Manchester United lowers stock float value

 
Manchester United executives ring the opening bell at the New York Stock Exchange Manchester United executives rang the opening bell at the New York Stock Exchange

Manchester United has been forced to cut the value of its share flotation in New York.

The football club said it would sell shares at $14 each, below the $16-$20 range that it announced just weeks ago.

The club is selling shares representing 10% of the club, which will raise $233m (£150m) to pay off some debt, below the $333m hoped for.

The shares will begin trading shortly on the New York Stock Exchange.

The exchange's opening bell was rung by executives from the club, and some traders wore the club's shirts.

'Priced to fail'

The lowering of the debut share price suggests the club could not find buyers at the higher prices.

The shares will pay no dividend, and some analysts say that floating just 10% of the club does not give institutional investors enough of a return opportunity.

"I don't know who will buy these shares," Mike Jarman, chief market strategist for H20 Markets - a former professional footballer and a Manchester United fan himself - told the BBC.

"Maybe a few hedge funds will take a small punt of $5m-$10m, which if it goes bad, they can easily write off. But it's not going to be a long-term investment for those guys.

Start Quote

It is a testament to the strength of Manchester United as a football club and its popularity internationally, that they have managed to do this well”

End Quote Stefan Szymanski University of Michigan

"Maybe for some super wealthy Asia or Russian investors having a slice of Man U in the portfolio is a bit sexy... but the deal is priced to fail."

Pete Hackleton, a partner in the London office of accounting firm Saffery Champness who specialises in the sport and entertainment businesses, agrees.

"If you are wealthy and want to buy a football club then I can see the attraction, but I don't know of any interest in the deal - and most football clubs that have floated are now back in private hands," says Mr Hackleton.

"UK fans will mostly still be wondering what will be done with the cash from the deal and how much of it will go to the club."

But Stefan Szymanski, an expert in sports economics from the University of Michigan, told the BBC that even with the lower share price, Manchester United is still "the most valuable sports franchise in the world, and the American investors are looking at this as a franchise".

"Given the way they have tried to sell this off, with no voting rights, no dividends, and limited disclosure [of financial information], it is a testament to the strength of Manchester United as a football club and its popularity internationally, that they have managed to do this well," he said.

Overseas expansion

In its prospectus, the 134-year-old club outlined its success on the pitch and the size of its fanbase, which generated a total global audience of four billion viewers in the 2010-11 season. Much of its future strategy is based on exploiting opportunities outside of the UK.

Start Quote

We have made it clear that on the Glazers' terms, the share sale is a bad deal for fans, investors and the club”

End Quote Manchester United Supporters Trust

The club said its commercial revenue had grown from £66m in 2009 to £103m in 2011, thanks to sponsorship and merchandising deals.

It made a profit of £13m on continuing operations in 2011. It estimates that it will have made profits of £23m in 2012, but this includes a tax credit of almost £30m. Without that it would have made a loss, it said.

The Old Trafford-based firm said it intended to increase revenue and profits in coming years from sponsorship deals, sales of Manchester United branded products, broadcasting rights and improving its new media and mobile offerings.

It has opened an office in Asia to try to attract new sponsors there, and is in the process of opening another one in North America.

It already has retail shops in Singapore, Macao, India and Thailand to try to capitalise on its popularity in Asia, and intends to open more in the coming years, the club said.

Disappointment

Some supporters had hoped that the money raised by selling shares in the club would all go towards reducing the debt load.

A statement from the Manchester United Supporters Trust (MUST) criticised the money-raising plan: "We have made it clear that on the Glazers' terms, the share sale is a bad deal for fans, investors and the club.

Manchester United fans Manchester United has a huge global fan base that they are seeking to capitalise on

"For the club, this is a bad deal because more than half of the funds raised will now be paid direct to the Glazer family, with a smaller portion being used to pay down some of their debt which they have saddled the club with since 2005."

Earlier this month, MUST called for a boycott of the club's sponsors in protest at the planned share issue.

It said this was intended to send "a loud and clear message to the Glazer family and club sponsors that, without the support and purchasing power of the fans, the global strength of the Manchester United brand doesn't actually exist".

High debts

Manchester United has been controlled since 2005 by billionaire US sports investors the Glazer family, which paid £800m for the club.

They also own the Tampa Bay Buccaneers American football team.

The shares will begin trading in New York on Friday under the ticker name Manu.

It estimates that as a result of the share sale it will be able to reduce its debts from £423m to £345m.

Sir Alex Ferguson, the manager, recently denied speculation that he stands to benefit financially from the imminent share flotation, after reports that club employees would benefit from a share incentive scheme.

"There is not a single grain of truth in this allegation," he said in a statement.

The Premier League giant came second last season and has won a record 19 titles.

 

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  • rate this
    0

    Comment number 123.

    I never thought I'd see the day where a football club floats on the stock exchange. Just proves football is more about making money than the actual sport these days.

