Saturday, August 11, 2012

MANU Fails To Score on IPO

MANU, the trading symbol for Manchester United Football Club, got a chilly reception from investors on Friday (August 10, 2012).

Opening on the New York Stock Exchange at $14, the club’s massive fan base of 660 million could do little to leverage the tepid stock to $20 a share.

English Premier League teams rarely make the profit column. These clubs earn annual revenues equivalent to a modest British supermarket chain. 

Manchester United derive its revenues from ticket sales, replica souvenirs and broadcast rights, hardly enough to pay for on-going operations and pay down more than $600M in debt, much less pay for a Brazilian in the transfer market.

Critics have pointed out that few European teams earn a profit, making them poor investment choices, even those team that finish high. To its credit, Manchester United  regularly finishes first or second in the Premier League and pays the highest average salaries to staff and players -- without paying out uber salaries in the transfer market.

The MANU IPO may yet enable Manchester United to dabble in the transfer market or pay off its lumbering debt, but not both. This season it is expected that the top ten transfer players collectively will receive payouts of $332M, putting a strain on any club's budget.

Manchester United's star forward, Wayne Rooney

Given that Manchester United will probably finish in the top two again -- even without mega-star transfer players-- wouldn’t it make more sense to find a quality discount player (s) from places like Bolivia, Honduras or Belorussia? Seems like a better option that an IPO.  What do you think?

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