No first-day pop for Manchester United

The soccer club raised $233 million in its IPO, which will help pay down part of its crushing debt load.

By Benzinga Aug 10, 2012 4:22PM

By Matthew Kanterman, Benzinga Staff Writer


Investors were unimpressed with Manchester United's (MANU) market debut Friday. Shares opened at $14.05 and barely budged throughout the trading day, closing at $14.


The soccer club raised $233 million in its much anticipated IPO on the New York Stock Exchange, becoming the first English football club to list on an American exchange. After expenses, Manchester United accrued $110.3 million in the offering and is expected to use $101.7 million to pay part of its considerable debt.


Post continues below.

Investors in the U.S. may be unsure about how to trade a football club, as it is a new type of company to list here. Investors may want to watch the team's first performance. Manchester United opens its season Sunday in the Football Associations Community Shield match against bitter cross-town rival and defending Premier League champion Manchester City. Manchester City will be looking to make a quick start to the season and the match will likely produce great publicity for both clubs.


By playing in high-profile games early in the season, Manchester United will probably reap extra television rights revenue and boost its top line. The club opens its Barclays (BCS) Premier League season on Aug. 20 against Everton FC. The Sept. 23 match against Liverpool FC, owned by the Fenway Sports Group, should be the club's first real test and pits decade-long rivals against each other in a match at Liverpool's historic Anfield grounds.


Investors may also want to watch the club's signings. In football, the signing of new players is called transfers, not just free agents, because clubs can actually buy the contract of another club's player out and then sign them. For example, Manchester United recently bought Shinji Kagawa, one of Japan's best players, from German outfit Borussia Dortmund for a minimum fee of $26.5 million, depending on performance and other factors.


Manchester United priced its shares below the expected range of $16 to $20, but this was not due to weak demand. Rather, this lower pricing was likely intended to price the stock fairly and allow fans and investors to have a full take up. With significant debt on its balance sheet, some equity researchers have expressed a view that the stock is still overpriced at $14. For example, Morningstar said it believes that the fair value of the stock is $10.


During the first day of trading, shares never fell below $14 and held within a five cent range. According to Reuters, the company overestimated the support shares would receive after market open.


"It's surprising to me that they got it away given the structure," said finance professor Tim Jenkinson of the University of Oxford. "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." Reuters also reported that a $50 million loss in proceeds was expected for the club due to these factors, as Manchester United is the first sports club to go public in about a decade.


More from Benzinga
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

109
109 rated 1
276
276 rated 2
421
421 rated 3
629
629 rated 4
511
511 rated 5
538
538 rated 6
686
686 rated 7
507
507 rated 8
331
331 rated 9
109
109 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
UPLULTRA PETROLEUM Corp10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.