The club’s partners, Republic, are writing to the investors in the scheme by email to inform them of the decision.
Although a total of £17.5m-worth of shares were made available to investors, fans and general public alike, the offering closed with Watford having raised only £3,919,334 from a total of 3,125 investors – an average of around £1,250 per investor.
The offering was always meant to target institutional investors from the US and Middle East rather than fans, but because of financial regulations it had to be made open to all.
The club even offered different ‘packages’ for fans who invested certain amounts, with exclusive scarves, tours of the training ground and even lunch with Tom Cleverley offered as incentives for those with the deepest pockets.
The Watford Observer contacted the club for an update on the equity issue immediately after the offer closed towards the end of 2024 but, with a further extension, waited until the new year before enquiring again.
At that point a club spokesperson said: “As has been stated at the recent fans Q&A and elsewhere, this is very much an institutional offering and not a retail offering.
“Institutional discussions are still ongoing and Republic hope to make an announcement on the success of these conversations in the coming weeks.”
In the eight weeks since there has been no further news from the club, and then this week it was confirmed the whole equity scheme has been cancelled.
When the digital equity scheme was launched in June 2024, the club said they believed it could “form a key strand of football’s future finance, where investors and supporters alike can enjoy the fruits of the club’s future success”.
In the pitch document, the Hornets stated that a portion of the sum raised would go towards “recruiting and training top players and coaching staff and developing the brand of the club”.
It also said “Watford FC plans to continue investing across the squad and club infrastructure to attain promotion and then to sustain that success through a continued presence in the Premier League.
“Thanks to the development of new young players and planned additions to the squad, the Club believes the team has the potential to gain promotion to the Premier League during the 2024/25 season.”
While the club did spend some £3m on new players in the summer, they brought in around 10 times that sum through the sales of Yaser Asprilla, Ismael Kone and Wes Hoedt.
The reasons for that were made abundantly clear when the club’s annual accounts were released recently, showing they needed to use the monies realised from player sales to offset the loss of income, most noticeably in TV revenues.
And with parachute payments now a thing of the past for Watford, ongoing austerity is very likely to be the order of the day, even though the club has significantly reduced its wage bill.
There was an initial burst of interest when the equity scheme was launched last summer, with £3.8m raised inside the first month.
For less than £50 Watford supporters could get involved and purchase the minimum commitment of four shares.
Watford chose to partner with American digital investment platform Republic on the digital share issue.
Republic have a proven track record for conducting equity sales of sports teams including AFC Wimbledon, South Shields and Altrincham.
In the UK, shares were available for purchase through Seedrs, Republic’s European affiliate.
“In common with many other clubs, we have been exploring opportunities to bring investment into the club to grow the club further and bolster revenue streams which, in turn, allow us to strengthen the playing squads,” Watford said in a statement when the equity offering was launched.
“Having looked at a number of options, we have decided to take the exciting and innovative step of becoming the first major English club to offer true ownership through digital equity. Digital equity is an easy and practical way to access shares in the club.
“Put simply, we are aiming to offer approximately 10% of the club at a value of £17.5million, on the basis of a club valuation of £175 million. Having posted a pre-tax profit of £24.1 million for the last financial year, the highest in the EFL, we believe this is a fair valuation of the club.”
With the 10% stake available valued at £17.5m, and a share price of £12.44, it meant there were some 1.4m shares available – with owner Gino Pozzo retaining 90% of the club.
Experts in football finance such as Kieran Maguire felt at the time the £175m valuation was a pretty punchy price for a club that had just finished 15th in the Championship and was running at a loss which was being covered by player sales.
Indeed, when Birmingham City was sold to Shelby Companies Limited, owned by American businessman Tom Wagner just over a year earlier, they reportedly paid around £35m for 45.6% of the club’s shares.
That being the case, the Blues were valued at a figure around £77m at that time. They were obviously relegated to League One since, but look certain to return to the Championship.
Similarly, Ipswich Town sold a 40% stake in the club to US private equity fund Bright Path Sports Partners for up to £105m in March 2024.
That put a valuation of £262m on the Tractor Boys, who have since been promoted to the Premier League, though relegation back to the Championship looks likely.
However, and perhaps understandably, Watford will point to them being the only club in the Championship to declare a profit (for the second year) so while the valuation was eye-watering, there could be some justification.
This season, under Cleverley, the Hornets have exceeded most reasonable expectations by being in or around the play-off places since August.
Even with a dip in form and results either side of new year which included a run of seven defeats in 10 games, they still sit 10th in the table, four points off the top six.
Watford signed only three players in January, and two of those were on loan, but goalkeeper Egil Selvik and Udinese defender James Abankwah have been pivotal in turning form around over the past few games.
With third signing American international Caleb Wiley now fit after recovering from a shoulder injury, the Hornets could still be in the mix to finish in the play-off places.
After reports that the club may have been looking to replace Cleverley at the start of the year, owner Gino Pozzo released a statement pledging his support for the head coach.
It’s no secret the Italian has been looking for new investment for some time though, way before the launch of the digital equity offer.
Whether he is willing to sell the club outright or simply attract minority investment is unclear, but both may well become easier now there is no longer a valuation of £175m swinging on a price tag attached to the club by the equity offering.
Equally, potential major investors may find Watford a more attractive proposition without a few thousand minor shareholders to take into consideration.
One thing is clear, though, and that’s raising less than a quarter of the £17.5m target from the digital equity offer made proceeding with the project less attractive to the club than having to reverse their plans.
