West Ham Betting On Options

In 2012 it is safe to say that the ‘everyman’ fears and loathes bankers. The ubiquity of anti financial industry sentiment is demonstrated no more clearly than the recent Batman movie. In the movie a particularly preppy banker says to the villain, Bane, something to the effect: ‘this is the stock exchange, there’s no money to steal here.’ Bane replies, without missing a beat, ‘then why are you here?’ Movie-goers chortle. In the current climate of austerity the public do not like individuals, companies or industries seen to have too much influence over money.

It is surprising then that the everyman’s game, football, is one of the worst offenders when it comes to recklessly betting on commodities. The commodities are of course footballers, and the particular bet that is currently causing me consternation is West Ham’s ham-fisted attempt to buy Andy Carroll.

Let us first of all analyse the value of the underlying commodity – Andy Carroll. He is 23, which is young in footballing terms, and ostensibly there is room for growth and thereby an increase in value. Andy plays as a striker – generally the most valuable position in football – and is also an England international. However, in terms of yield, Andy has managed to score six goals in his forty two appearances for Liverpool. A good strike-rate would be one goal every other game, 0.5 goals per game; Andy has a strike-rate of 0.14. Further, since his 35 million pound move to Liverpool, Andy’s value has declined at an alarming rate – due of course to his very low yield.

I am certain Sam Allardyce and the West Ham board have taken this all into account to come to a 2 million pound loan offer. This deal would entitle West Ham to the services of Carroll for one season and the option to make that move ‘permanent’ for 17 million pounds. Carroll would also be paid 80,000 pound a week as part of that contract.

What West Ham is proposing is essentially a call option – a right to purchase Carroll at a future date. While Carroll will play for West Ham until the option matures, that value is more than covered by his current 80,000 pound weekly salary. To that end it becomes clear that the only way West Ham will gain additional value from this deal is if a 24 year old Carroll is worth more than 19 million pounds at the end of the season – and that is not even factoring in the time value of the 2 million pounds.

It is unfathomable to me how anyone could think that this is a good investment. A striker who has failed to do his job – score goals – for the better part of two years represents a significant risk. More importantly, if Carroll puts in solid, but not spectacular performances and West Ham chooses not to exercise the option, the 2 million pounds paid to obtain the right will all but be written off – which would only be useful if West Ham are in a massive profit position and could use some deductions for tax purposes. One thinks not given the debt under which most EPL clubs operate.

When you consider all this, it is amazing that the everyman will salivate with such anticipation during transfer season when so many clubs will speculate with the money they squeezed from their fans. Especially when the same person would probably just as enthusiastically tell you how much they revile corporate greed.

1 Comment

  1. Carroll’s games per goal is misleading – if you add his minutes on the pitch together it only equates to 38.5 matches (his 11 shortest appearances only make 86 minutes, not even one full match). This includes cups and European games too, in which he has scored 11 goals total for Liverpool. His strike rate isn’t that great, 3.5 games per goal but that was also in a system that wasn’t tailored to his strengths – and there is no denying that towards the end of last season he was bordering on “unplayable” (remember the FA Cup final?)

    Finally, most target-man style strikers don’t reach their peak until they are in their late 20s. Huntelaar, Drogba, Crouch, Morientes, Llorente are all examples.

    Carroll isn’t the finished article by any means, but in terms of development in comparison with those above he is well on his way to becoming a top target-man in the next few years. Under Allardyce’s very direct style of play he may well start fulfilling some of that potential and look more like the player of a few months ago rather than early on in his Liverpool career.

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