Die Schwarz-Gelben from the Ruhrgebiet are truly one of a kind in German football. Why you ask? They are the lone German football club listed on the Frankfurt Stock Exchange. You might also be inclined to ask why a club of Dortmund’s size and status would make such a move? What benefits does it provide them with, what disadvantages? Has the bold move to become the first, and to this day, only, publicly listed football club in Germany helped Borussia Dortmund since the decision was made in 2000? The results are mixed from both a sporting, as well as from a business perspective. For certain, it has forever changed the way that BVB operates on a daily basis and has placed them in a class of their own in that category. Lets take a look at how this all came to be.
In October of 2000, German football powerhouse Borussia Dortmund debuted on the Frankfurt Stock Exchange – the biggest stock exchange in Germany and the tenth largest in the world. The way this is all structured has made BVB a club that operates in their own way, with a different set of rules than every other football club in the country. Activities of the club fall under the parent company Borussia Dortmund GmBH & Co. KgaA, which is owned by a holding company, Borussia Dortmund e. V. Bernd Geske, a member of the Supervisory Board of Borussia Dortmund GmBH & Co. KgaA is the largest singular owner of BVB, owning roughly 9.00% of the club’s total shares. Evonik Industries AG, Borussia Dortmund’s main shirt sponsor, owns 14.78%, Borussia Dortmund e. V. owns over 5.50%, Signal Iduna, who retains the naming rights to the stadium, just under 5.50%, and BVB official apparel-maker PUMA SE 5.00%. The other 60.25% of shares are spread out among the public – institutions and individuals with no association to the club – besides perhaps being a fan. Due to the way Borussia Dortmund’s shares are distributed, it truly makes them a publicly owned and traded sports club, unlike Juventus Turin or AS Roma who are listed on the stock exchange in Italy (Borsa Italiana), but club-affiliated entities retain majority ownership of all of the shares of the two clubs. Juventus allows approximately 32% of their total shares to be traded among the public, while Roma leaves a mere 22.0% to be purchased by anyone with an Italian trading account.
Saying that the initial euphoria of Borussia Dortmund’s first day as a publicly traded club faded quickly is by no means an exaggeration. By the end of that day, the price of one share dropped from 11.00 euros to 10.50 euros. The price of the stock continued to fall even as Dortmund were crowned Bundesliga champions in 2002. The initial influx of cash was spent on high-profile stars who, despite one season of excellence (2002), largely under-delivered on what was thought to be a new golden age for the club. Following the championship season of 2001/02, BVB slipped into mid-table mediocrity with nowhere near the amount of money coming in that was initially forecast. Few people were investing their money and the club itself was not fulfilling its end of the bargain by qualifying for the UEFA Champions League or competing for the league title, both of which guarantee a substantial financial gain. The well was drying up in the Ruhr and those aforementioned “high-profile stars” still required wage payments, regardless of the team’s results.
These events resulted in Borussia Dortmund being only hours away from bankruptcy in 2005. The club had been floated, in other words, a large investment was made in star players with hopes of future success. In turn this success would generate sufficient funds to pay back the debt incurred from these player purchases. BVB was living beyond their means and overspent on big names. Worse yet, the club banked its future on them. With the lack of success on the pitch from late 2002 through early 2005, Dortmund was unable to earn the money it needed to pay its debts and keep operating at a high level. A mere three seasons after winning the German championship and five seasons after becoming Germany’s first publicly traded football club, Borussia Dortmund faced almost certain extinction.
BVB president Dr. Reinhard Rauball credits the survival and resurgence of the club largely to one man, Hans Joachim-Watzke, who became CEO in 2005 during Dortmund’s darkest days. He restructured the club’s finances and changed the philosophy on buying players, opting for younger, cheaper players with untapped potential. The goal with these players was to develop them into home-grown stars, rather than paying large sums of money on established elite players. Watzke was also responsible for changing the club’s shareholder structure. It is because of him that majority ownership of Borussia Dortmund is now made up by thousands of minority shareholders, rather than large institutional investors. These owners are also known as: “Fans.”
