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Financial Focus

Manchester United heads to the stock market (again).

Way back in the 1990s, a host of football clubs decided to become public companies, listing their shares on the London stock market.

They were led by Manchester United, which floated in 1991, and were followed by the likes of Aston Villa, Sunderland, Chelsea and even Charlton and Birmingham.

Backers tried to convince investors they were some sort of early dot.com play, like Leeds United, which was run for a while by the wily entrepreneur Chris Akers before being taken over by the famously over-ambitious Peter Ridsdale. They all sold the vision to investors of ever increasing revenues on the back of the digital revolution.

Others, like Chelsea, presented a strategy (which now looks distinctly flawed) of selling investors the idea of a football business that was combined with general leisure activities such as hotels and a travel business. Why a football owner like Ken Bates ever thought he would run these disparate businesses with any sort of beneficial synergies is anybody’s guess, but hindsight is a wonderful thing.

For a while the experiment seemed to be working and was all the rage, but in time it became apparent that, whilst football-related revenues in most cases did keep rising, they did so insufficiently quickly to keep up with ever rising costs, mainly in the form of player wages.

When the dot com bubble burst, football club share prices collapsed, and most of the listed companies were taken over.
Tomorrow, Manchester United will become a publicly listed company again, but this time in New York rather than London after a similar attempt to float in Singapore was abandoned.

Surprisingly, despite almost universally negative publicity, the flotation, which hopes to raise £212m, appears to be meeting targets, with enough demand being registered for the shares within the price range of $16-20. The broker Morningstar values the shares at a more conservative $10 a share.

Says Owen Wild of the respected financial publication IFR: “Manchester United is a unique asset. The power of the Manchester United brand is like no other and it is hard for anyone else to replicate.”

During the marketing sessions there have been all sorts of arguments about how to assess the brand, with fans’ groups pouring scorn on the banking advisers’ claims that United has 659m followers.

That United does have an incredible awareness globally and an army of zealots that might be prepared to follow its fortunes on web-sites and iPads and Blackberrys, is not to be doubted however. The club’s recent $559m sponsorship agreeemment with Chevrolet – 128 per cent up on its current deal – underlines the potential of the club’s revenue growth.

But this flotation is partly about the Glazer family’s desire to monetise some of its investment, and fans complain that it will lead to little investment in the team or its stadium or in the holding down of rising ticket prices. The Glazer’s ownership of the club appears to have weakened it in the eyes of fans.

What the likely success of this IPO will demonstrate though, is that New York and an adviser such as Jefferies can succeed in floating UK household names in a way that London currently can not.

Recently the vacuum technology group Edwards IPO’d in New York after failing dismally to do so in London last year.
More will follow these groups, says Wild. There must be a lesson here for London somewhere.

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