The finance behind the European Super League

JP Morgan was expected to be the main source of finance behind the European Super League (ESL).

JP Morgan Chase is an American investment bank and financial services company based in New York City with over $3 trillion to its name. Its sports finance team was created in the late 1990s by high-net-worth individuals. One of JP Morgan's largest clients is Stan Kroenke - the owner of Arsenal FC, Los Angeles Rams and Denver Nuggets. JP Morgan reportedly lent Kroenke $2 billion to fund the rams' Inglewood stadium project. This may be an indicator of a good commercial relationship between Kroenke and the bank.

The funding

JP Morgan were intending on funding the league through a 23-year term loan originally reported to be between $3.8 and $5 billion. This loan was expected to represent the biggest sports financing deal of 2021. The loan reportedly attracts an interest rate of 2-3%.

The founding members were promised €100m-€350m each to join the contest, secured against expected revenues of $4 billion through media and sponsorship sales. Clubs were expected to receive a fixed payment of $264 million a year.

Legal and financial implications

There was fluctuation in share prices from competing quoted clubs. Manchester United’s share price rose 10% and Juventus' shot up by 17% after the announcement of the €300 million upfront, but quickly tanked after the super league fell apart, whilst JP Morgan’s remained largely untouched.

As the ESL incorporates only the top 6 clubs with no potential for relegation, a legal implication is a risk of facing antitrust claims of alleged anti-competitive behaviour. Investors may be hesitant to take stake unless football governing bodies like UEFA sanction the breakaway league.

Football has taken a massive financial hit during the pandemic. JP Morgan should have been concerned with whether these clubs can repay their term loan.

Why the backlash?

There has been widespread condemnation from nearly all football fans, politicians, pundits and even football players. Most importantly, governing bodies and leagues across Europe have objected to the ESL, arguing that it would destroy the premise of open competition. Many others have argued that the move to create the ESL is a cynical project driven by greed and power.

One of the main reasons why both the champions league (and Europa League) are so popular is because the smaller football clubs (or the ‘underdogs’) can fight their way to the top through their performance on the pitch. On the other hand, the ESL breaks away from this traditional pyramid model and instead rewards clubs with wealthy pockets.