Rev Algenon Stickleback HReading FC isn't a publicly traded company so share values are completely at the discretion of John Madejski - adding assets or making losses doesn't drive the share price up or down.North Somerset Royal Yes that is right. My personal view is that JM is happy to spend money on that sort of thing as it increases the fixed assets and thereby the value of his shares. Money spent on buying a player does reflect in a balance sheet asset but depending on the players age etc may have to be written off over the contract period if they on a Bosman or become worth less because of age. Also their wages certainly do have to be written off against profits and therefore have a negative effect on the share value. If I was JM therefore I would be happier spending money on media suites than players.
Unless JM is immensely stupid, which seems unlikely, he knows full well that a Reading in the premiership is worth far more than one in the championship that has an extra building or two that can be called an asset.
And has been pointed out, having that media suite was a prerequisite of admission to the premiership. It wasn't something he wanted to build, and it also wouldn't be much of an asset as it doesn't generate any income, nor add any real value to the property.
Whilst it is true that the holder of the shares in an unquoted company can ask as little or as much as they like for them in all cases an independant valuation will be sought by the prospective purchaser. There is an approved method of valuation used by HM Revenue & Customs shares valuation division which is basically based on the assets less liabilities plus a multiple of average annual income and the negotiating margins are in fact quite limited as they relate mainly to intangibles such as goodwill etc. The higher level of receipts in the premier league is therefore a factor but unlike fixed assets would not be regarded as certain enough in terms of future earning potential to effect the value that much.
Anyhow my views on motives are speculative and of little value. The main point I was really making was that its pointless for people to ask why the £6m
was not spent on players as the fact that there was a surplus in the profit and loss account does not mean that it has not already been appropriated to acquire assets. Without seeing the whole accounts including the balance sheet it is impossible to say what amounts were available to fund player acquisition. Even If we had spent £100m on players it would not have altered the profit only the assets in the balance sheet. If we had cash in the bank to pay the £100m then the reduction in the bank balance would be balanced by the asset of players worth £100m. If not then there would be a liability for a loan of £100m contrad to the asset.
