SBD/August 13, 2012/Franchises

ManU Shares Stay Relatively Flat During NYSE IPO, With Many Questioning Club's Debt

The Glazers' debt may have been a factor in low NYSE debut
Shares in EPL club Manchester United made "a muted debut" as they opened for trading on Friday just above their initial public offering price, according to Mackenzie & Makan of the FINANCIAL TIMES. The failure of the shares to “pop” on its trading debut on the N.Y. Stock Exchange was "a second blow for the listing," after underwriters lowered the price to $14.05 (all figures U.S.) per share late on Thursday. The stock eventually peaked at $14.20 and closed at $14 on turnover of more than 30 million shares, then dipped below the offer price in after hours trade to $13.90. The club and its owners raised about $234M "from the sale of 16.7 million shares." That is nearly $100M lower than the $330M "implied at the top end of the price range." The sale of the 10% stake leaves ManU with a market capitalization of less than $2.3B. On the trading floor Friday, which was covered with artificial turf, many traders wore the club’s red shirts with “MANU-LISTED-NYSE” on the front (FINANCIAL TIMES, 8/11).

DISAPPOINTING DEBUT: In Toronto, Morgan Campbell wrote ManU's IPO "was about as exciting as a nil draw in a preseason friendly." The price reduction combined with a lack of activity "left many experts underwhelmed." IPOScoop Founder John Fitzgibbon said, “There was a lot of wing flapping, but not much flying today. It’s reflective of the overall IPO market." Campbell noted the amount of money the club will now split between ownership and obligations to creditors is "much smaller than expected." Lowering the stock price cut the IPO’s haul to $223.3M, a "modest number" compared to the sums discussed when the IPO was first considered, and "vindication for a growing group of ManU fans vocally opposed to the deal" (TORONTO STAR, 8/11). The AP's Mae Anderson noted some analysts had warned that the IPO was "overvalued, particularly since the club is debt ridden and the family that owns them, the Glazers, retained almost total voting control over the team" (AP, 8/10). ManU CEO David Gill on Friday said the team “looked at other markets” to launch the IPO, but "determined that New York was the right exchange." Gill: "The sports business model I think is understood in the U.S. The strength and demand for the shares is very apparent." Gill said the team lowered the initial price per share and lowered the number of shares offered because the club "wanted to have long-term holders in there" (“Squawk on the Street,” CNBC, 8/10).

DEBT ISSUES: In London, Ruddick, Blackden & Cooper wrote despite the lower-than-expected pricing, the IPO "still establishes ManU as the world's most valuable football club." However, the IPO offering "has created further anger among fans of the club" (TELEGRAPH.co.uk, 8/10). REUTERS' Keith Weir wrote ManU's loss of as much as $50M in expected proceeds "will be a blow as it copes with a heavy debt burden and seeks to buy new players" (REUTERS, 8/11). Gill has promised that the club "will continue to invest in top-class players" despite a slow start on the NYSE. Gill said, "We will make sure there are sufficient funds to invest in the team going forward." He added, "We've signed Chevrolet to a seven-year shirt sponsorship commencing in 2014, which is over twice what our current shirt sponsors make -- we've got a lot of interesting and good opportunities to improve our cash flow going forward" (London DAILY MAIL, 8/11). CNBC's Robert Frank wrote that ManU Owner the Glazer family's "fondness for debt may be growing into a liability." The IPO also "adds to criticism that the Glazer family has been extracting value from the team, rather than growing it through investment and added capital" (CNBC.com, 8/10).

RINGING THE BELL: In London, Helen Collis noted Gill and ManU co-Chairs Avram and Joel Glazer on Friday "applauded as they rang the bell from the NYSE balcony." The ceremony also was attended by ManU Chief of Staff and BOD member Edward Woodward (DAILY MAIL, 8/10).
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