|United Launch IPO in New York|
|Written by Wyn Grant|
|Sunday, 05 August 2012 09:42|
Manchester United fans are once again angry with the Glazers who own the club. After some delays they have now filed their initial public offering on the New York stock exchange and are hoping to sell 19.1m shares.
However, originally the offering was supposed to be used entirely to reduce the club's debt burden. The latest plan sees half the money raised going to the Glazer family, estimated at £150m. In any case investors are expected to be wary of the offer which will not pay dividends
Manchester United's full accounts are not expected to be available until later this month but the extent of the hit the club took as a result of its early exit from the Champions League is apparent in the documentation it filed in New York earlier this month in connection with its share issue.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortisation (known as Ebitda) is estimated to have fallen by between 16 and 18 per cent to £90 to £92 million. Turnover is expected to drop by 3 to 5 per cent from £331m to between £315m and £320m.
Broadcasting revenue was hit particularly hard by the exit from the Champions League at the group stage. Broadcasting revenue is estimated to have dropped between 11 and 13 per cent to between £102 and £104m compared with £117.2 million in the year ending June 2011.
Matchday revenue is also forecast to have fallen by 11 or 12 per cent from £110.8m in 2011 to between £97m and £99m as a result of playing four fewer home games last season than in the preceding campaign.
The one bright spot is commercial revenue, reflecting the strength of United as a global brand whatever temporary setbacks the club encounters on the pitch. Commercial revenue is predicted to increase by between 11 per cent and 13 per cent to £115m to £117m, a sum well in excess of matchday revenue. This reflects increased sponsorship deals and a successful pre-season tour of the United States.
The ability of Manchester United to attract increasingly lucrative sponsorship deals is demonstrated by their new shirt sponsorship deal with Chevrolet. Their current deal with US insurer Aon, admittedly over a four year period, is worth £80m. The new deal which will start from the 2014-15 season is reported to be worth $600m over seven years. They are the club's fifth shirt sponsor.
Chevy is not particularly interested in the British market where it has an only one per cent share. The real prize is United's fans in Asia. The company sponsored the Chevrolet China Cup last week as part of the club's pre-season tour.
In May GM signed a five year partnership with Manchester United that made it the football club's official car sponsor. The company announced a similar partnership with Liverpool last week.
Despite some bullish statements, there is a rather downbeat tone to the prospectus issued by Manchester United for its New York listing. Of the 143-page document, 21 pages is given over to risk factors. These cover everything from natural disasters to the idea that the club's popularity and, indeed, the popularity of football may decline.
Circumstances have obliged the Glazers to launch in New York in a country where football is a minor sport and through what is generally regarded as a second tier investment bank. However, the Glazers want to keep control of the club with weighted voting B shares. Such dual share structures are extremely rare in the UK and unattractive to UK investors.
Even in the States investors may be put off by the declared intention not to pay dividends. They can only get a return on their investment by selling their shares in the future at a higher price or through a sale of the club which does not seem likely any time soon.
United blogger and finance expert Andy Green commented, 'After seven years of the club denying the debt burden was a problem, we are now witnessing the huge volte face of an IPO specifically for the purpose of reducing the amount of debt. The great shame is that more than £500m has been wasted on interest and fees over the past seven years.'
Football economics guru Professor Stefan Szymanski, now at the University of Michigan, has estimated that the Euro 96 football tournament made people so happy that it had a value of £165 per person. This is, of course, an average value as some people have no interest at all in football.
Professor Szymanski argues that 'Anything that ultimately brings us happiness can be considered as an economic benefit.' A social historian of my acquaintance used to argue that football was not about happiness but collective suffering for one's team.
Perhaps that was more true when people used to support their local team or at least one they had a personal association with. Now they can choose to follow a top club which can deliver wins with some predictability.
Of course, the pain can be greater when things go wrong. I remember when Charlton beat Liverpool 2-0 at The Valley hearing a London accented supporter saying in despair, 'I was so looking forward to this evening'.
For many fans it seems that the real 'pleasure', if it can be so called, consists in slagging off their own team and manager and often other fans as well. This may serve as a means of compensation for the frustrations of their everyday lives. As the saying used to go, 'It's being so miserable what makes me happy.'
Portsmouth have been teetering on the brink of liquidation, but it looks as if former owner Balram Chainrai, whom they owe £20m will step in to save them, although what sort of playing squad they will have remains to be seen. Kanu is threatening to sue them for £3m of wages he claims he is owed.
Rangers started their new life in the Scottish third division with an away cup game to Brechin City whose own coffers were boosted by £40,000, half their normal annual income. A new television deal has been agreed with Sky which means that they will show five third division games involving Rangers, but the long-term financial impact on Scottish football remains to be seen.
I have been enjoying Olympic football at the City of Coventry Stadium, although the two women’s matches I saw were more fun than the men’s game and I am looking forward to seeing the bronze medal match for women next week.
Wyn Grant is a regular contributor to Albion Road and also the publisher of footballeconomy.com, a website covering the business and economy of the game of football.