LONDON (Reuters) - AFC Ajax shares slumped on Wednesday after the Dutch team was eliminated from the Champions League, highlighting the volatility of soccer stocks where results on the pitch can knock millions off their value.
Europe’s top clubs have drawn in big money over the last decade, with U.S. private equity firm Silver Lake last month acquiring a stake in the group that owns Manchester City in a deal valuing it at $4.8 billion (3.74 billion pounds).
But the reliance on match performances to drive financial results have made the dozen soccer companies listed on Europe’s stock exchanges a niche product for professional investors.
These stocks are “typically too volatile for traditional investors (and) that is why we see very few clubs listed in the stock exchange,” Tim Bridge, director in the Sports Business Group at Deloitte, said.
Ajax shares slumped almost 20% in May after the last-minute defeat to Tottenham Hotspur in the club’s first Champions League semi-final in more than 20 years, reversing a rise to all-time highs when they knocked out Juventus.
Shares in the Italian club lost as much as a quarter of their value following the April defeat to Ajax.
While Champions League elimination hits supporter engagement with a team and revenue from merchandise, the bigger penalty comes as clubs forego any extra income from TV-rights and prize money in other knock-out rounds.
“If Ajax had qualified for the next round it would have received 10 million euros in prize money,” Jauke de Jong, a research analyst at AFS Group in Amsterdam, said.
Ajax, whose market value fell by around 33 million euros on Wednesday, said its revenues more than doubled to 199.5 million euros ($220 million) in the year to the end of June, mainly thanks to income from the Champions League.
For young teams like Ajax, the value of its squad may also be curbed by elimination from the final stages of European football’s top competition.
“The Champions League is the best showcase of the playing talent. When those guys perform strongly, most people around the world will see those players performing,” Bridge said.
Ajax sold Dutch defender Matthijs De Ligt and midfielder Frenkie de Jong to Juventus and Barcelona, respectively, for a total of 150 million euros on the back of their performance in last season’s Champions League, he added.
And clubs excluded from the football competition may struggle to secure sponsors, also hitting revenue, Bridge said.
Reporting by Joice Alves, additional reporting by Danilo Masoni; Editing by Alexander Smith