Analyst’s Not Hoping Much From Manchester United Cut-Price IPO Debut

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One of the biggest soccer clubs of all times, Manchester United Ltd (NYSE:MANU), makes a cut-price debut on the New York Stock Exchange on Friday. The debut though great, disappointed the English soccer club’s American owners, and enraged some of its fans.

Despite soccer being the most popular game, the set back in the form of  a cut-price, highlights the fact that monetizing sports is not always good. The IPO was slashed to $14, from the $16-20 range expected by the club’s bankers, cutting the proceeds from Friday’s listing to $233 million from an earlier estimate of $300 million. The proceeds from the IPO were to split equally between the club and its owners, the Florida-based Glazer family, are also the owners of the Tampa Bay Buccaneers NFL team. United, which already had a debt of 423 million pounds ($661 million) at the end of March, upon which a loss of $50 million from the price-cut, could hurt a bit as it seeks to buy new players, who cost tens of millions of dollars each. Some of the fans are already complaining that the debt has forced up the prices of tickets for the club.

Agreeing with the current valuation, Duncan Drasdo, chief executive of the Manchester United Supporters Trust (MUST), said, “It would seem all the analysis of the true valuation was correct; the Glazers and their advisors were being far too ambitious – or perhaps greedy – and the true value of the shares should be around $10, rather than the $20 the Glazers were seeking,” and added “means less money coming into the club to pay down the Glazers’ debt and, more annoyingly, the Glazers still take further money out of the club for their own personal means.” MUST is of the opinion that Glazer family should sell their stake and let fans play a bigger role in the club.

MUST have also appealed for a boycotting of club’s sponsors over the IPO. The club signed a $559 million deal last week with General motors’, to have the Chevrolet brand on its famous red shirts from 2014. A statement from the Manchester United Supporters Trust (Must) reads: “The Manchester United Supporters Trust has today called for a worldwide boycott of Manchester United Ltd (NYSE:MANU) sponsors’ products, with support across the UK, Europe, Asia, and the US. The boycott strategy is intended to send a loud and clear message to the Glazer family and club sponsors that, without the support and purchasing power of the fans, the global strength of the Manchester United brand doesn’t actually exist.”

Some facts related to the club, the 134-year-old club pulled out last year from listing in Singapore and Hong Kong due to volatile markets. The Red Knights, a group of wealthy fans including Jim O’Neill, Goldman Sachs Group, Inc. (NYSE:GS) head of asset management, tried to bid for the club two years ago but the price deterred them. The club was purchased by the Glazers in a highly leveraged deal in 2005 for 790 million pounds, and then they took it private after 14 years on the London Stock Exchange. United crosstown rival, Manchester City, is owned by a member of Abu Dhabi’s ruling family, who recently invested 800 million pounds for reviving the club.

Wall Street analysts are not rating the IPO very highly, “I’m calling this son of Facebook Inc (NASDAQ:FB),” said David Menlow, president of the research firm He said “too little of the money being raised looked like it was going to be invested in the club, the club had too many debts, and it was not clear how they intended to grow as a business. Sports franchises have this emotional flourish, then everybody wakes up and wonders, ‘Do I really want to own this?'”

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