Britain’s highly touted soccer team Manchester United, owned since 2005 by the family of the Florida-based businessman Malcolm Glazer, is hitting the street—Wall Street, that is. Two separate management teams will go on a roadshow for two weeks to drum up interest among investors in the U.S., Europe and Asia prior to an IPO scheduled for the U.S.
Reuters reported Tuesday that the move came after IPOs were canceled in Singapore and Hong Kong, and that it riled fans of the team once they heard that a substantial portion of the proceeds would go to the Glazer family rather than paying off team debt fans say impedes the progress of the players’ success.
If soccer fans aren’t 100% behind the move, neither are members of the financial sector. Aside from the facts that stock in a British soccer team could be a tough sell here in the U.S. thanks to a lack of a basis for comparison—no publicly traded sports teams against which Manchester can be compared—and because soccer comes in a distant second on this side of the pond to football, the numbers themselves could give one pause.
The team plans to offer 16.67 million shares at between $16 and $20 each. That values the club, at the top of the range, at $3.3 billion. The shares will come half from the club itself and half from the Glazers, in an offering intended to raise as much as $333 million. While the club's IPO take will be used to lower its debt—from 423 million pounds ($664 million) as of March 31 to 345.4 million pounds ($543 million)—the team will still be left owing a hefty amount, while the Glazers will profit.
In addition, the Glazers will still be dominant after the offering, with 89.8% of the combined class A and B shares. They will retain control after the sale because their Class B shares will have 10 times the voting power of average investors' Class A shares.
To top it off, revenue for fiscal 2012 is expected to be 315 million to 320 million pounds, a drop of 3% to 5% from last year, according to the company's S-1 filing with the Securities and Exchange Commission (SEC). Operating expenses were up 4% to 5%, thanks to a rise in player and staff compensation. The shares are priced high based on earnings, and the price-to-earnings ratio based on both A and B shares is a pricey 95 times.
According to Ken Perkins, a Morningstar analyst, "It could be challenging to justify such strong multiples for a company that needs to spend a lot of money to generate success." Perkins was quoted in the report saying, "Even if their performance is good their price may be a bit high."
David Menlow, president of IPO Financial, which tracks IPOs, was also skeptical, saying in the report, "I'm a little concerned that the offering couldn't be done initially and now all of a sudden it has a heartbeat. The mentality with sports teams is that people like owning a piece as a trophy investment, but will it live up to expectations?"
Fans from the Manchester United Supporters Trust (MUST) are angry about the deal, and about the amount of debt their team carries, which they say hurts the team’s performance on the field. Duncan Drasdo, chief executive of MUST, said in the report, "Supporters are going to be very angry about this. The Glazers have already cost United more than 550 million pounds in debt-related fees and now another slap in the face as they help themselves to half of the proposed IPO proceeds."
He added, "Clearly this has nothing to do with benefits for Manchester United and is all about giving the Glazers quick access to desperately needed cash at the expense of our football club."