In another week, you could be a part owner of one of the the world’s most widely recognized sports franchises. On August 10th, the famed Premier League club Manchester United will make it’s initial public offering of 10 percent ownership of the team. The Glazer family who acquired the Red Devils in 2005 for $1.2 billion off the London Stock Exchange is unclear about what it will do with the generated revenue.
The IPO is said to make 16.7 million shares available at a price between $16 and $20 to raise approximately $300 million, and making for a total valuation of the club around $3 billion. Financial experts and fans are both concerned with the push for quick fund raising on the part of the Glazers. Since they purchased the club, they have added to the debt of the club, now reported at near $650 million, and been otherwise very private with their strategy as owners.
What has analysts and fans concerned is the lack of transparency or clarity in the Glazers mission as club owners. Will they be willing to pay down the growing debt of the club, or perhaps make moves on the transfers market and recruit a striker to work the top of the field alongside Red Devil’s beloved Wayne Rooney?
The issue is complicated by the fact that the shares offered in the IPO will not retain traditional voting rights of standard stock shares. These nearly 17 million shares will retain the voting power of one vote to ten shares, allowing the Glazers to retain 98% voting rights of the club. The same strategy was used by Facebook and Google in their IPOs. This raises a red flag for fans who already feel the owners are out of touch, while the move allows the Glazers to act on their own self interest without aligning with new shareholders.
I think the supporters appreciate it if you’re doing everything you can to put a successful team on the pitch, I think people are forgiving if they know you are doing that… We’re just going to carry that on and make sure they have what they need, then the rest usually takes care of itself. – Joel Glazer in 2005 Interview
So what do you get for buying into the world-famous club? Well, the IPO discloses no intention of paying dividends, though the Glazers just paid themselves a 10 million pound dividend only four months ago. So maybe a long-term growth of the share price? Not likely: IPOs attempting to justify huge valuations usually rest on the capable direction of the owners to grow the brand successfully. The Glazers though don’t indicate any big changes for the future, but instead continuing to do more of the same. Chevrolet signed on to be the next primary jersey sponsor for seven years beginning in the 14/15 season. The deal is reported to be worth nearly $600 million.
As a club being run more as a business than a family, the bunch at Old Trafford has done pretty well for itself. Will the Red Devils lose any fans because of the public offering? We don’t think so, nor will it establish a brand new following in the United States because soccer fans can suddenly now own a piece of Premier League glory
Long term, this could be a first step in a shift for the Glazers and Manchester United. But for the coming season, we expect to see just as much passion and goalscoring at Old Trafford, especially after rivals Man City stole the league title from under their noses in the final minutes of last season.