{"id":643,"date":"2020-07-09T20:28:54","date_gmt":"2020-07-09T19:28:54","guid":{"rendered":"https:\/\/research.reading.ac.uk\/football-research\/?p=643"},"modified":"2020-07-23T08:40:19","modified_gmt":"2020-07-23T07:40:19","slug":"the-curious-case-of-wigan-athletic-fc","status":"publish","type":"post","link":"https:\/\/research.reading.ac.uk\/football-research\/the-curious-case-of-wigan-athletic-fc\/","title":{"rendered":"The curious case of Wigan Athletic FC"},"content":{"rendered":"

9 July 2020<\/strong><\/p>\n

The curious case of Wigan Athletic FC<\/h2>\n

Wigan Athletic is the first English club to go into administration post the\u00a0COVID<\/span>-19 induced lockdown and related suspension of football in England. How far can this situation be related to the lockdown, or is this reaction associated with ownership changes \u2013 which would be more symptomatic of the earlier crisis at\u00a0Bury\u00a0FC<\/span><\/a>? The big question for English football going forward is how many of these financial struggles are attributable to the unforeseen pandemic, and how many are due to endemic problems of irresponsible owners, reinforced by a less than satisfactory test of\u00a0suitability?<\/p>\n

The background<\/h2>\n

Rising from the fourth division of English football, Wigan, under the leadership of David Whelan, maintained English Premier League (EPL<\/span>) status for an impressive eight years and won the\u00a0FA<\/span>\u00a0Cup in 2013. A few days after, Wigan got relegated to the Championship and this signalled the beginning of the club\u2019s woes. A combination of managerial and boardroom changes saw Wigan relegated to League One before eventually regaining Championship status in\u00a02018.<\/p>\n

In 2018, the Whelan family \u2013 David Whelan had stepped down as board Chairman in 2015, replaced by his grandson David Sharpe \u2013\u00a0sold Wigan to International Entertainment Corporation<\/a>\u00a0(IEC<\/span>), a Hong Kong-based company, for \u00a322m. The\u00a0new owners<\/a>\u00a0promised to follow the Whelan family\u2019s long-term focus, traditions and values and restore on-field success. Therefore the news of\u00a0IEC<\/span>\u2019s sale of Wigan<\/a>\u00a0in May 2020 to the Next Leader Fund (NLF<\/span>) due to \u201cunsatisfactory financial performance and uncertain prospect of the club<\/em>\u201d was at best confusing for their fans. With almost all the clubs in the Championship consistently reporting significant financial losses, either\u00a0IEC<\/span>\u2019s due diligence wasn\u2019t thorough, or they had over-estimated their ability to run a championship football\u00a0club.<\/p>\n

Curiously,\u00a0NLF<\/span>, who bought Wigan on 4 June 2020, had Dr Choi Stanley, (the majority shareholder of\u00a0IEC<\/span>), as its majority shareholder. On 24 June Mr Au Yeung, a minority shareholder of\u00a0NLF<\/span>, became the majority shareholder of\u00a0NLF<\/span>\u00a0with 75% ownership. Both the sale of Wigan from\u00a0IEC<\/span>\u00a0to\u00a0NLF<\/span>\u00a0and emergence of Mr Yeung as Wigan\u2019s owner passed the English Football League\u2019s Owners and Directors Test. Days after\u00a0NLF<\/span>\u2019s takeover, Wigan under the leadership of Mr Yeung paid back an existing \u00a324m loan to\u00a0IEC<\/span>\u00a0and put the club into administration; automatically attracting a 12 points deduction. With Wigan currently clear of relegation by only six points with five games to go, the points deduction might send them into League\u00a0One.<\/p>\n

The finances<\/h2>\n

English football is inundated with the delicate act of balancing revenue and expenses while remaining competitive. Wigan\u2019s break-even-result (BER<\/span>) \u2013 a measure that shows the operating profit\/loss of clubs \u2013 has consistently hovered around \u00a30. This might sound marginal, but actually in context is not unusual or an immediate cause for\u00a0concern.<\/p>\n

\"Wigan<\/figure>\n

Wigan\u2019s debt and cash-flow from operations (CFFO<\/span>) figures \u2013 the most critical measures in assessing solvency \u2013 are more concerning and worsened during\u00a0IEC<\/span>\u2019s\u00a0leadership.<\/p>\n

\"Wigan<\/figure>\n

In terms of debt burden, Wigan has moved from on average 47%, to 100% short-term debt (debt due within one year); their\u00a0CFFO<\/span>\u00a0has been consistently negative, and as of 2019, the club\u2019s current assets were only able to settle 21% of its short-term debt. Further, as a result of\u00a0COVID<\/span>-19, the club would have to refund matchday revenue for the remaining 2019\/2020 matches. With uncertainty about when fans will be allowed to return to stadiums, Wigan\u2019s matchday revenue – which accounts for 22% of total revenue \u2013 cannot be counted on when 2020\/2021 season\u00a0starts.<\/p>\n

\"Wigan<\/figure>\n

The future<\/h2>\n

The decision to call in the administrators has been questioned by the media and fans alike, with many theories and conspiracy theories being discussed. These seem extremely speculative but reflect the unexpected and unexplainable nature of the recent activities around the change of ownership and the actions of the new\u00a0owners.<\/p>\n

As we discussed in an earlier article on\u00a0Newcastle United<\/a>, the Owners and Directors Tests used by the\u00a0EPL<\/span>\u00a0and Football League need serious revision to reflect the current issues facing English football \u2013 some of which are a direct result of the pandemic, and others which have been made more pressing due to the resultant crisis in the game. So what can be done? We have some ideas as\u00a0follows:<\/p>\n