Manchester United IPO price drops but club still valued at £1.5 billion

Photo creditation – Michael Angelo

The much criticised flotation of Manchester United goes ahead in New York later today valuing the football club at £1.5 billion, nearly twice the £800 million that the Glazer family paid for it in 2005. The Glazers also own the Tampa Bay Buccaneers American football team.

The flotation price has been cut to $14 a share, below the $16-20 indicative range a few weeks, with many analysts citing $10 as fair value for the club. The IPO will raise $233 million, against the hoped for $333 million, with 16.7 million shares or 10% being sold. The Glazers previously failed to sell the stake on the Hong Kong and Singapore stock markets.

At $2.3 billion (£1.5 billion), Manchester United will be the most valuable football club in the world and it will be the largest ever sports company flotation. Real Madrid, is valued at $1.9 billion.

Manchester United has debts of around £423 million, and club supporters have been dismayed that up to $150 million will end up in the Glazer family’s pockets rather than paying down the debts of the club more aggressively. The Manchester United Supporters Trust (MUST) issued a statement saying that “The Manchester United Supporters Trust has today called for a worldwide boycott of Manchester United sponsors’ products, with support across the UK, Europe, Asia and the US.” That pretty much illustrates the strength of feeling by the Clubs own supporters against the unpopular Glazer family.

The listing will mean that the family will retain control of the club through class B shares that have 10 times more voting power than the publicly-traded class A shares. The IPO will result in new investors owning 42% of the shares available but only carrying voting rights of 1.3%. That, to us, is the very essence of bad corporate managemet and basically says to other shareholders – “give us you money to bail us out of the debt burden we saddled with the company and the b*g off”

The company is also taking advantage of recently introduced legislation under the “Jumpstart Our Business Startups, or the so called ‘Jobs’ Act ” which limits the financial disclosures it must make and so allows Man Utd to list as an “emerging growth” company! The move means United will not be required to file quarterly reports or be subject to the same level of financial scrutiny as other US-listed firms for five years. Spotting a pattern here?

Certainly, unless you are a die hard supporter and don’t hope to make any money out of the shares for some time, the shares are best avoided. The Manchester United IPO looks to be in the same league as the May Facebook float flop – basically a way to enrich the founders/primary shareholders and the banking syndicates that take fees from the flotation with scant regard for the shareholders…

If the shares fall below $10 that’s a different matter but the club has too much debt and its fortunes are always tied to success on the field, which is always a gamble even for a club which is 134 years old and associated with consistent success.

There is only one agenda and that is to make the Glazer family a lot wealthier!

SBM’s take – avoid at all costs or short on any pop.

Contrarianinvestor UK & Editor