Text/ Tachibana Music
CFA CPA
The original article was first published in December 2021
On the afternoon of November 26, 2021, while people were indulging in shopping carnival, Serie A giants Juventus encountered a veritable "Black Friday".
As part of the investigation code-named "Prisma", the Turin Prosecutor's Office and the Italian Financial Guard raided the offices of the "Old Woman" in Turin and Milan. At this point, the "water injection" transaction that prevailed in Italian football was once again exposed to the spotlight.
After the incident, Juve's stock price fell 25% to the lowest point since 2017, and the market value of 1.1 billion euros evaporated by 70% compared with the peak in 2019. Everything on and off the court is not smooth, and the Bianconeri's 2021 is really not very exciting.
Juvetus (JUVE.MI) stock price movement in the past five years
Veteran readers should be familiar with the things that account for player trades, and the protagonist of this investigation, Juve, joined forces with Barcelona in the summer of 2020 to stage a "bookkeeping drama" in which Pjanic and Artur swapped.
The above two are still good stars with heads and faces, and the transaction does involve the difference between real money and silver. If you use an unknown youth team player, even the difference in price can be saved, and you can make profits "empty-handed" without paying a penny.
In a January 2021 deal, for example, Juve priced Italy U20 international Tongia for 8 million euros and exchanged it with Marseille's France U19 international Arco, while in fact the duo is currently only worth 2.5 million, and neither has entered the first team of the new owner after the transfer.
Tongia is a single-handed youth player developed by the Bianconeri, and the net value of the player registration rights is negligible, so the price of 8 million euros can be almost fully counted in the proceeds of the disposal of the registration rights in the 20/21 fiscal year. Although the cost of the newly signed Arco registration right is 8 million, it must be amortized into the income statement for the next few years according to the contract period of 4.5 years, and the amortization amount of half a year only needs to be included in the amortization of about 890,000 yuan last season.
The deal brought in and out of the deal a "net gain" of about 7.11 million euros in the previous fiscal year. Of course, clear-eyed people can see that this is just a trick to eat food, and the value created out of thin air will erode the team's report in the future, but if such a transaction is carried out every year, it can push the problem back like a drum and a flower, and snowball in a relatively hidden way.
This is also why many teams obviously look at the profits are decent, but they have no cash flow, and even need shareholders to transfuse blood. Accounting for profits is deceptive.
Behind the deal are Juve's former "Big Three" Paratic, Nedved and Agnelli
More than a month ago, Le Repubblica reported that the Italian Football Association's Professional Football Supervisory Commission has launched an investigation into 62 transfer transactions in Serie A between 2019 and 2021, of which 42 involved Juve and 13 involved Parma.
Napoli striker Osmayne, who has been in good form this season, has also been involved, and in the summer of 2020, Nigeria landed in the Apennines with a value of 71.25 million euros, and despite his excellent performance in Ligue 1, the value is so high that it is presumably not simple behind the transaction.
Sure enough, €20.1 million was paid off by four players, all three of whom, with the exception of 36-year-old Greek goalkeeper Karnezis, who made one appearance for his new club in the cup, have returned to Italy to join the lower leagues.
Osmayne joined Napoli at a sky-high price
In fact, Italian football has long been accustomed to water injection transactions.
Among the teams that were not investigated this time, Inter Milan was once recognized when they introduced Škriniar, and the Slovak Iron Guard was once called "account guard" by Chinese fans before playing famous. AC Milan's accounting history can be traced back much earlier, when the "little pharaoh" El Sharavi was not yet famous in 2011, he was introduced at a high price of 20 million euros, and the other end of the deal was the 6.5 million youth youngster Merkel.
Of course, now the spearhead is not wronged against the old woman, and the Zebra Legion has gone too far down this road. Of the 42 deals investigated, 36 involved under-23 players, and clubs working with Juve included Genoa and Parma on home, as well as Barca, Manchester City and Marseille overseas.
Although there is currently no authoritative basis for player valuation in football to prove that the transaction has been injected with water, people can still be empirically aware of abnormal transactions. For example, Rovira, who was introduced from Genoa in early 2021, had a contract of half a year left but was priced at 18 million euros.
From the subsequent development of the trade-related players can also see the beginning of the water injection, many of the names in the above table are probably even Little known to Tini, which is still a problem transaction with a higher amount, and the players involved in other transactions are less well-known, and then they cannot gain a foothold in the new owner.
In the three financial years of 18/19, 19/20 and 20/21, the proceeds from the disposal of Juve player registration rights totaled 323 million euros, of which the Turin Prosecutor's Office pointed out that 282 million of them were suspected of being water injections of varying degrees. The motivation for this is also obvious, the Bianconeri has lost a total of 339 million in three seasons, which is already the result of doing their best.
Juve's publicly traded status has also alarmed the National Commission on Social and Stock Exchanges (CONSOB), after all, financial fraud is in the interests of public investors. In a sense, the old woman has a more negative impact on the financial level than at the football level.
The investigative body also resorted to the use of the means of monitoring the phone calls of Juve executives, and former general manager Paratic admitted in a call record that the club's poor financial situation was not all a problem of the epidemic, which was in line with the conclusions of the author's analysis of the 19/20 financial report.
Since the 17/18 season to eat superstar Cristiano Ronaldo, the old woman has turned a profit into a loss, and the Portuguese bring in more than 80 million euros a year in salary expenses and amortization of registration rights, which is obviously too luxurious for Serie A clubs. The team's other huge investments in the transfer market have also had little effect, relying only on the water injection trade of young players to quench their thirst, and the snowball is getting bigger and bigger.
Prosecutors also found in the telephone surveillance that C Luo may have a secret violation of the salary agreement with Juve, which does not rule out the possibility of being asked to cooperate with the investigation in the future.
The "president" has gone, but the turmoil has not stopped
This is not the first time that such an audit storm has been in Serie A, and in 2018 Chievo was fined 3 points and 200,000 euros for the new season for accounting problems. In 2008, Milan was investigated for swap transactions and eventually fined 90,000 yuan.
After all, accounting is an off-field factor, and Juve are not like the "flying donkey" to whitewash the report to meet the league access requirements, so the possibility of penalties is unlikely, let alone the demotion penalty advocated by the Italian Consumer Protection Association.
But that doesn't mean old women can sit back and relax, the real problems they face come from outside the football world, whether it's the Turin Prosecutor's Office, or CONSOB, will not give up on this, and the potential fines can be huge. And such a scandal is also quite detrimental to the Zebra Army, which aims to build a brand image.
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At the same time, the Italian media also set off a wave of "self-detonating" inventory, and inter and other teams that had not been investigated before were also highlighted. Making the storm more intense is not necessarily a bad thing, Italian football is terminally ill, and the phenomenon of water injection trading as a part of it should indeed be rectified.
However, we should recognize that the root cause of the ills lies in the outdated operating concept and lack of flexible social system in Serie A, the proposal of external capital to inject the broadcast rights has been resisted by a small number of teams, and the construction of the stadium is still difficult, and the four giants of Inter, Milan, Juve and Roma lost a total of 737 million euros last season.
There are many problems to be solved, and accounting is probably only the simplest one...
Source:
Juventus annual reports
Explained: Why Juventus, Fabio Paratici and 62 Serie A transfers are under scrutiny
https://theathletic.com/2987869/2021/12/02/explained-why-juventus-fabio-paratici-and-62-serie-a-transfers-are-under-scrutiny/
http://www.titan24.com/publish/app/data/2021/11/28/402033/os_news.html