Can Manchester United Blindside Investors to Raise a Successful IPO?
City Index August 9, 2011 7:39 PM
<p>The Manchester United IPO reminds me of a scene from Stephen Spielberg’s movie Catch Me If You Can, starring Leonardo DiCaprio, when the lead character’s […]</p>
The Manchester United IPO reminds me of a scene from Stephen Spielberg’s movie Catch Me If You Can, starring Leonardo DiCaprio, when the lead character’s father Frank Abignale Snr, played by Christopher Walken, tells his son: “Why do the Yankees always win? Cause the other teams can’t stop staring at those damn pinstripes.”
This IPO smacks of the same sentiment. Roundly trashed in the media, and by some points for good measure, the Glazers are perhaps attempting to blindside potential investors with the starry eyed visions of the famous red shirts of one of the most famous and successful football (or soccer if you will) clubs in the world today.
Manchester United are looking to raise up to $333m through the IPO, with a current price range per share of $16 to $20, which if the upper level is reached would give the club a $3.3bn valuation.
Not bad going for a club bought by the Glazers through a leveraged buyout in 2005 worth £790m or $1.36bn (taking the 2005 ending sterling/dollar rate).
The question will be how successful will the IPO be however.
After the embarrassment of pulling out of an IPO in Singapore earlier this year, the Glazers have decided to list in New York. The sceptics amongst us, and perhaps non-Man Utd fans, will draw quick conclusions that a listing in London would be extremely difficult given the antipathy towards the owners by many Utd fans and indeed football fans alike, for saddling the club with a £423m worth of debt.
In that sense, a listing in New York makes smart business sense.
Early indications and leaks to the media indicate that US investors have viewed the listing favourably thanks in part to an aggressive marketing roadshow.
The question will be however, can they turn that favourable reaction into a successful listing with investors putting money on the line, particularly after the last celebrity IPO to launch, Facebook, failed miserably (Facebook shares are currently trading 45% lower than the launching price).
It should also be worth noting the IPO proposes to offer 16.7m class ‘A’ shares, with the Glazers maintaining a voting power of 10 to 1 on those shares that are made public.
That means that despite investors who buy into this IPO, could end up owning 42% of the ‘A’ shares available, they will only have a voting power of 1.3% overall.
To some, that is remarkable.
The key then will be whether the Glazers can sell into potential shareholders the power of the Man Utd brand and its ability to grow and increase in size.
The commercial power and prowess of Man Utd is undeniable. Deals with major brands such as General Motors Chevrolet – for $559m – and Aon as well as a £40m deal with DHL to sponsor their training kit, shows the prowess the club maintains when it comes to maximising its commercial revenues.
Without a doubt, Manchester United is one of the leading football clubs in the world when it comes to maximising commercial revenues.
Leaked comments from bankers working with the underwriters of the IPO have stated that the IPO is over-subscribed; indicating high demand but then again, so was Facebook’s IPO supposedly.
So whilst we await the formal pricing, which is set to be announced later tonight (August 9), we watch yet another celebrity IPO to see whether the Glazers can pull off a listing success for the UK’s most successful football club.
City Index clients will be able to trade Manchester United shares from 10 August, barring any IPO hiccups.
Update – 10 August, 8am.
The club announced on the evening of 9 August that the IPO price will in fact be $14 a share, below the low end of the estimated price range and must come as a big disappointment to the Glazers. A successful take up at $14 a share would see the club valued at $2.3bn, well below the hoped for value of $3.3bn (upper range of previous estimates).
That does not necessarily mean the IPO will fail of course. IPO pricing can be a highly sensitive element of the first stage of a public life for a company. What it does do however is show that despite the aggressive marketing roadshow, the tone of potential investors is that the underwriters had over priced the issue. This of course is what everyone in the market, the media and Man Utd supporters indeed called before the drop in price. Perhaps the underwriters were being overly optimistic. Five years ago not many would have blinked. The state of today’s investment world is one of a much higher degree of due diligence.
Will the drop in value help to entice a higher pick up? We will see.
Remember that I have previously stated IPO’s are a highly volatile business. Its hard to ascertain its successes until the euphoria of the launch has passed and this can take some weeks.
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