Manchester United IPO fizzles despite price cut

Posted at 08/11/12 8:13 AM

NEW YORK - Manchester United shares barely treaded water in debut trade in New York Friday even after underwriters slashed the IPO price amid doubts about the legendary British football club's financial promise.

The shares bounced along just above the $14 issue price all day in a sign that underwriters were likely supporting them amid strong selling pressure, analysts said.

They finally closed at $14.00, and slipped below to $13.90 in after-hours trade, with trading volume nearly double the 16.7 million shares released in the initial public offering.

It was a disappointing launch for the team accustomed to victory on the pitch, especially after the IPO price was cut Thursday from the original plan for $16-20 per share.

The exercise pulled in $234 million, significantly below the $300 million sum the debt-ridden club and its owners, who take half of the IPO receipts, had hoped to bring in.

It nevertheless left the Cayman-registered Manchester United Ltd the world's most highly valued sports team, with a market worth of $2.3 billion.

The launch ran into doubts from investors and analysts over whether Manchester United could match its famed record on the football pitch with a similar profit for share buyers.

Investors have also become wary about aggressively priced IPOs since the heavily promoted Facebook launch soured, with the social networking giant's shares slumping by nearly half since its May 18 listing.

Manchester United has been mired in debt since 2005 after a heavily leveraged takeover by the Miami-based Glazer family, whose management has endured heavy criticism from the team's tens of millions of fans.

The IPO was originally planned for Hong Kong or Singapore, where the team apparently hoped its millions of Asian supporters would help it raise enough to retire the current debt load of 423 million pounds ($660 million).

But Asian regulators reportedly looked askance at the company's two-tier share structure, with a small number of "A" shares to be sold to the public while the Glazers retained full control of the much larger number of "B" shares, each of which has 10 times the voting rights of "A" shares.

The structure was not a problem for US regulators, but raised doubts among investment analysts.

The IPO ultimately only contributes $101.7 million to debt reduction, after IPO fees are withdrawn, while the Glazers will take in some $116 million for putting 8.33 million of their own shares into the offer.

"The question to ask is whether Manchester United is really the next Facebook Inc. IPO," said analyst Jon Ogg of 24/7 Wall St.

"It has 600 million fans, it is under tight control by the Glazer family and it is full of hype," he said.

"Perhaps the discounted price will keep some interest in the shares, but this dual class listing in New York is not allowed in London, where Manchester United should be based for its home market trading.

"Man-U would easily fit on our list of companies where shareholders have no power -- at all," Ogg added.

Manchester United chief executive David Gill told CNBC television he was optimistic about the club's future, with big opportunities to earn income through marketing partnerships with other firms.

"We have a sensible business plan going forward. What we are doing today is for the long term plan of the club," he said.

"What we can show... is we are very much a growth story, and in the current climate we all face, it's a very positive thing and people have bought into it," he said.

Gill said the management is "very comfortable" with its debt level, "particularly given the growth of opportunities," for the club.

But fans were less confident.

The saga of the IPO "has been a grubby and unedifying spectacle in our club's history that does very, very little indeed to improve the club's finances," said Andy Green, author of the Andersred blog, which focuses on the management of the team.

"The whole exercise has only been undertaken to help the Glazer family with their cash flow problems," he wrote.

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