United bullish despite IPO flop
Shares in Manchester United Ltd made a flat stock market debut on Friday, a disappointment for the world's most famous football club but one it insisted would have no effect on its ability to acquire top-flight players.
Manchester United sold 16.7 million shares at a price of $14 each, below the expected range of $16 to $20. At close of business in New York, the shares were unchanged.
The stock never dipped below $14, held mostly in a five-cent range and saw volume thin sharply after early trading. One IPO expert said the team may have made a serious miscalculation about the support it would receive.
"They overestimated the willingness of the fan base to go buy the stock. So it's kind of sitting there right now," said Francis Gaskins, editor of IPOdesktop.com. "If they don't have any buyers now at this price, why would they have any buyers (next week)."
A mystery to most Americans but a household name in most of the world, the club listed on a U.S. exchange after pulling a planned IPO in Singapore earlier this year. Finance experts expressed some wonder that the offering went off at all, given a share structure that lets the team's owners retain control.
"It's surprising to me that they got it away given the structure. The ownership structure seems inappropriate to me for this sort of company. I don't see much in it for the outside investor who has no control," said Tim Jenkinson, a professor of finance at the Saïd Business School, University of Oxford.
One of the club's top officials said the team took less money than planned because it preferred the mix of investors involved at the lower price -- even though the decision cost the team and its owners as much as $100 million in proceeds.
"We priced below the range because as you sort of took a step back and looked at the book, the huge number of high-quality institutional investors that were there at $14 just made us more comfortable in terms of the longer-term view here with regard to the type of investor base we wanted," said Ed Woodward, vice chairman of Manchester United, in an interview.
The offering valued the 19-time English champions at $2.3 billion. The $233 million ultimately raised in the IPO will be split equally between the 134-year-old club and its owners, the Florida-based Glazer family, owners of the Tampa Bay Buccaneers NFL team, among other interests.
Two of family patriarch Malcolm Glazer's sons rang the opening bell on the New York Stock Exchange to start trading, while two were on the trading floor -- surrounded by traders standing on Astroturf and wearing Manchester United uniforms.
The loss of as much as $50 million in expected proceeds for the club will be a blow as it copes with a debt burden and the club seeks to buy new players, who cost tens of millions of dollars each.
But Woodward denied that there was any shortage of cash for player transfers.
"Clearly if you look at where we are today in terms of the cash generative nature of the business and even more so contractually going forward, we have huge firepower in the transfer market," he said.
United had debt of £423 million at the end of March, which the executive said was its lowest in years and also low relative to peers.
Some fans argue that the cost of the debt has forced up ticket prices for the club, which draws sellout crowds of around 76,000 at its Old Trafford Stadium and claims 659 million followers across the world.
A group of United fans who are campaigning for greater involvement in the ownership of the club jeered the Glazers.
"It would seem all the analysis of the true valuation was correct; the Glazers and their advisers were being far too ambitious - or perhaps greedy - and the true value of the shares should be around $10 rather than the $20 the Glazers were seeking," said Duncan Drasdo, chief executive of the Manchester United Supporters Trust (MUST).
MUST is calling for the Glazers to sell and allow fans to play a greater role in the club's ownership, as well as for a boycott of sponsors. United's commercial appeal was underlined last week when it signed a $559 million deal with GM to have the Chevrolet brand on its famous red shirts from 2014.
The Glazers bought United for £790 million in a highly leveraged deal in 2005, taking it private after 14 years on the London Stock Exchange. Malcolm Glazer has been ill after a 2006 stroke, and his six children sit on the team's board.
"There are six siblings, and if one of them wanted to do something small then they can. But I think they are committed long term. All six want to stay involved," Woodward said.
United suffered a rare barren season last year, losing their Premier League title to rival Manchester City, whose owner, a member of Abu Dhabi's ruling family, has pumped 800 million pounds into reviving what had long been United's poor relation.
Yet Forbes still ranks United as the world's most valuable sports team by a wide margin. But with so much tied to winning games, soccer clubs are an inherently risky investment.
"I didn't even look at it. I would never, ever invest in a football club," said the head of UK equities at an investment house running around £100 billion in assets.
Italian champions Juventus is one of the few European soccer clubs with a stock market listing, and it is valued at only around $240 million, according to Reuters data.
But as one consultant noted, the ultimate goal of a sports team is not to be a good business, but to win trophies.
"If there is one club to invest in it would be Manchester United, but being the best economically among your peers may not be enough," said Emmanuel Hembert of consultancy A.T. Kearney.