Manchester United Ditched Eurozone in Fund Raising
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The well known team, Manchester United, one of the world’s wealthiest football teams and holder of 19 championships, has filed a $100 million IPO on the US based NYSE. The announcement came amid speculation that the team would be listing in Singapore, completely avoiding the most comfortable fit, London.
While the amount has been declared, it is typically a placeholder for the organization to begin paying taxes for potential earnings raised from the IPO. This means the amount raised could vary, depending on initial investor reactions. The team opted not to release how many shares would be available for purchase, this according to the US Securities Exchange Commission.
Proceeds will go toward paying off debts the club currently owes. The move was delayed due to volatile markets; it will be the first big IPO in the US in nearly a month. United had originally planned to raise close to $1 billion on the Straits Times Index (FTSE), Singapore’s top 30 stocks publicly traded. The index recently was down 6 percent, companies have been able to raise $7 billion in 2011.
Jeffries Group Inc (NYSE: JEF), Credit Suisse Group AG, and JPMorgan (NYSE: JPM) are said to lead the offering. Morgan Stanley (NYSE: MS) is the noticeable omission thought to head up the Singapore IPO.
Former JPMorgan banker Ed Woodward, handled the Glazer family’s purchase of the team and was recently appointed the club’s vice chairman. Back in January, he directed the 500 million pounds bond sale and was originally set to head the $1 billion IPO in Singapore. No clear word if he is now handling the NYSE IPO in a direct way.
Jeffries Group, chosen by the family to handle the Manchester United IPO, also has never handled a client larger than $250 million which raises one of my eyebrows as to the solvency of the decision.
Banks made the pitch to the Glazer family that owns the club. The family purchased the club in 2005 for 790 million pounds and it also owns the American Football team the Tampa Bay Buccaneers. The family has earned some unpopularity by using their operational control of the club’s assets to pay for the acquisition. This and other factors left the club with 423 million pounds of debt in the third quarter. The hope is that the IPO will be able to pay off the club’s debt which would actually be a remarkable feat.
The team features many stars including Wayne Rooney, Ashley Young, Portugal’s Nani, and Nemanja Vidic. The team has been quite the performer over the years, and won the Barclays Premier League in the 2010-2011 season, while finishing second to Manchester City in the 2011-2012 season. They also reached the finals of the UEFA Champions League, the major continental club tournament in Europe, where they were defeated by FC Barcelona.
Analysis
Clubs like Manchester United need funds to attract and buy superior talent that rival competition. By paying down interest and debts, the club can become more competitive in trading players and bringing in larger names. This would also reassure brand value and almost surely increase revenues.
The 21 page filing with the US Securities Exchange Commission did raise some eyebrows when potential risks to the Club included a natural disaster and a decrease in team interest or football in general. While all possibilities, many view the function of a risk assessment to include more specifics such as debt susceptibility in a particular market, just to provide an example. This is also amid concerns that the Glazer family may have had too high expectations which were brought down by their investment bankers – at times the family asserted the club was worth $2 billion.
Much has been said about stalled US market debuts, which include the recent Facebook (FB) IPO; this led to a third company devaluation and regulatory investigations.
Benefits of the US listing also include the family being able to own class B shares, which have 10 times voting power to Class A shares. This allows the family to maintain operational control of the team by voting power. With no plans to pay dividends to investors and the volatility of a family that used club funds to purchase the club, I would have to show skepticism about the IPO and the potential to raise significant funds for investors. I like many other analysts view the move as a gesture to pay down debts and return solvency to the franchise.
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