  • Comment number 122.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 121.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 120.

    This is only happening becasue the Glazers want united to wing in Europe to keep them solvent, with the new financial fair play rules they need to gring down their debt and the Glazers are not willing to stump up.

  • rate this
    +1

    Comment number 119.

    The Glazers paid for Manchester United by putting the club into debt. No wonder the fans didn't want them. If any losses are made, the club goes further into debt. The profits go to the Glazers. The same is true with the current share offer. More money for the rich, paid for by the poor. A bit like successive UK governments.

  • rate this
    0

    Comment number 118.

    This would mean a P/E ratio of around 50 (as stated elsewhere). As a comparison, Ford's share price gives a P/E ratio of around 2. Go figure.

  • rate this
    +2

    Comment number 117.

    If I were a Utd fan I would be praying that SAF doesn't retire, will the Glazers come up with the money if Utd ever have to buy their way out of trouble? 2 bad seasons and Man Utd could be the next Liverpool, a club trading on former glories,what with new kids on the block City and PSG and renewed enthusiasm for Abramovich.

  • rate this
    0

    Comment number 116.

    How many English people would buy shares in the Miami Dolphins or Green Bay Packers?

    US have consistently shown it does not understand or appreciate football.

    I wonder what the uk tax implications are?

    This looks like desperation, a club living beyond its means, 3rd division for MU if they cannot pay their taxes?

    C McK

  • rate this
    0

    Comment number 115.

    Rather than shares why not just send the footballers tickets to a london nightclub directly with free champers & cola vouchers

  • rate this
    +1

    Comment number 114.

    The working mans game.

  • rate this
    +3

    Comment number 113.

    Please note, this money isn't going to Man Utd. It is going to the Glazers. There is a huge difference. The only reason Utd have the massive debt they have is down to the Glazers mortgaging the club in order to buy it. They've continued to use the club as a cash cow ever since, and this is the latest move. You'll see when not all the money is used to pay off debt or invested in the squad.

  • Comment number 112.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 111.

    105 continued...

    The only investor problem I can see is that "The shares will pay no dividend",.

    For providing finance and trust to a company, in the purchase of their shares, the risks in Manchester United's case, exceed the rewards.

    It is possible the shares increase in value over the years, but I do not see many cash making football clubs.

    THEY ARE LIKELY TO BE A LOSS, but prestigious.

  • rate this
    +4

    Comment number 110.

    Ah yes, Manchester United.

    A perfect example of modern financial trickery.

    Looked at one way they are the richest club in the world, looked at in a different way they are in so much debt as to be technically bankrupt.

    Personally I think you'd have to be an idiot to invest real money in something founded on those kinds of smoke & mirrors.

  • rate this
    +2

    Comment number 109.

    United's IPO is going to end up like Facebook's IPO. A complete disaster for United.

  • rate this
    -1

    Comment number 108.

    Club Valuations (in GBP)

    Barcelona = 2.2bn
    Real Madrid = 2.4bn

    AC Milan = 1.1bn
    Inter MIlan = 600m
    Juventus = 800m
    Roma = 200m

    Bayern Munich = 1.4bn
    Borussia Dortmund = 250m

    Ajax = 500m
    PSV Eidhoven = 150m

    Bordeaux = 140m
    Lyon = 150m
    PSG = 250m

    Arsenal = 500m
    Chelsea = 250m
    Liverpool = 1.8bn
    Man Utd = 2bn
    Man City = 5p
    Tottenham Hotspurs = They can win the league

  • rate this
    0

    Comment number 107.

    105 Continued....
    Manchester United's strategy has a better commercial grounding and chance of success than Facebook has.

    Facebook had many interested parties buying shares I believed were SERIOUSLY overvalued, so I can not see any problems with share sales.

    Facebook is a Social site, where people are in yak mode rather than buy or browse to buy modes.

    Man U is BOTH Social and WANT TO BUY mode.

  • rate this
    +2

    Comment number 106.

    #104
    The only, and only, other team which can compete with history and stature to Man Utd in the English league is Liverpool.
    ---------
    And you're both leveraged US franchises- that isn't a good thing.
    Banks that were too big to fail, did. Remember that.

  • rate this
    -2

    Comment number 105.

    It is not ALL about making a profit.

    Some people will be simply pleased to get some shares in approval of their Football Heroes. Manchester United. Upward travel of share values will only be a bonus as they are only for self prestige.

    It WILL help Manchester United get out of the financial hole that mainly exists due to Interest Charges.

    Once clear of those charges, fans WILL get better reward!

  • rate this
    +1

    Comment number 104.

    If Man Utd with their glorious history and great style of play are not worth 2bn, how many pennies are the likes of Chelsea, Citeh, Spurs and Arsenal worth?!? The only, and only, other team which can compete with history and stature to Man Utd in the English league is Liverpool.

    Man Utd are an international club. Narrow minded people won't understand that.

 

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