Stoke City and a £170m gamble that didn’t pay off

These last few years haven’t been an easy time to be a Stoke City supporter. It’s been six years since the club last finished in the top half of a league table, and relegation from the Premier League in 2018 has been followed by three anonymous seasons in the Championship during which they’ve failed to finish above 14th place, and despite a strong start to this season – they lost just two of their first 11 matches, a run which saw them head towards the division’s promotion places – they’ve slumped since then, and are back to occupying a place in lower mid-table again.

Brows often become furrowed when a smaller but well-established club loses its Premier League place; clubs with relatively low income from ticket sales and commercial revenues but which are dependent on Premier League television and prize money are often ill-equipped for the cold shower that comes with relegation from the top flight. Stoke’s relegation came after ten years of Premier League football, but their owners have shielded them from the worst effects of this demotion.

The last set of available accounts, for the 2019/20 season (PDF), showed just what a pickle their financial circumstances had become upon relegation from the Premier League. The club’s pre-tax losses had grown by £15.4m to £88.4m (the biggest loss reported by a Championship club that season), with wages only cut by £3.4m over the same period and a lower parachute payment for their second season back reducing their broadcasting revenue for the year from £51m to £31m. The company accounts covering the 2020/21 season, during which fans weren’t allowed into matches, are due with Companies House by the end of May.

It’s the relative proximity of those accounts that probably informs the recent flurry of activity surrounding the club’s finances. The club changed its constitution to allow the owners to invest more money, increasing the maximum number of shares in the company from 10 million, and confirmed the sale of its ground to Bet365, following a pattern set by others in the division such as Sheffield Wednesday, Derby County, Reading and Birmingham City. This is a one-off deal that can reduce a club’s losses on paper, and the documentation confirmed that this was carried out on May 25 2021, five weeks before new EFL rules banning such sales came into effect.

The specific reason for the increase in shares has now become evident, with a further announcement from the club regarding its financial position. The owners, who were owed £170m by the club from interest-free loans that they have been putting in to keep Stoke afloat, have now converted £40million of shareholder loans into equity in Stoke City Holdings Limited while also waiving £120million of shareholder loans.