The Manchester United IPO stinks

What exactly do investors get in the deal? No voting power and a team saddled with debt.

By Kim Peterson Aug 9, 2012 3:09PM
Updated 6:45 p.m. ET

Think the Facebook (FB) IPO was bad? Get a load of Manchester United (MANU), which will go public Friday. This is a first-class stinker.

The Glazer family, which took the famous soccer club private in 2005, was hoping the IPO would value the team at more than $3 billion -- far higher than the worth of Spain's Real Madrid, Bloomberg reports. But when shares priced late Thursday at $14 each, the club was valued at just $2.29 billion. The offering, which gives Manchester United the ticker MANU, will likely raise about $234 million.

What do shareholders get for their investment? No say in anything -- the Glazer family will retain nearly 99% of the voting power -- and a piece of a club with a crushing $680 million debt.

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The club is in so much debt that it can't afford key new players. But only about half of the money raised in the IPO is going to reduce debt. The other half goes into the deep pockets of the Glazer family. (The family initially claimed all the proceeds would go to pay down debt, according to Fox Sports.)

The family stands to receive roughly $117 million in the deal. It could get more if the IPO's underwriters opt to sell as many as 2.5 million more shares; the proceeds from those shares will go directly to the Glazer family.

The IPO will offer 16.7 million shares, or about a 10% stake in the club. Shares were priced at $14, below earlier estimates in the $16 to $20 range. The midpoint of that range would value Manchester United at $2.95 billion, making it far more valuable than any other comparable team. The top of that range values United at $3.3 billion -- about 26 times earnings before interest, tax, depreciation and amortization.

Analysts at Morningstar say the shares would be fairly valued at just $10 each.

So what's attracting investors? Even the IPO's financers aren't sure how to sell it.

Lead underwriter Jefferies Group is trying to sell United as a global brand, comparing the team to luxury retailers such as Michael Kors (KORS) and Lululemon Athletica (LULU), Reuters reports. But JPMorgan Chase (JPM) is selling the team as an e-commerce company like Amazon (AMZN). And finally, Deutsche Bank AG is claiming the team is a media company similar to Walt Disney (DIS).

Don't these guys compare notes?

Manchester United initially planned to have a $1 billion offering in Singapore. It ditched those plans for a U.S. offering on the New York Stock Exchange.

"I think it is very interesting how they have been shopping this around the world, first in Asia, now the U.S. Why not list in London where people actually know something about the business?" James Clunie, head of equities at Scottish Widows Investment Partnership, a British fund management company, told Reuters.

In any financial analysis, this thing is a bomb. Maybe that's why some of the hype around the IPO is framing it as a chance to get a piece of sports memorabilia, according to MarketWatch.

That may be the IPO's best chance at succeeding. Sure, you're buying a piece of a debt-saddled team that can't afford superstar players couldn't clinch the Premier League title last season. But you're also getting a small bit of history.

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5Comments
Aug 9, 2012 4:51PM
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What have the Glazers got planned for the $559 million from GM?

Aug 9, 2012 5:11PM
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No reason to IPO in London.  Empty pockets there.

 

 

Aug 9, 2012 6:49PM
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by a T shirt it will be worth more a year from now.
Aug 9, 2012 7:13PM
avatar
Of course it's a bad deal. Man City will eat all of their merchandise sales and Chelsea will continue to gobble-up the silverware...
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