Manchester United choose Asia for IPO

Posted on August 16, 2011

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First featured in FT

Singaporean fans of Manchester United last caught glimpse of their favourite club when the Red Devils visited the country in a one day trophy-touring parade in July. But as of next year, they, along with millions others, could well have the opportunity to buy shares in the 19 times Premiership champions if the club’s plans to do a partial float on the Singaporean stock exchange go through.

Yet, as Manchester United gears itself up to become a publicly listed company once again (it was delisted after the Glazers bought it in 2005), the question that is being asked among the club’s UK-based fans is not only why Singapore over say, Hong Kong, but why Asia more generally?

Ostensibly, a club based in the north west of England and with American owners, should be looking to London and New York as its first ports of call for any IPO.

So should we be surprised by Britain’s most famous sporting name moving east? On the face of it, the answer is an overwhelming ‘no’.

The team that started off as Yorkshire and Lancashire railway side in 1878 was ranked by Forbes earlier this year as the world’s most valuable football club, worth an estimated $1.86bn. Manchester United have been an international football brand for decades and have toured and played in Asia since 1974 – longer than any of its major rivals. The Red Devils also boast over half of their 330m fan-base in the continent and have consistently rammed down the throat of anyone willing to listen, that Asia is where it’s at.

But is United’s IPO dream really motivated by the prospect of an estimated 190m Asian fans becoming major share holders in the Reds? Or the cold hard fact that the owners want the highest  possible valuation for a company that has been a constant source of controversy since they bought it six years ago?

Financially, there is no doubt that the buoyant stock markets in Asia offer the Glazers a higher valuation than anything they could get closer to home. But the $1bn valuation that is being attached to the 25-30 per cent partial flotation is lower than the £2bn the owners are thought to have touted for a club they bought for £790m. The revised down valuation will come as no loss to most of Manchester United’s fans, many of whom are loathe to see the Florida-based owners walk away from the club making a healthy profit.

“We welcome the IPO in the sense that it gives fans a chance to buy shares in the club, but the decision to float in Singapore is just an extension of the fact that the Glazers have always refused to engage with [UK] fans”, a spokesperson for the Independent Manchester United Supporters Association told beyondbrics.

The listing will not preclude international buyers from the shares, but it will complicate the procedure for British fans who have long resented the debt burden placed on the club since the Glazers took over. Debt repayments meant that despite an operating profit of £91m, United still made an operating loss of £79m in 2010.

Even the Far-East, often vaunted as a footballing cash-cow, doesn’t produce the returns that would justify the investment made by clubs in terms of marketing and pre-season tours. Asia is awash with fake merchandise and its commercial television rights pale in significance to those earned from domestic rights. Manchester United made a mere 2 per cent of its total club turnover from an Asia tour in 2009.

In fact, steps towards public listing, in Asia or otherwise, is a pretty unusual move all round, and especially unusual for a club with outright owners like Manchester United.

Stock markets are not the vogue for either club owners or potential investors. The Premiership may be the most lucrative domestic league in the world but most of its money is pumped into massive transfer fees and inflated player wages, rather than being passed on to investors.

As IFR wrote on Tuesday:

The club could pay a dividend, but rational investors are keen on secure earnings if they are to buy a pure yield story at IPO.

It is only fans, a special type of ‘investor’, for whom public listing is a way of staking an often sybolic claim over their clubs.

When United were bought and de-listed by Malcolm Glazer in 2005, thousands of fans refused to return their share certificates, losing hundreds of pounds for holding on to what were essentially worthless pieces of paper.

This time round, the Reds faithful may find it harder to get their hands on those pieces of paper in the first place.

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