Football Index sparks uproar by slashing dividends days after “minting” new shares

Football Index caused outrage among customers at the weekend by announcing significant reductions in dividend pay-outs just days after shares in new players were “minted”.

The Jersey-based platform allows users to buy and sell “shares” in footballers by placing a three-year bet on whether a player’s value will rise, while dividends are paid out relating to on-field performances and media buzz.

On Friday evening, Football Index, which is licensed by the UK Gambling Commission (UKGC), announced it was giving 28 days’ notice of the cutting of dividends from a previous maximum of 14p to mostly 1p or 2p pay-outs.

The company said the move was being made to “ensure the long-term sustainability” of the platform. Trading was suspended until 7am Saturday morning.

However, the announcement led to the latest in a series of price crashes as the value of players listed on Football Index nose-dived.

For instance, Manchester United playmaker Bruno Fernandes was worth £7.20 per share before Friday’s announcement. At the time of writing, he is worth just £1.36.

Likewise, Borussia Dortmund star Jadon Sancho, who hit a high of around £15 last year, is currently available to buy at £1.12 after trading at around £7 in February.

Some customers took to Trustpilot to leave one-star reviews, as well as Twitter to express their fury at the decision, which came shortly after the issuing of new shares in players.

Users revealed on social media how much their portfolios had lost of late and how they were forced to reveal to partners at the weekend the extent of their losses. Others posted how they had five and six figures tied up in their investment portfolios.

To say I feel sick is an understatement…my life savings up in smoke, how can they get away with this #footballindex pic.twitter.com/3RSAiSaEIZ

— pie_FI (@SiFI50065872) March 7, 2021

Football Index, which is the main shirt sponsor of QPR and Nottingham Forest, drew criticism among its customers last year when the company removed the opportunity to instantly sell shares in players back to the firm.

Management introduced order books to transform Football Index into a peer-to-peer exchange, yet the lack of liquidity prompted a series of market crashes that left many users with huge losses and unable to exit positions.

Also, a deal signed in July 2019 for the Nasdaq to provide a cloud-based trading engine has yet to come to fruition, with Football Index revealing in the latest announcement that it had “hit pause” on the integration.

Some of its customer base have questioned whether Football Index planning to slash dividends is legal and have called on the Gambling Commission to investigate.

In a written statement, a spokesperson for Football Index said the company was aware the announcement has “caused frustration and disappointment” for many customers.

“While we take the concerns of our customers very seriously, we want to stress that our decisions have been guided by a desire to help customers achieve the best outcomes and receive the best possible returns, while also having the long-term sustainability of the business front-of-mind.

“Every decision that we make with regards to introducing new features to the platform is made with the express goal of providing a sustainable level of growth in terms of customers and the value of bets made in that period.

“We see our business plan as a sustainable one for growth and, eventually, for improved returns to customers, as soon as this becomes viable once more. As we have previously outlined to our customers, yields had become unsustainably high compared to the level of activity on the platform, which has made this decision an unfortunate but necessary one.”

Football Index was co-founded in 2015 by Adam Cole and went on to gain a cult-like following among users who evangelised the product on social media platforms.

However, Cole stepped down as CEO in December in order to “reset” the business. He remained chairman and was replaced as CEO by co-founder and CMO Mike Bohan.

 EGR has approached the UKGC for comment.