Wasps is the latest in an increasingly long line of brands tapping its fans as well as investors for money, following everyone from John Lewis and Hotel Chocolat to Ladbrokes. But will its retail bond get over the line?
The premiership rugby club is hoping to raise between £25m and £35m from the seven year, 6.5% bond. But unlike companies like Naked Wines and Chilango, which offered goodies (wine and burritos, respectively) as well as cash with their unsecured ‘mini-bonds’, Wasps’ is both tradable on the London Stock Exchange and secured, against the 32,600-seat Ricoh Arena in Coventry (companies who have raised money via listed retail bonds include Ladbrokes and the National Grid).
The club is using that to sell the investment as a safe bet, particularly as two-thirds of its roughly £19.5m turnover comes from gigs, conferences and other events at the stadium. It bought the Ricoh for £5.6m at the end of last year, having been in a mere 5,000-seat venue in High Wycombe for the previous 12 years. But an ‘independent valuation’ by estate agent Strutt & Parker put a current value of £48.5m on the arena. Wasps did pay an extra £1m to Coventry City Council to extend the lease from 50 to 250 years, but that’s still an enormous jump in value.
If the bond, which is open for orders at a minimum buy-in of £2,000 until May 6, is successful it’ll be a huge victory for a club that was on the brink of bankruptcy at the end of 2012 before it was rescued by Irish-American businessman Derek Richardson.
But Wasps has a hefty load of debt to pay down before it really starts scoring. The bond will be used to pay back £13.4m to Coventry council, almost £4m to investment bank Close Brothers and £10m of Richardson’s £20.4m ‘shareholder loan’. Unless fans and investors really get behind the fundraising, the club won’t have any cash from the bond available for extra investment in its new home.