The Championship Drop and What It Means for West Ham United
A rough look at the financial and structural impact relegation would have, without getting lost in exact figures, but focusing on the broad realities facing the club.
The drop to the Championship, what it means in a very rough sense. There is no point getting involved in trying to post accurate figures at this stage. But West Ham United have, it seems, genuine debts of around £70 million, plus what is termed as sundry debt at around £25 million, so basically £95 million in debt.
Obviously the latest transfers can be added, less outgoing transfers. This is only grossing up, no amortisation and so on, as this is not for that purpose. Sullivan in the last two seasons has valued West Ham at £1.2 billion. This is pie in the sky, with the Gold family owning one quarter of the club.
Valuation and ownership reality
They have tried unsuccessfully, for two years, to cash in their shares for £300 million. It is believed an American hedge fund offered somewhere between £150 and £175 million for their entire stockholding. This was turned down flat, which may prove to be a mistake.
That offer valued West Ham between £700 million and £800 million, a figure many agree is closer to reality.
The Premier League safety net disappears
The Premier League is bountiful for all the reasons you all know, principally Sky money and big crowds. A drop changes things radically. Sky money, other than the odd game, is gone.
Crowds naturally dissolve. The die hard supporters on this site will carry on going, but the casuals and tourists will disappear. Some games we may get 40,000, but on a regular basis that will likely drop to around 30,000.
Ticket prices will fall, which is the second revenue stream taking a hit.
Fire sale and short term stability
West Ham would conduct a fire sale of the relegated team. Bowen, Areola, AWB, Diouf, Magassa Fernandes and Todibo would all be gone. On paper, that would clear all the debts and leave a surplus, plus the first instalment of the parachute payment at around £50 million.
For a moment, the club might look ok. But when you take into account that eight to ten players may need to be purchased, and the big money has gone, things do not look so prosperous.
The longer term risk
On a decreasing basis, parachute payments continue for three years, then they are gone. If West Ham get promoted, they disappear even sooner.
Looking at the overall situation, the value of West Ham in the Championship feels unlikely to exceed £500 million. Sullivan will have a massive choice to make. Cut his big personal losses and sell to any interested parties, or try to get West Ham back to the Premier League at the first attempt, which is a very big job indeed.
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