Venezia FC Bonds, Xbox Game Pass, and Paramount's Dividend
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Venezia FC Bonds, Xbox Game Pass, and Paramount's Dividend
Some thoughts on investing in sports teams, Microsoft's acquisition of Activision Blizzard, Xbox Game Pass's next big move, and Paramount's next divvy
Happy Monday and welcome to our new subscribers!
Last week ended pretty poorly for market dwellers, with the latest blistering inflation report tanking the S&P 500 by upwards of 5%. A black cloud seems to hang over Wall Street as the inevitability of a recession begins to sink in for even the formerly bullish.
Not good.
But, in these troubled times, the wonderful Genevieve Roch-Decter offers a ray of hope:
⚽️ Venezia FC’s Bond Offering
For sports fans the world over, owning a team is just about the ultimate dream. Alas, for the non-billionaires among us, it’s a pretty far-fetched one.
On a smaller scale, there are a few publicly-owned professional teams out there that allow fans to purchase shares. Unfortunately, these “investment” opportunities rarely turn out well.
At least not financially.
The NFL’s Green Bay Packers are famously fan-owned, but their stock is mostly symbolic. It can’t be sold or traded and pays no dividends but pride.
Manchester United, on the other hand, trades on the New York Stock Exchange, meaning that investors can actually make money if share prices increase. Sadly, that hasn’t been the case in recent years — with MANU losing 55% of value since 2018. United’s performance on the field hasn’t been much better, either.
Back in 1998, the Cleveland Indians went public at $15 per share and traded on the Nasdaq exchange under the ticker CLEV. About sixteen months later, Larry Dolan purchased the team and took it back private, paying those shareholders $23 for each share they owned. That 53% gain remains one of the very few times that a sports investment paid off for the common man.
Now, a new opportunity arises out of Italy. And, unlike some of the above examples, this one promises stable returns that might be of interest to the conservative investor.
Venezia FC, a small club based in Venice, shocked the sports world a year ago by winning promotion to Serie A, the top level of Italian soccer. Then this little minnow went one better: the release of Venezia’s 2021/22 jersey caused a viral sensation on social media — selling out immediately with 95% of orders coming from outside Italy.
Not bad for a team that nobody had ever heard of before.
Okay, now the bad news. That viral kit release marked the high point of Venezia’s season. The club won just six out of thirty-eight matches and was relegated back to Serie B at season’s end.
This summer, as Venezia plots a quick return to the top flight, the club will offer official bonds to help finance a new training center. Complete with training pitches, locker rooms for the players, a gym, rehab center, and more.
This fixed-term investment of five years will pay 7.5% interest per annum. In recent years, as interest rates hovered near zero, bonds mostly fell out of favor because of the minuscule returns on offer. But 7.5% is nothing to sneeze at — particularly if you think we might be headed for a recession.
The biggest potential perk, though, is the 15% cash bonus paid to all bondholders if Venezia win promotion back to Serie A during the next five years. That’s far from guaranteed, but not exactly a long shot. If Venezia can leverage its internet celebrity with another viral kit release, the resulting windfall might fund a quick bounce back.
The minimum subscription of €1000 prices me out of digging deeper into this bond offering, so this certainly is no recommendation to YOLO any money into Venezia FC. Just a unique crossover of the sports and investing worlds that might be of interest to others.
Remember: Nothing — not even bonds issued by a professional sports team — is guaranteed. Any capital invested will be at risk for the lifetime of this bond.
Let’s stick with Italian soccer for a minute. Mostly as an excuse to post another photo of Venezia’s viral jersey. Fun fact: Theopisti Pourliotopoulou, the Greek model hired to show off the new kit, saw her Instagram following more than triple after these stunners were released.
Okay, back to soccer. One of Serie A’s proudest teams, AS Roma, is another cautionary tale on the perils of sports investing. In May 2000, the capital club went public on the Borsa, Italy’s stock exchange, at a price of €5.50 per share.
Last week, even after its most successful season in ages, AS Roma’s price had fallen to just €0.42 per share. The club won the UEFA Conference League and boasts both ambitious American ownership and the best manager in the world — and shares barely budged.
