Monday 11th November, 2024 at 2:59pm
What is the purpose of this article and why now?
This article is designed to give all Partick Thistle supporters an update around the proposed “Tranche 2 investment” of £500,000 in the club in advance of a formal consultation period and subsequent vote by the club’s beneficiaries (and shareholders).
It spells out why the investment is being proposed, who is behind it and how the funds will be used.
The proposed Tranche 2 investment follows the Tranche 1 investment, also of £500,000, which was completed in October 2023 – https://ptfc.co.uk/ptfc-news/partick-thistle-fc-announces-strategic-investment/.
The proposed Tranche 2 investment requires approval by the club’s shareholders and beneficiaries (those beneficiaries entitled to a vote are all season ticket holders, 71 Club members, members of The Jags Foundation and members of The Jags Trust).
We encourage Thistle supporters to read this update in full.
The investment and its impact on the club’s shareholding
The proposed Tranche 2 investment of £500,000 is in return for shares in Partick Thistle Football Club Limited with the investment having the impact of reducing the fans’ (The PTFC Trust and The Jags Trust) shareholding in the company from 72.6% to 65.3%.
On the basis that the fans shareholding in the club is already below the “super majority” level of 75% whereby the holder of these shares can make changes without consulting other shareholders, a dilution of this holding has no practical implications for governance.
This position would remain the case whilst the majority owners of the club, the PTFC Trust, hold more than 50% of the shares in the club. This position cannot be changed as per the company’s articles of association which were updated following the Tranche 1 investment to further protect the fans’ majority shareholding in the club.
There is no intention to dilute the shareholding of the club below the 65.3% that would be the result on the completion of this tranche.
Why is this investment needed?
At the time of the Trance 1 investment around a year ago, both the club’s directors and the potential investors felt that a minimum investment of £1million was required. This second tranche will bring the inward investment to this level.
Without this investment, the club will find itself with negative working capital and low cash balances.
Negative working capital is a situation whereby, if the club collected all monies owed to it and added this to the funds in the bank account, there would not be enough money to repay all of our creditors what they are owed.
What happened to the Tranche 1 investment?
The £500k that was invested in late 2023 was used to cover losses made over the last two years and for investment in new ticket and tills systems as well as the creation of income-generating hospitality areas inside Firhill. We have also increased the budget available to The Partick Thistle Women’s Team and safeguarded the future of The Partick Thistle Youth Academy.
Who will be investing?
There may be further individuals prepared to invest £50,000 each, a development which would result in Donald McClymont reducing his contribution toward Trance 2 accordingly in order to maintain an over £500,000 investment.
As a reminder the other £100,000 raised in Tranche 1 is held by:
In addition to benefitting from the capital introduced by these individuals, we will also gain access to their business networks containing several high-net-worth individuals who will be given the opportunity to sponsor Partick Thistle for their businesses, or those of their clients.
What rights will the Investors gain?
They will gain the right to vote in club shareholder meetings based on the number of shares they hold as a percentage of all shares held, i.e. no more votes than other shareholders, and no additional ability to influence the running of the club.
Shares can be redeemed only where the club has a cash balance of more than £2million for the entire financial year. Where that is the case, the shares can only be redeemed using 50% of the excess funds over £2million.
To put that in context, the club has not had a cash balance at that level for at least 30 years, and almost certainly at no time in its history.
Only shareholders who have more than £350,000-worth of shares have the right to appoint a director. This will only apply to Donald McClymont who has presently appointed himself to this position.
In summary, whilst the percentage of shares in Thistle owned by fan organisations will be reduced to 65.3%, the investors gain no control over the club. That remains in the hands of the fans through the shareholdings held by The PTFC Trust and The Jags Trust. Investors have very little prospect of their money being returned to them and have agreed to participate on this basis.
What will we do with the money?
The club will use some of the funds from this investment to make stadium repairs, which we currently estimate the time critical element to be in the region of £200,000.
The remainder will be put into high-interest bank accounts to earn money for the club, and also to provide a working capital reserve for unforeseen circumstances in the future.
As part of this proposal, we plan to amend the Club Trust Agreement to include safeguards in terms of minimum levels of cash and net assets (in simple terms “money in the bank”) that the board will have to adhere to, with any deviation from this having to be reported to the Trustees of the PTFC Trust.
Will there be further sale of shares?
No, we are budgeting to make a managed loss of £280,000 this year based on a fourth-place league finish. This would see us end the season with around £400,000 of cash in the bank and net current assets of c£230,000. It is worth noting that the end of the season is a low point for our cash reserves.
Beyond this season it is our aim to run the club as close to breaking even as possible over a three-year rolling period. The years where we benefit from player sales and good on-field performance will compensate financially for other years where losses are made due to underperformance on the pitch.
This investment is the second tranche of a planned £1million investment in the club, and this investment is aligned with our long-term strategy for growth and stability. We believe that the club is progressing along that path broadly in line with our expectations and we have every confidence that by taking on the second tranche of investment we will be able to bring this club to financial sustainability and position it to be competitive both at this level and following a promotion to the Premiership. This ambition is not reliant on ongoing tranches of investment beyond the originally proposed £1milion.
What if the beneficiaries and shareholders decide to vote against this proposal?
It is anticipated that the club will be under significant cash flow pressure towards the end of this season, before final League prizemoney is paid.
There is also a reasonable chance that we would have to take short-term loans in the Spring of 2025 to get us through this period.
This situation would mean that we would have negative working capital of around £250,000 at the end of the year, meaning that we would owe others £250,000 more than we have available to us to meet our debts. Whilst this can be managed in the short-term due to the timing of our cash receipts, it would mean the club would be run on a hand-to-mouth basis and would leave no margin for error or reserves to meet stadium repairs or unforeseen circumstances.
What happens next?
The board would like to provide all supporters an opportunity to ask questions around this proposal. As a result, the club will be holding an open meeting on the evening of Friday 29th November 2024 from 8:15pm, with further detail to follow on this in the coming days.
Following the open meeting, it will be for the PTFC Trust to coordinate and administer a vote of all beneficiaries. The club will assist the PTFC Trust in communicating and promoting this vote and any supporting activities once details are available.
Finally, there will be a formal vote among shareholders. This will require an EGM, although depending on timescales there may be an opportunity to combine this event with the AGM which is currently provisionally scheduled for January 2025. In any event, we expect a decision to have been reached on this proposal no later than January 2025.
