There could be trouble ahead for Football Index and its users after the firm announced considerable changes to its dividend format.
For the uninitiated, Football Index is the world’s first stock exchange style platform covering the beautiful game, with site users able to buy and sell shares in their favourite players.
The idea is to buy those players whose value you suspect will rise in time based upon their performances, and another revenue stream is dividends – owners also earn a payout when their players do the business out on the pitch, scoring goals and making assists etc.
And it’s this last point which has caused much consternation, with Football Index recently making dramatic changes to the dividend pay scale that has infuriated their users and left many questioning the future of the company.
Update 12/3/21: Football Index Enters Administration
Football Index’s operator BetIndex has entered administration following the suspension of their license by the Gambling Commission. The Football Index platform is now currently frozen. More on this can be found here.
How Does Football Index Work?
Like the traditional stock exchange, the idea of Football Index is to ‘buy low, sell high’ – so, buying shares in players whose value you expect to rise.
This gap is your profit margin – selling for an inflated price will of course secure a profit.
The secondary source of revenue is dividend payments, which are linked to a player’s on-field efforts but also how often they feature in the media. Those who perform well and are regulars in the newspapers will yield more dividends than more ‘vanilla’ stars.
The problem is that, unlike the traditional stock exchange, Football Index themselves have the power to move the goalposts, and they have wielded that power by announcing that as of April the dividend payments will be reduced considerably.
More alarming still for their users, a spokesperson for the brand claimed this was ‘to ensure the long-term sustainability of the platform’ – if that doesn’t set alarm bells ringing, nothing will.
What Changes Have Football Index Made to Dividend Payments?
In amongst a raft of changes, the key one is that the amount of money a user can make from dividends in a single day has been slashed by around 80%.
Before, on a ‘gold’ matchday, a user could earn up to 33p per day per share, which can tot up quite nicely for those with a significant holding in a player.
However, that has now been slashed to just 6p per day, which will have a considerable impact upon how profitable owners can be on the platform.
As you can imagine, this has caused much fury among site users, and worst is to come. With many pulling their money out of the platform in protest, the spread in the buy/sell price has increased markedly – meaning that if a user wants to sell up and leave Football Index they will have to do so at a considerable loss.
For context, Bruno Fernandes’ value fell from £5.62 to just £1.10 overnight – for those with 100+ shares, the loss is dramatic. There are rumours of those with £100k and more tied into Football Index.
What Will Happen Next to Football Index?
Users of Football Index have raised a petition hitting out at the changes made, but sadly petitions usually end up in the waste paper basket of the government official responsible.
Football Index have covered their backs to with a series of wide-ranging terms and conditions and get out clauses, including the right to make ‘adverse changes’ to their payments platform as they wish.
What is interesting is that FI is licensed by the UK Gambling Commission – this is a betting platform, after all, and they will be very interested in the brand’s latest movements.
However, as mentioned, Football Index have protected themselves with rigorous terms and conditions – users essentially agree to that contract whenever they open an account and start trading.
Noticeably, Football Index have muted replies to their tweets to help protect the brand, and a scheduled Q&A with the company’s chief executive Mike Bohan – principally to discuss how new investment could be brought into the platform – has now been shelved.
As part of their Gambling Commission licensing, Football Index has in place ‘medium’ protection for their users’ funds, which means that if they fall into liquidation they may – or may not – get their invested money back. The definition of medium protection is that ‘….there are arrangements (e.g. insurance) to make sure that the money in separate accounts is given to customers if the company goes bust,’ but that does not guarantee a return.
The future does not look bright for the firm, and sadly many users are going to be considerably out of pocket for the foreseeable future.