Manchester United Slashes Price for US IPO
Britain’s world-renowned football club Manchester United slashed the price of its US share launch, cutting the amount it was raising in Friday’s IPO to US$233 million from a hoped-for US$300 million or more.
The fabled team, mired in debt since 2005 after a heavily leveraged takeover by the Glazer family of Miami-based investors, lowered its price for the 16.7 million shares on offer to US$14 late Thursday from the originally planned US$16-20 range.
The company gave no reason for cutting the price, but the IPO has come amid some doubts about the team’s ability to boost profits as long as it carries a hefty debt burden – Morningstar analysts estimated a fair price for the shares at just US$10.
Investors have also become wary about aggressively priced initial public offerings after the much-promoted Facebook launch soured, with the social networking giant’s shares sinking to nearly half of the launch price just two months after the May 18 issue.
Critics had assailed the Glazers’ plan to allocate just half the IPO receipts to reducing the team’s current GBP423-million (US$660 million) debt burden.
The other half will go to the Glazers themselves, who are contributing 8.33 million shares to the IPO.
In addition, despite putting 10 per cent of the shares of Manchester United Ltd on sale, the Glazers will retain about 97 per cent voting control of the listed company via their lock on “B” shares, which have ten times the voting power of the “A” shares being sold to the public.
That arrangement reportedly caused regulators in Hong Kong and Singapore to balk at a listing in their markets, where the club had hoped to tap the interest of tens of millions of Asian Man U fans.
The price still left the legendary football franchise valued at US$2.3 billion, well above any of its rivals, including Real Madrid, which sports much larger profits.
Home to stars like Wayne Rooney and Rio Ferdinand, United is the most successful club in English football history with a massive global fan base, especially in Asia.
But it has struggled with the debt loaded onto the team’s books since the tycoon Malcolm Glazer and his family of investors in sports teams and real estate took over in 2005.
The debts, critics say, have steadily eroded its ability to compete for top talent in an ever-spiralling player transfer market.
But debt has been pared in the past two years to the current level, and profits rebounded with the team’s narrow loss of the Premier League title to cross-town rivals Manchester City this year.
According to the prospectus, profits for the nine months to March 31 were GBP38 million (US$60 million), nearly triple a year earlier.
But that adds up to just 24 pence (38 US-cents) per share for the nine months, giving the company a rich price-to-earnings ratio usually reserved for high-growth technology firms.
The shares were due to hit the market sometime during Friday’s session, trading under the MANU symbol.
The owners hope the value in the club’s global popularity will translate into strong investor support.
“For 134 years now we’ve been one of the most successful and iconic sports teams in the world,” executive vice chairman Ed Woodward said in an IPO presentation.
“We generate inherently compelling content; we’ve developed into the global brand in sports. And as a result of that we have a whole line of partners knocking on our door and trying to partner up with us.”
But British supporters have strongly criticized the share sale.
“The IPO is a huge wasted opportunity to stop this enormous outflow of money from Manchester United,” said Andy Green, author of the Andersred blog, which focuses on management of the team.
The Manchester United Supporters’ Trust, which advocates for fan ownership of the team, called the share sale a “bad deal for fans, investors and the club.”
“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.”
“For fans, it is a bad deal because it is a missed opportunity for more equitable ownership of our club, with proper distribution of voting rights,” the group added.
“By floating shares at this inflated price, it provides a poisoned pill which might deter any more enlightened owners from buying the club in future.”