Less For Moores Forbes Report

In December 2004, David Moores, chairman of and largest investor in the fabled Liverpool Football Club, appeared to be distraught as he addressed his team's board. Moores fretted that the financially strapped club would have to scuttle plans for a £170 million ($290 million) stadium.

The new ground across Stanley Park from their Anfield home was needed to bring in receipts the Reds need to remain competitive on the pitch against much wealthier rivals like Manchester United and Chelsea. "These past 12 months have not been easy," said Moores during the meeting. "We are looking at all roads to get investment into this club, including offers already on the table."

A full year and a surprise European championship title later, the club's inner circle must have been shocked to hear the same sentiments from Moores. The team posted 2005 operating losses (in the sense of earnings before interest, taxes and depreciation) of £1.6 million despite £30 million in bonus revenue from European competition. We estimate that the value of Liverpool fell 11% in the past year, to £226 million.

How could the finances be so dismal? The club had come to life under new coach Rafael Benitez and such star players as midfielder Steven Gerrard and defender Jamie Carragher. Entering the 2004-05 UEFA Champions League competition a heavy underdog, it dispatched much fancied Chelsea in the semifinals and then pulled off a stunning come-from-behind upset of Italian powerhouse AC Milan in the final. It was the fifth such title in the team's storied history, dating to 1892.

Liverpool's fan base soared to 18 million people worldwide, from just 8 million the year before, according to German sports-consultant Sport & Markt AG. Besides collecting the European revenue, a record number of visitors to the club's Web site generated £685,000 last year, 11 times 2004 Web-related revenue.

Moores has since ironed out a contractual dispute with kit sponsor Reebok, top of another deal with Adidas. He also extended by two years the club's 12-year shirt sponsorship by Danish brewer Carlsberg, the longest-running commercial partnership in England's elite Premier League, worth a reported £5 million per year.

Despite Liverpool's rebound on the pitch, it has taken Moores' total commitment and financial legwork just to keep the lights on. Profits on player transfers as Benitez reshaped the team helped the Reds post an League revenue, is too rich. Had Liverpool missed qualifying for the 2005 Champions bracket, the club very well could have been running £30 million short of breath.

An undercapitalised team like Liverpool cannot consistently compete with rich clubs like Manchester United, Chelsea or Arsenal (also of London) without a modern stadium. The Reds pull in only £33 million from stadium revenue; Manchester United gets more than double that.

With a capacity of only 45,000, Liverpool's Anfield can't come close to accommodating the crowds Manchester United packs into its Old Trafford stadium (68,000, expanding to 76,000 this year). A move into the planned 60,000-seat Stanley Park could mean a 35% boost for Liverpool's match-day revenue (more than £11.5 million) in its first season.

Liverpool's ticket prices are lower, too. Match-day revenue contributed only 27% of total income for Liverpool, a far cry from the 38% to 42% seen at rivals ManU, Newcastle United and Chelsea. Making matters worse, a new broadcasting agreement for the Premier League will diminish fees paid out to clubs. This particularly hurts Liverpool, whose fans travel the farthest of any Premiership club (50 miles on average) to home matches, according to research consultant SportsWise.

One way to boost operating income would be to solicit some new equity capital and invest in a new stadium. But Moores, who owns 51% of the team, is not enthusiastic about diluting his stake. (He declines to be interviewed on the subject.)

He has suitors. On March 29, the club said in a London Stock Exchange statement that it was in talks with a shortlist of fewer than ten possible investors regarding "a potential investment of new funds" that "may include an offer for the entire share capital of the club".

There is equity money to be had from, for example, Robert Kraft. The U.S. billionaire owns two American pro sports teams, Major League Soccer's New England Revolution and the New England Patriots of the National Football League.

The billionaire has reportedly offered to bankroll up to £60 million of the construction of Liverpool's proposed new stadium in return for a minority stake. Kraft pumped £200 million of his own money into a new stadium for the Patriots franchise, which he bought for £99 million in 1994 and turned into the third-most-valuable team in the NFL, worth £575 million.

Prior to Kraft, Thailand's wealthy Prime Minister Thaksin Shinawatra made intimations that he, the Thai government or private Thai companies (depending on the day) had interest in the cornered club. But wrinkles in how a 30% stake worth up to £63 million would be financed dissolved talks prematurely.

Another knocking at Liverpool's door has been Spanish tycoon Juan Villalonga, a former president of Spanish telecom giant Telefonica.

By far, Liverpool's most visible suitor has been Moores' fellow club director, centimillionaire British businessman Steven Morgan. Boardroom bickering spilled over once again this past February at the club's annual general meeting as Morgan, now the third-largest shareholder, contended that Liverpool's debt burden (£26 million) meant he should get a discount on buying a majority stake.

As early as 2004's general meeting, it was Morgan's wife who voiced her frustration over spurned attempts by her husband to scoop up shares in the club. "Here is a local, successful businessman willing to put millions into this club," said Didy Morgan. "Yet we are still waiting by the phone."

Morgan, flush from a likely sale of his stake in a hotel group, may renew his efforts to recapitalise the club. At some point, if the price gets high enough or the balance sheet strained enough, Moores might just take the money.