Man U 'world's most valuable club' even at $6 discount

Manchester United's shares are to be sold on the NYSE at a disappointing $14 apiece, but the club should still be worth a cool $2.3bn (£1.5bn).

by Andrew Saunders
Last Updated: 19 Dec 2012

That would make it the most valuable football club of them all - in comparison Real Madrid is worth $1.88bn according to a Forbes ranking. Not bad after the shocking season on the pitch that the Reds have just had.
 
All the same that’s a substantial discount on the initial price of $16-$20, suggesting that buyers for the shares couldn’t be found even at the bottom of that range. The 16.7m shares being issued should thus raise around $233m, $100m less than they would at $20 a share. So why are shares in one of the world’s most popular and successful football teams proving so hard to shift?
 
Well, let’s have a look at the pros and cons of buying them. On the pro side, there must be a good many fans who might enjoy ponying up a few quid to own a small piece of their favourite club. And, in comparison with the way that many US sports clubs are monetised, there is still substantial growth potential in the Man Utd brand.
 
On the con side, there are quite a few pressing reasons why most professional investors would be inclined to give this a wide birth. For starters, the 10% of the club that is being put up for sale is in the form of non-voting shares, so investors will have no say in how the club is run. There are no plans to pay a dividend, something which in these times of moribund stock markets can be a really useful source of income.
 
Football clubs are pretty risky and unpredictable ventures too, with a long history of biting the financial hand that feeds them. And what would happen to the value of their investment if the septuagenarian Sir Alex Ferguson fell under a bus tomorrow, or Wayne Rooney tweaked his metatarsal? To cap it all, the impressive line up of advisers hired by the Glaser’s to help get the IPO away - including JP Morgan, Credit Suisse and Deutsche Bank - is perhaps too suggestive of a classic Wall Street ‘pump and dump’ operation.

For the Glasers, things stack up rather better. Half the money raised will be used to pay off some of the club's hefty outstainding debt, which should help ease the financial pressure on its operations somewhat. The rest - around $117m - goes into the Glaser’s pockets. So whatever happens to investors, it should work out for the club’s owners. But is that really how IPO’s are supposed to function?
 

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