perhaps purge themselves of years of debt, none have been particularly successful and the reward for investors has been minimal. Clubs are either privately owned, listed (on stock exchanges) or are member-based — they are just not looking for more private investment.

Some clubs have even had to be rescued from bankruptcy by supporters’ consortiums or have only been able to keep running thanks to the persistence of loyal fans. And this is the point. Buying a share in a football club is not reciprocal transaction. Clubs have to give up equity, and meanwhile fans get nothing meaningful back.

The truth is, investing in football is a labour of love. Generally, people invest for the love of the team, but investors cannot expect any significant returns. It’s first and foremost an emotional experience. Sadly, and rather ironically, being a shareholder doesn’t give you any rights over and above being a normal fan. Shareholders don’t get special treatment and their opinion doesn’t count in the grand scheme of things.

Ultimately, we don’t believe that offering fans shares or equity is particularly rewarding or engaging. But we do believe that football fans are hugely passionate about their team, they want to be heard and they want their voice to count for something.

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