Although Watkze has accomplished many positive things for Borussia Dortmund, he has struggled to offer an attractive stock investment. Despite investors now earning some money through BVB shares, financial experts are still hesitant to advise their clients to invest in a football club. Die Schwarz-Gelben, being the pioneers of such a brave move, were always going to be the guinea pigs, as every other club in Germany looked on. It is with good reason that no other clubs joined BVB on this venture, and to this day, Borussia Dortmund remain the only German football club listed on the Frankfurt Stock Exchange. Borussia Dortmund as a company pays very little as it pertains to dividends, but the biggest reason perhaps, is the conflict of interest between the fans and the actual investors. Financial Analyst Freider Barten explains: “Fans want sportive success. Fans want management to buy the best players. Investors too, want clubs in which they have invested to be successful because success increases revenues, they prefer not to buy top players to avoid increasing costs. They want a profitable company and good share performance.” This is a prime reason why FC Bayern München, FC Schalke 04, Bayer 04 Leverkusen, and other top German clubs may avoid ever taking the same leap of faith as Dortmund. No other club in Germany is forced to operate this way. For Dortmund however, it is not an option, but rather, a requirement. It is extremely difficult if not impossible to please all sides, yet, due to their own gamble, this is precisely the job the BVB front office has been tasked with.
The crowning achievement of Hans-Joachim Watzke’s tenure as Borussia Dortmund CEO is without a doubt overseeing the club winning consecutive German championships during the 2010/11 and 2011/12 seasons. This resulted in more fans purchasing season-tickets, increased television revenue, UEFA Champions League paydays, and a spike in merchandise sales. Why then, did the stock share price fall during BVB’s most successful two-year span since the mid-1990’s?
Freider Barten further explains: “We saw the share was going down 18%. It was because shareholders already knew this information, so they sold.” This is truly fascinating. Imagine for a moment, Amazon or Apple stock telling the investor beforehand, that the company was going to achieve a massive success, therefore the stock price would rise. This would be considered “insider-trading” for a normal corporation, though, if a football club has secured the domestic title with four match days left, this is essentially the same thing, only legal in this scenario. Bartens continues: “It was because shareholders already knew this market information – that Dortmund will get the title – and they realized their profits.” Many BVB investors opted to sell their shares while the team was having great success on the pitch, not waiting until the end of that season or the start of the next. This also hindered Dortmund from having the necessary money during the summer transfer window to spend on more lucrative players. For shareholders, even before the club was officially presented the Meisterschale, the squad was in a fine place. If investors of a club have this mindset while non-shareholding fans primarily desire Champions League success in addition to star players on the roster, it places the best-case scenario for on-pitch success firmly under a glass ceiling, with only the occasional anomaly (such as the 2013 Champions League Final).
A final stock market disadvantage Borussia Dortmund had to adjust to comes in the form of the transfer market. Because they are publicly traded, Dortmund must disclose all transfer inquiries from any club interested in one of their players as well as any player BVB themselves might have interest in pursuing. Many of Europe’s football powers, which Borussia Dortmund consider themselves to be a part of, are not obligated to operate in this fashion. Failure to disclose these inquiries would be considered withholding information, and would thus qualify as insider trading. This places BVB at a firm disadvantage in many people’s opinions.
Borussia Dortmund fans are constantly asking: “When are we going to close the gap to Bayern?” The above information may shed some light on the answer to that question. As things stand currently, the simple answer is: “They won’t” — although Dortmund certainly look like title challengers following their brilliant start to the 2017/2018 season, with a 5-1-0 record and league-leading +18 goal differential (double that of Bayern) — FC Bayern München operates by a different set of rules and have been the larger, more successful club for a few decades now. Consider also, that Bayern receives more sponsorship money than most other clubs outright, in large part due to their close relationship with apparel-maker Adidas. Imagine though, if a news source had information leaked to them regarding an inquiry made by PSG to Bayern over acquiring star forward Robert Lewandowski. Bayern could simply choose to ignore this altogether. Dortmund on the other hand, would have to immediately report this inquiry to its shareholders and to the media. The opposition essentially has a legal wiretap on every Dortmund transaction before it happens.
Perhaps this has given some insight into why Borussia Dortmund are always referred to as “Germany’s number two.” Perhaps it will explain the fear many BVB supporters share of RB Leipzig challenging Bayern for the Bundesliga title long before their beloved Schwarz-Gelben get close again. Perhaps it sheds some light on the daily struggles of being a Dortmund supporter and realizing that while you will always be big in the football world, you will never be a true giant.
In closing, I would like to say that the beauty of being a Borussia Dortmund shareholder is quite simple. It isn’t about power, control, or calling Hans-Joachim Watke on the phone and expressing to him your desire to purchase Eden Hazard or Mauro Icardi. Dortmund is a working-class club and has always proudly carried that title. There was a moment of discontent within the BVB family when the club opened it’s doors to ugly football capitalism. Thankfully, this was short-lived. The truth is, very few, if any, Borussia Dortmund fans bought their shares for the money. Most, put them in frames, proudly displaying them in their homes. As one long-time BVB supporter explains: “Owning shares in Borussia Dortmund makes you feel like you are part of the club, and that is a good feeling.”
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