I definitely get the appeal of buying stock in professional sports teams, but they almost always turn into financial black holes. Steer clear.
No Console Needed: Xbox Game Pass ➡️ Smarts TVs
Back in May, Microsoft president Brad Smith provided an update on the company’s $68.7 billion acquisition of Activision Blizzard. All seems to be progressing well.
“It’s moving fast, at least fast enough for an acquisition of this size.”
“One of our attorneys summed it up nicely by saying, ‘We’re coming to the end of the beginning and now we’re entering the beginning of the middle.’”
Wall Street still seems skeptical. Activision stock closed at $76.48 on Friday, well below the $95 offer price from Microsoft. This creates quite the merger arbitrage opportunity for anyone feeling confident that the deal will close on time during the first half of 2023.
Based on Friday’s price, cagey investors could earn a 24.2% return on this arbitrage play. Berkshire Hathaway now owns 9.5% of Activision Blizzard for this very reason.
Microsoft’s hefty purchase of the Call of Duty maker is all about bolstering its Xbox Game Pass subscription service with more high-quality content.
And, this week, Microsoft took another big step in positioning Game Pass — and its recurring revenue from subscribers — as the future of the Xbox brand. Starting June 30, the service will be offered on all 2022 Samsung Smart TVs, eliminating the costly need for an Xbox console at all.
This opens the door for millions more non-console owners to sign up for Game Pass and play the latest Xbox Game Studios titles (and more) via streaming.
It pains me to say this as a Nintendo fan, but Microsoft’s Game Pass is a heck of a deal. All first-party titles (as well as select others) for just $10-15 per month. Considering these games cost $60-70 each at retail stores, the savings add up pretty quick.
Opening up Game Pass to Smart TVs also savvily sidesteps the chip shortages plaguing the video game industry. Now, every new Samsung Smart TV comes with potential Xbox functionality inside. For a small fee, of course.
But the long-term success of this venture relies on the quality of play. There’s always been a concern about input lag when playing via the cloud, especially with many of Microsoft’s top titles requiring fast-twitch reflexes and speed.
The big bucks for Game Pass will only roll in if users stay subscribed to the service month after month. Inferior gameplay — caused by lag, slow data speeds, etc. — could jeopardize Microsoft’s grand plans.
But, in general, this sounds like exciting (and promising) news. Microsoft needs gamers signed up for Game Pass, paying a monthly subscription fee in perpetuity, and must eliminate every friction getting in the public’s way. Allowing anyone with a new Samsung Smart TV (with other brands coming soon) to jump into the Xbox ecosystem seems like a pretty good way to start.
Paramount Goes Ex-Dividend on Tuesday
Some companies can’t catch a break. Just as beleaguered Paramount stock looked to be perking up after receiving the Buffett imprimatur last month, it got caught up in a big sell-off and sunk back below $30.
But this isn’t a bad time for the stock to go on sale. Anyone who buys shares in Paramount today (6/13) will skate in right under the wire for the company’s next dividend payment. All PARA shareholders of record at the close of business on June 15 — meaning that any purchase must be made by June 13 at the latest — will receive $0.24 per share on July 1.
That’s an impressive 3.4% dividend yield at current prices.
In other Paramount news, the company held its (virtual) annual meeting last week — and CFO Naveen Chopra made the case for Paramount’s multi-platform strategy:
“All these #1 films are currently, or will be, available on Paramount+, which means that they generate additional returns through our streaming service on top of what they already earned in theaters.”
So far in 2022, five Paramount feature films opened at #1 at the box office:
Scream
Jackass Forever
The Lost City
Sonic the Hedgehog 2
Top Gun: Maverick
All five will end up on Paramount+. And everything from CBS, Nickelodeon, and MTV, too.
Unlike some legacy streamers, Paramount can monetize its $15 billion content costs across multiple platforms. The same goes for Disney and Warner Bros. Discovery. That’s a huge advantage for these companies.
And, in closing, I will once again beseech Warren Buffett to buy more shares of Paramount while the price is under $30. The next Berkshire Hathaway 13F can’t come soon enough.
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.