Could Premier League clubs return to the stock markets?
Mon 6th Oct 2014 | Money & Finance
Since its initial IPO two years ago, much has been made of Manchester United’s presence on the New York Stock Exchange (NYSE).
As the only Premier League club to be truly publically tradable – Arsenal Holdings plc is technically publicly listed but only on the specialist PLUS market, under very specific rules, and at £14,625 per share – Manchester United has come under intense scrutiny, been the subject of fan derision and may yet offer inspiration to many other Premier League owners.
When Malcolm Glazer decided to float 10% of Manchester United’s shares back in August 2012, he was making a move against the tide of recent football businesses. The inception of the Premier League 20 years previously had meant a huge leap in value for all the clubs within (and, in turn, those close to promotion). Owners of football clubs suddenly saw that their assets had untapped profit potential, and took to the stock markets as a method of cashing in.
By 2011, though, Tottenham Hotspur and Millwall were some of the last teams to exit the markets after a peak of 27 clubs had floats just a few years earlier. One of the teams involved in the exodus was Manchester United themselves, pulled by Malcolm Glazer himself when he took over the club in 2005.
As such, the decision to re-list in 2012 caught many by surprise. There is a precedent in other leagues: Italian teams Roma, Lazio and Juventus are some of the notable names that have been on the markets for some time, as are German runners-up Borussia Dortmund and Scottish rivals Celtic and Rangers. With a current market cap of $2.6 billion, though, Manchester United are worth considerably more than all those clubs put together.
The decision to return Manchester United to public trading made sense as a measure to raise capital that can both service the considerable debts incurred by Manchester United’s ownership and maintain competition with billionaire-backed clubs like Chelsea and Manchester City. Until this year, it appeared that the capital raised was not intended for new players: Manchester United’s record signing before Juan Mata in January (then Di Maria in August) was Dimitar Berbatov, before the IPO in 2008.
What that means for the club’s financials is not yet clear, and depends on how well the club can balance high wages and player spend with revenues. After a shaky start, though, their life on the NYSE has been fairly healthy.
From a low in October 2012 to now the club has increased in value 35% despite the departure of Sir Alex Ferguson and subsequent league woes (which have dampened investor enthusiasm). Whilst that increase compares unfavourably to that of, say, the S&P 500, it is negatively affected by Manchester United’s poor start to the season.
The Glazer family (now in charge after Malcolm glazer passed away this year) chose to list a further 5% of the club in the summer - so clearly see potential in the stock markets as a revenue generator. If Louis Van Gaal can safely secure Champions League football this season (currently a big if), then we may soon see their value increase sharply.
Since several other clubs mirror Manchester United’s position – having to compete with cash-rich rivals whilst remaining with financial fair play restrictions, but with a rising value from spiralling TV revenues – a successful run on the pitch and on the markets could well entice other owners.
If that happens, we may see an influx of UK-based football teams on the stock markets of the like not seen since the mid-90s. Fans may not yet approve of Manchester United’s business plan under the Glazer family, but the Premier League may have to get used to it once more.
By Patrick Foot, financial markets writer for IG
Image: REUTERS/Brendan McDermid
Posted by: Kev Howland
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