Parma: when management went crazy

Parma FC SpA would high likely bankrupted again after a decade, or at least an auction of the residual asset and formation of new company. But why? In recent years Parma was keen on cashless player swap with other clubs with financial trouble (such as bankrupted Ascoli, Padova and Siena), which the pricing of the players were suspicious. Moreover with a squad of over 100 players, did Parma really playing lottery in order to make profit from underrated players? However, despite Cesena discovered Parolo, the club barely covered their investment from Chievo when Cesena sold Parolo to Parma in 2013. Or would Parma able to discover another Giovinco? Giovinco was a special case that Juventus want to block the player transfer to archrival Internazionale, which may be a trick between Inter and Parma to aid the finance of Parma, or Juve willing to feed Parma for a excessive 11 million EURO.

However, with EURO 85,786,101 asset value of the player contract, Parma only able to compare with Cesena, which had 16 points as of 16 February 2015, which only have a squad worth EURO 21,766,600 in accounting on 30 June 2014, or Sassuolo which had a value of 31,793,341 EURO on 31 December 2013. Sampdoria, had 39.076 million EURO on 31 December 2013.

How high 86 million is? Juventus  squad "worth" 120 million EURO only (30/06/2014), which Milan "worth" 118 million on 31 December 2013. Or look at non-giant: Lazio, 35,936,631 EURO, Roma 89.156 million EURO.

Despite we knew Parma ranked 7th last season, however even entered Europa League, the TV revenue would not able to sustain from an amortization of over 20 million a season, which generated from players that not existed from the first team squad, such as Andrea Rossi (720,000 per season until 2017), or Thomas Fabbri (500,000 per season until 2015). Mauro Cioffi (520,000 per season until 2017), Andrea Rossini (640,000 per season until 2017) Francesco Finocchio (400,000 per season until 2018). Unlike Porto that individual players would able to act as warrantee in order to secure loan from the banks, (as well as forbidden by FIFA), no one actually buy flops. If deducting the value of the squad to reflect the actual value, say, the squad actually worth 50 million in accounting, then the actual net equity would be negative 15 million, not the paper value of 9,560,255 EURO on 30 June 2014.

That's why the club was sold for a peppercorn of 1 dollar, as the club was actually in deep insolvency few years ago. Without a sugar daddy to run the club, but in terms of raising debt, the club better folded again to rebirth.

How broke Brescia would be?

First of all, according to the filing to Italian Chamber of Commerce (CCIAA: http://registroimprese.it)

At the financial year end on 30 June 2014, Brescia Calcio SpA had the following key figures:

Total Assets: €47,159,960
Net Assets = Net equity:  €2,754,794
Turnover of the season:  €23,141,359
Net profit (loss) of the season:  minus €8,679,133

The trend of net profit already an alarm for the second division club which finished as the mid-table in 2013-14 season. However, the breakdown of the figures were worst.

In 2013-14 season, Brescia profited from player trading for €14,182,529, however €7,797,696 of them were from the last minute cashless player swaps with Varese, Pescara, Cesena and Bologna in June 2014. (or €7.8 million revenue) All of gain of Brescia were 100% flops as either reserve players or Lega Pro players namely Pachulia, Iunco, Galassi, Boccaccini, Camilli, Fonte and Gabrielli.

Deducting that amounts from net loss as well as from the assets, Brescia in fact had a net loss of €16,476,829; total asset of €39,362,266 and net equity of negative €5,042,902, which certainly triggered Italian law to recapitalize the company.

Last but not the least, as Brescia had used the financial trick before, which means in their intangible assets, more than €7.8 million were yet to be proven their paper value, including Canini (around €800,000 residual value on 30 June 2014, 2013 signing), Ferri (around €1.2 million residual value on 30 June 2014, 2012 signing) as well as the bought back of Belotti on 2 September 2013, which his contract residual value would around €1,066,667 on 30 June 2014. Adding those up, would be around €10,866,667. Compare to actual value declared in the bilancio, which the whole residual value of the contract of the first team "worth" €10,990,732, the flopped signing represented 98.87% of the accounting value. So, if deducting the value, the net equity would be minus €8,111,873.

Certainly we could argue the accounting value of the player, which based on the signing fee as well as amortization (weathering) , would differ from the actual market value if the players were sold , which on 5 February 2015 this essay was written, transfermarkt estimated the market price of the squad would be €10.7 million. However due to the well known community based elements of the site, the value were not reliable.

The fate of Brescia would certainly based on the recapitalization by the current owner, or a new buyer willing to pay extra to buy the club (as well as recapitalization) due to they think the club worth more in brand name or goodwill than in accounting (which based on historic value), or a promotion to Serie A. If those measures failed to achieve, Brescia could used the player swap financial trick again, however would the club followed the same fate as AC Siena SpA, which also raised paper profit by player swap for few years before bankruptcy?