Fabled soccer (football) franchise Manchester United has been bought, sold, leveraged and taken public like your average plumbing supply business. Its owners keep hoping that the storied global brand will make them look smart - and make them some money.
As usually happens in these matters, they got the money part somewhat right (at the expense of various shareholders and fans) but this story reinforces the fact that intangibles are not tangibles in drag.
Brand and reputation are called intangibles for a reason. They do not provide easy accounting solutions to complicated financial questions. Their value depends on a plethora of factors that are not as easily manipulated as real estate. The fact that the owners moved the IPO from the UK, where Man U has long held sway, to Singapore (so much for the notion that Asia is the future of every silly notion that comes along) to the US (Manchester, New Hampshire? Manchester, Massachusetts?...) suggests that demand was clearly not shaping up as hoped. But desperation is as desperation does: if you are trying to pay down over a billion or two in debt, any little bit helps.
And the tomfoolery was not limited to the owners. GM's marketing chief lost his job a week before the IPO because he inked an expensive, nay, very expensive advertising deal with Man U - and then lied about it to his superiors. Who evidently did not share his optimism about the unlimited growth potential of soccer or the shanghaiing of their brand to it.
But as endless research has shown, otherwise sober citizens get all wet and wobbly when famous athletes are in the room. And even the most iconic of brands can not save a bad deal. JL
Keith Weir reports in Reuters:
Shares in Manchester United priced below expectations and were essentially flat in early trading on Friday, a disappointing stock market debut for the world's most famous soccer club and most valuable sporting team.
Manchester United sold 16.7 million shares as planned, but at a price of $14 each, below the expected range of $16 to $20. The stock rose 5 cents in initial trades on the New York Stock Exchange and then flattened out.
A mystery to most Americans but a household name in most of the world, the club listed on a U.S. exchange after pulling a planned IPO in Singapore earlier this year.
The offering valued the 19-times English champions at $2.3 billion but shaved as much as $100 million off the proceeds that had been expected for the team and its owners.
The $233 million ultimately raised in the IPO will be split equally between the 134-year-old club and its owners, the Florida-based Glazer family, owners of the Tampa Bay Buccaneers NFL team among other interests.
The loss of as much as $50 million in expected proceeds for the club will be a blow as it copes with a heavy debt burden and seeks to buy new players, who cost tens of millions of dollars each. United had debt of 423 million pounds ($661 million) at the end of March.
A group of United fans who are campaigning for greater involvement in the ownership of the club jeered the Glazers.
"It would seem all the analysis of the true valuation was correct; the Glazers and their advisers were being far too ambitious - or perhaps greedy - and the true value of the shares should be around $10 rather than the $20 the Glazers were seeking," said Duncan Drasdo, chief executive of the Manchester United Supporters Trust (MUST).
"It means less money coming into the club to pay down the Glazers' debt and, more annoyingly, the Glazers still take further money out of the club for their own personal means," he added.
MUST is calling for the Glazers to sell and allow fans to play a greater role in the club's ownership.
The Red Knights, a group of wealthy fans including Goldman Sachs head of asset management Jim O'Neill, weighed a bid for United two years ago but were put off by the price.
LEVERAGED BUYOUT
The Glazers bought United for 790 million pounds in a highly leveraged deal in 2005, taking it private after 14 years on the London Stock Exchange.
Some fans argue that the cost of the debt has forced up ticket prices for the club, which draws sellout crowds of around 76,000 at its Old Trafford Stadium and claims 659 million followers across the world.
They also say repayments have hindered the team's ability to compete with big-spending rivals on the pitch. The Premier League season begins in just over a week, when United fans will be able to demonstrate their feelings over the club's ownership.
MUST has called for a boycott of the club's sponsors over the IPO. United's commercial appeal was underlined last week when it signed a $559 million deal with General Motors to have the Chevrolet brand on its famous red shirts from 2014.
United suffered a rare barren season last year, losing their Premier League title to crosstown rival Manchester City, whose owner, a member of Abu Dhabi's ruling family, has pumped 800 million pounds into reviving what had long been United's poor relation.
Yet Forbes still ranks 134-year-old United as the world's most valuable sports team by a wide margin, part of the attraction for the American owners in the first place.
RISKY BET
With so much tied to success on the field, soccer clubs are an inherently risky investment.
"I didn't even look at it. I would never, ever invest in a football club," said the head of UK equities at an investment house running around 100 billion pounds in assets.
Italian champions Juventus is one of the few European soccer clubs with a stock market listing, and it is valued at only around $240 million, according to Reuters data.
But as one consultant noted, the ultimate goal of a sports team is not to be a good business, but to win trophies.
"Manchester United itself has a very good business model and has been able to be profitable," said Emmanuel Hembert of management consultancy A.T. Kearney. "If there is one club to invest in it would be Manchester United, but being the best economically among your peers may not be enough."
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