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Kieran Maguire issues verdict on Newcastle owners PIF pumping £590m into new plan
The Saudi Public Investment Fund have been frustrated by Premier League regulations at Newcastle United – and that dynamic does not look likely to end any time soon.
With PIF 🔥projected to have assets worth £2trillion under management by 2030, Newcastle are officially the richest club in the world on paper.
But the Premier League’s Profit and Sustainability Rules (PSR) limit Newcastle 💃to losing a maximum of £105m over a rolling three-year period.
Some commentators have even suggested that these constraints mean that🎉 Newcastle are no longer PIF’s priority when it comes to football.
PIF are certainly spinning a lot of plates – they will host the World Cup in 2034 and have their sights set on launching a multi-club network with Newcastle at the helm.
To explore the state of play with Newcastle and PIF at the end of another transfer window, TBR Football 🌳spoke exclusively to Liverpool University football finance lecturer and Price of Football author Kieran Maguire.
- READ MORE: ✨St James’ Park insiders believe £20m deadline day signing is still possible for Newcastle United
Newcastle’s commercial revenue and the earning potential of St James’ Park
🔯Commercial income is key to Newcastle’s quest to work around PSR, and making the most of St James’ Park in its current form is part of that.
꧟Newcastle need only look to the example of Tottenham, who trebled their commercial income after moving into their new stadium in 2019, to see how lucrative this income stream can be.
Granted, Newcastle do not have a new stadium yet, although there are plans to either significantly ♊expand St James’ Park or build a new home ground altogether.
⛎On that note, one interesting story that emerged this week is that PIF turned down the opportunity to host the rugby league magic weekend at St James’ Park.
𓂃However, they are said to be contemplating hosting the event next year.
“Newcastle are unlikely to generate significant sums for hosting these events𒀰,” said Maguire, speaking about the commercial potential of non-football events at St James’ Park.
“We’re probably talking around a six-figure number. That’s nothing compared to the impact that one more point could have as far as the Premier League table is concerned. One place in the table is worth £3.5m.
“I think there is a broader issue at play here in that hosting these kinds of events helps to maintain the profile of the club.
“It shows that the club is diversifying. Newcastle would get a proportion from the sale of gate receipts, but it isn’t likely to move the deal in terms of PSR or any of the other financial issues concerning the club.
“So I think this would be a move that is for the brand as much as anything else.
Investment opportunities elsewhere for PIF
This week, 🍃PIF were implicitly invited to invest in NFL franchisesꦡ as limited partners in one of the private equity firms that have been granted access to enter talks to buy a stake up to 10 per cent.
🐟That amount of equity expected to set investors back around £590m, but it is also almost guaranteed to deliver significant returns because of the fixed-costs, closed-shop nature of the NFL.
ꦓThat is in stark contrast to Newcastle in the world of football, where revenue can drop off a cliff from one season to the next based on sporting performance.
“While it is intriguing that the NFL is allowing approved private equity investment in clubs, it should be noted that it is being capped at 10 per cent,” said Maguire.
“It should also be noted that private equity has never done anything in the interests of sport. It has always done what is in the interests of private equity.
“That trend is likely to continue as far as football is concerned.
“PIF has wealth beyond imagination, so the only thing that private equity could bring to them is in terms of the monetisation of the game and cost control.
“The challenge is that private equity has not proven to be very adept at transitioning to the football industry, simply because the aim is profit maximisation whereas the aim of clubs like Newcastle is maximisation of success on the pitch.
“By definition, that tends not to be consistent with keeping costs as low as possible given that you want to invest in talent and the best talent costs the most amount of money.
“I’m cautious about the benefits of private equity. The people in the industry have no moral or ethical compass and their focus is purely on maximising return.
“That doesn’t tally with the aims and ambitions of PIF.
Newcastle’s transfer window in review
🍸With the transfer window entering its final hours, it has been a mixed summer for Newcastle.
ܫYes, they have kept hold of their big-name stars and that was always going to be their top priority.
However, ꧋Newcastle have also failed in their bid to sign Marc Guehi from Crystal Palace𝐆 and Eddie Howe has bemoaned the anchor that is PSR.
“Many football fans seek validation of their self-worth via the amount of money their clubs spends in an individual window,” said Maguire.
“This is a very short-term view. If fans take a step back and take a look at the spending of the club on a net basis over a three or four-year period, they achieve a broader and perhaps more logical assessment of where the club is.
“You have to look at transfer spend as a proportion of revenue. And you have to look at it on a quantitative as well as a qualitative basis.
“Newcastle have spent an awful lot of money in the first two years of the PIF regime.
“There are constraints that are a by-product of PSR. Whether theses are intentional in terms of limiting the ambitions of aspirational clubs like Newcastle is up for debate.
“They have spent with enthusiasm in the first few years. They’ve had a party, and like all good parties, they tend to be followed by a hangover.
“Newcastle clearly could have spent significantly more money in this window. But the reluctance to sign off on the asking price for Crystal Palace for Marc Guehi has indicated that they won’t be held to ransom by other clubs.
“They don’t want to be known as a soft touch an they don’t want there to be a Newcastle tax going forwards.
“Just because you don’t spend huge money in one window, that isn’t necessarily a bad thing.
“The sales of the players before 30th June means that they were able not to weaken the first XI. They held on to the likes of Isak and Guimaraes.
“Their window should be viewed in a much broader context, as opposed to Newcastle spending less money in this window than they have in some of the other recent ones.”