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There’s no such thing as resale value

When buying a young player, it’s common to talk about his ‘resale value’ – the idea that that we can secure a transfer profit in the future because his value will naturally grow. However, this is the wrong way to assess market value; instead, we should be focusing on whether the player is undervalued.

In financial markets, information is typically ‘priced in’. For example, the value of the pound sterling reacts not just to key Brexit votes and events, but in anticipation of these. If everyone thinks the pound will fall in the event of a no-deal Brexit, and the probability of a no-deal rises, then the pound falls accordingly in advance of no deal.

The same applies to player valuations in football. If everyone thinks that a player’s value will rise – in other words, if everyone thinks that the player has ‘resale value’ – then his market value should rise to a point where there is essentially a 50/50 chance of the buying club actually realising a profit on the deal. Buyback clauses and sell-on fees distort this picture slightly, but the underlying picture remains.

Internazionale and Roma illustrate this point. Both clubs have bought around a dozen 21 to 24-year-olds since 2014; players who you’d think could deliver both a performance a financial return. However, if we compare the value of those players bought to how much they were sold for, or how much they are worth now (according to our player valuation model), we find that Inter have incurred an 18% capital loss on their signings, compared to Roma’s 52% gain. Roma have found significant ‘resale value’ (most notably with Paredes, Alisson and Salah), but Inter have not (yet, anyway).

It’s therefore dangerous to assume all young players will rise in value, just because they’re young. Instead, we need to focus on finding undervalued young players. We need to find players where other clubs don’t believe the player’s market value will rise, but we do. This can be done through good live scouting, as well as providing a good environment for young players to develop. But it also requires a thorough research and examination of the data, in order to identify sustainable trends that no one else has spotted. Over recent seasons, for example, have young players from a particular country, or from a particular style of team, disproportionately grown in value after purchase?

In a world where transfer fees are as important as they ever have been, competitive edge in finding value – especially with young players – has never been so essential.

About Omar Chaudhuri

Omar Chaudhuri has created 151 entries.