Wednesday, 4 July 2012

The Manchester United IPO - what it all means

By Winston Dias (Follow me on Twitter)

 LUHG – Love United Hate Glazers

Ask any United follower what they think about the Glazers and they wouldn’t mince words in expressing themselves.

Ask any United follower what they think is the best possible alternative to the Glazers and you can surely expect silence or an answer that says ‘should be owned by the fans’ without actually expressing how the fan could own a club that the owners don’t want to sell.

The United IPO prospectus seems to have jolted a majority of their followers who see this as another ploy by the Glazers to make more money out of their precious club.

The way I see it, it’s just a small step in the Glazers losing their control over the club in the near future.

Let’s examine what this whole IPO situation means

Man Utd have finally agreed that there is debt on the club.

United have never said there is no debt on the club, the figures are published annually and are for all to see.

United have finally agreed that the debt is getting in the way of more signings and possibly a change to the wage structure.

This bit is true. We have had David Gill stating that we are still very competitive in the market. The truth being far from it and very evident in the prospectus that it is affecting us and/or will affect us in the future.

This IPO is not good for the club / The response to the IPO will be poor – remember the Asia IPO plan

The IPO is backed well by underwriters, the offering plans to raise about $100 million whereas the IPO in Asia planned to raise over a billion and therefore was not thought of as realistic by the market. Jefferies have in the past raised upto $250 million and $100m is well within their reach although whether they play a part in the future if this IPO is successful is another question. The IPO at face value to the common man might not look attractive but an investor would look at the potential of growth and with United its almost guaranteed that it will be huge. With the debts cleared and the income we get versus our expenditure we could be one of the most successful business houses.

This IPO does not do anything to decrease the Glazers control over the club

This is true to a certain extent. Shares B which are owned by the Glazers give them 10 times the voting right as compared to Shares A which would be offered initially.

Depending on how successful it is, there are chances of more shares being released to the public. Again depending on the valuation chances are that a new class of Shares – Type C could be made open to the market. Or more of Type B with additional voting rights to the initial buyers compared to the new one.

Eg. Currently Share Type A – Voting right 1 Share Type B Voting right 10
Future: Share Type A – Voting right 4 Share type B voting right 5 and finally share Type C voting right 1

The IPO has the power to effectively reduce the overall control the Glazers exert on the Club though changes will be gradual.

Manchester United – Biggest club in the club will now be registered in the Cayman Islands thereby damaging the reputation of the club.

This is perfectly legit and in no way damages the reputation of the club,.
The Glazers who own the club are based out of the USA and therefore would be liable to pay up to 35% tax. In a smart move they have created a new company that would be registered out of the Cayman and therefore the US would have no jurisdiction on it.
What would you rather have, save a significant amount in taxes in a perfectly legal manner or fund the US Government by paying them tax?
Oracle, Intel and a lot of A graded companies are registered out of the Caymans.

Time to press the panic button?

If I thought there was a way in which Glazers could lose their control over the club and also the club would be rid of its debt then I would reserve my comments for the future. This is an opportunity for the fans to buy the club in a few years time. I don’t expect Glazers to sell the club completely but there could be 49% split to the fans with Glazers owning 51% and have a slightly higher degree of control than the fans.

In summary, let not the hatred for the Glazers mask the fact that this IPO could be in our best interests. There is no guarantee that this initiative will be a success but I will take that over Glazers having undisputed control over the club and a debt that has the potential to derail the progress of the club, if it has not done so already.

If you have any questions or comments on this post, please leave them below and Winston will be happy to answer them. 

1 comment:

  1. Neat piece Winston. I totally agree. I cannot see how this can be a bad thing. While the Glazers have definitely sucked the club dry, they can do no worse than bite the hand that feeds them! Of all their businesses this is their biggest, fattest cash cow and it is in their best interest to keep the club competitive even if they do not want to sell or lose control.Addressing the debt situation is the right way forward and I hope this is the first step in that same direction.