Manchester United shareholders have $3bn reasons to cheerful

28th January 2013

When Manchester United held an IPO on the New York stock market last year, it met with suspicion from many fans who felt it was simply a cash raising exercise for the club's controversial owners the Glazers.

That listing was actually the second attempt, as a previously planned partial float in Singapore, had been abandoned due to adverse market conditions. But investors who did subscribe and held on to the shares, including billionaire financier George Soros, look like they have more reason to be happy than most.The shares carried a tenth of the voting rights  compared to those issued to Glazer family members and do not pay a dividend, so anyone investing was doing so because they saw the prospect for share price growth. 

As Forbes magazine’s sports and finance expert Mike Ozanian points out, that is what has happened. Those shares have recently jumped from $14 to $17 placing a valuation on the club of well over $3bn.

It also means that the Glazer family are benefiting substantially from their ownership despite the history of opposition from some very wealthy opponents including Goldman Sachs economist Jim O’Neill and of course tens of thousands of grass roots fans. Those fans set up the Manchester United Supporters Trust and the more tightly organised Red Knights, who were prepared to bid around £1bn for the club as the Daily Mail reported in 2010. It was thought the Glazers wanted at least £1.5bn. Untempted by a billion pounds, they remain its owners and success in the league (though not last year) has seen some of the criticism abate though they haven't been silenced completely.

As the the Sun reported last year, the Glazers were believed to have pocketed around half of the $140m raised by the listing. The Guardian in a forensic analysis by David Conn suggested that Manchester United had ultimately paid out almost £500m over seven years to the Glazers but also to service the interest payments on the debt placed on to the club that financed the Glazers' takeover.

Many supporters believe that had the money gone into the club it might have dominated Europe in much the same way as it has dominated the Premiership – last year’s loss of the title to its Manchester City rivals excepted.

The Glazers have been outstanding at securing the very best corporate sponsorship terms with recent deals with Japan’s Kansai and the China Construction bank demonstrating the way they can maximise value from the team's global brand presence.

Up till now, the track record of listed sports teams, as Ozanian points out, is often poor. Generally teams list only to go back into private hands often at reduced prices.It is certainly a strange sort of competitive landscape given the different forms of ownership across Europe's leagues.

Last week saw the publication of the football money league by consultancy Deloitte based on revenues generated last season.

Real Madrid topped the list with revenues for the year of more than 500 million euros followed by Barcelona, then Manchester United on 367m euros, Bayern Munich, Chelsea, Arsenal, Manchester City and A.C. Milan. But this isn't a measure of profits and is far from an ordinary competitive landscape.

The two biggest challengers in the league to Manchester United are Chelsea and Manchester City. Both clubs are backed by billionaires where the normal rules of free market competition do not appear to apply – even with fair play rules on the horizon. Paris Saint Germain now has access to a similar pile of cash. 

In Europe, the club confronts Barcelona and Real Madrid. These two clubs benefit hugely not just from unparallel rivalry but the fact that in Spain television revenue is negotiated on a club by club basis handing Real and Barca a huge advantage. They also have the implicit backing of their respective regions though perhaps that backing isn't quite worth what it was.

Given that share prices are generally for future not past performance, one might also see some risk in the fact that Sir Alex Ferguson must be nearing retirement. At times, it has felt as if he has driven the team on by sheer force of will, though a £24m spend on striker Robin van Persie at the start of the season cannot have hurt either.

The team is currently top of the league, it welcomes Real Madrid in the Champions League next month and made very short work of Fulham this weekend in the FA cup while many premiership peers succumbed to lower league opposition.

Yet despite success on the pitch, and even with an increase in Premier league television money, it feels like there are a lot of reasons not to invest. Then again, maybe the likes of Soros just sees one of the world's biggest sporting brands and that is enough to make the shares a risk worth taking.  

Football Money league Source: Deloitte

Position Club 2010/11 revenue (€m)
1 Real Madrid 479.5
2 FC Barcelona 450.7
3 Manchester United 367
4 Bayern Munich 321.4
5 Arsenal 251.1
6 Chelsea 249.8
7 AC Milan 235.1
8 Internazionale 211.4
9 Liverpool 203.3
10 Schalke 04 202.4
11 Tottenham Hotspur 181
12 Manchester City 169.6
13 Juventus 153.9
14 Olympique de Marseille 150.4
15 AS Roma 143.5
16 Borussia Dortmund 138.5
17 Olympique Lyonnais 132.8
18 Hamburger SV 128.8
19 Valencia 116.8
20 Napoli

114.9

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