Manchester United IPO Trading Flat After Pricing Below Range
08/10/2012| 01:59pm US/Eastern
--Soccer club stays close to its IPO price
--Executives said it received strong interest from U.S. investors
--One other IPO traded up after cutting price; another postponed
(Updates sixth paragraph with Manchester United's standing as the most valuable sports team in the world.)
By Lynn Cowan
It was the equivalent of the soccer game that ends in a scoreless tie.
English soccer club Manchester United's stock didn't rise much, but didn't fall either as it made its market debut Friday.
Manchester United's (>> MANR UTD) shares opened at $14.05 each on the New York Stock Exchange, less than 1% above their initial-public-offering price of $14, and were changing hands recently at $14.01. On the downside, the shares priced below their expected range of $16 to $20, and they didn't get the first-day pop many IPO investors look for. But the stock didn't dip below its offering price, either.
The team sold 16.7 million shares, bringing the deal's value to $234 million at the IPO price.
Manchester United, a 134-year-old club, carries a market capitalization of about $2.3 billion at its IPO price, eclipsing the $2.15 billion paid this year for Major League Baseball's Los Angeles Dodgers.
It is the largest sports IPO globally on record, according to Dealogic, for the most valuable sports team in the world, by Forbes' estimation. It is also the second IPO for the soccer club. The first listing for Manchester United was in June 1991 on the London Stock Exchange. It was delisted in 2005 following a $1.47 billion buyout by the Glazer family, headed by American businessman Malcolm Glazer. The new listing follows unsuccessful attempts to launch an IPO on exchanges in Asia.
The role of the Glazers, which took on debt to purchase the team in 2005, stirred the ire of some among its fan base. Critics said the team's debt load restricted its ability to keep and attract top talent.
"In the last few years, they have missed out on key players because their hands were tied by too much debt," said Sam Hamadeh, chief executive of research firm PrivCo LLC. "People shouldn't confuse this stock, which is a fan collectible, with an actual investment. There is virtually no chance it will trade two years from now higher than what it was priced at."
Company executives saw it differently. "We attracted a significant number of high-quality institutional investors," said Manchester United Vice Chairman Ed Woodward.
As of March 31, the company had total debt of 423.3 million British pounds ($663.5 million); it is using its IPO proceeds to help reduce that level. Half of the total IPO shares sold went to the Glazer family and half to the company.
In promoting the deal, Manchester United officials emphasized that it is a globally recognized brand, and the club put two sets of executives on its marketing road show--one to tour the U.S., and one covering investors in Europe in Asia.
"We had a fantastic response from the investor base in the U.S.," said Mr. Woodward. "We found that a number of people came in with a strong level of interest, which was tweaked higher when they heard our story. It's very easy for people in the U.S. to grasp the huge opportunities around merchandising and digital media."
Mr. Woodward said the company decided to go for a listing in the U.S. not only because it believed its brand resonated with investors, but because many of the team's partners and sponsors--such as Nike Inc. (>> NIKE, Inc.) and General Motors Co. (>> General Motors Company)--are U.S.-based.
"There's a large number of future deals we expect to do with U.S. corporations, " Mr. Woodward said.
Manchester United's future earnings growth is most likely to stem from sponsorships and merchandise sales, which make up about a third of the firm's revenue, analysts said. On July 26, Manchester United signed a multimillion-dollar sponsorship deal with General Motors to have the Chevrolet brand adorn its jerseys starting in 2014.
Preliminary estimates for the fiscal year that ended June 30 indicate Manchester United's total revenue decreased 3% to 5% compared with the previous fiscal year. The decline occurred primarily because the team failed to qualify for the later stages of the UEFA Champions League, reducing broadcasting revenue, and stadium revenue fell as it played four fewer home games than the year before.
In the nine months that ended March 31, Manchester United reported its revenue rose 6% to GBP246 million, and its profit from continuing operations nearly tripled to GBP38 million, compared with the same period a year earlier.
The Glazers will continue to control the company through a class of supervoting stock.
Manchester United is the first major sports team to launch an IPO in the U.S. since Major League Baseball's Cleveland Indians did it back in 1998, according to Dealogic. The Indians were taken private again in 1999.
The Green Bay Packers of the National Football League have been a publicly owned nonprofit since 1923; the team still sells shares from time to time, primarily to fans. But its stock isn't listed on an exchange, its redemption price is minimal, and it doesn't appreciate in value, according to the team's website.
Also trading for the first time Friday were shares of Performant Financial Corp. (PFMT), which recovers delinquent and defaulted assets for companies and the government. That stock rose 11.9% in morning trading after cutting both the share size and price of its IPO.
A third deal that had been expected, from restaurant chain CKE Inc., was postponed Thursday, with the company citing market conditions. CKE owns or franchises 3,263 fast-food restaurants under the Carl's Jr. and Hardee's brands.
Write to Lynn Cowan at email@example.com