The club cuts the value of its stock market flotation, valuing the club at only $2.3bn (£1.47bn) and shaving as much as $100m from the anticipated proceeds for the team and its owners.
The club said its shares priced at $14 apiece, below the $16-$20 per share range it had in mind.
At the high end of the range, the team would have been valued at $3.3bn.
Manchester United priced 16.7 million shares, as planned, and raised $233.2m – which will be split equally between the club and its owners, the Florida-based Glazer family.
The loss of as much as $100m in proceeds for the club will be a blow as it copes with a heavy debt burden and seeks to buy expensive new players.
While the deal still makes it the largest sports team flotation on record, the valuation is a setback for the 134-year-old club, which had to abort plans for an offering in Singapore and then saw Morgan Stanley leave the underwriting syndicate, partly due to disagreements over valuation.
Investors, bankers and analysts have said the share range represented an exceptionally rich valuation. One analyst said shareholders were paying up even at the IPO price.
“I’m surprised it wasn’t more of a discount,” said Ken Perkins, an analyst with Morningstar. “Our value was around $10. It’s still a rich price. They’re asking people to pay up a lot to take on a lot of operational and financial risk.”
The Glazers, whose interests include shopping centres and the Tampa Bay Buccaneers football team, will also take in less money from the share sale, but the deal still represents a return of some 2.5 times their equity investment in the club.
The club is planning to use the money to pay down its pile of debt that dates back to the Glazers’ £790m buyout in 2005.
Manchester United’s debt stood at over £437m as of 30 June.
Some fans have protested, criticizing the Glazers for only using half of the deal’s proceeds to pay down debt. They argue that the large debt has led to reduced financial flexibility which came at the expense of investment in players and the team’s performance.
The Glazers have chosen to float Manchester United on the New York rather than London’s stock exchange, Channel 4 News’s Business Correspondent Siobhan Kennedy explains why.
Manchester United – aka the Glazers – are actually being very cheeky, which is why they had to cut the price of the initial public offering (IPO). They have chosen to list anywhere but London because of the way they wanted to structure the IPO, ie to sell shares to investors and raise money but not actually give up any control of the club itself.
You are allowed to do this in New York by issuing so-called B shares, which do not carry the same voting rights as preference or A shares. In other words, you buy Man U shares and become ‘owners’ of the club but you do not have any say on how it is run. The Glazers retain all the power.
This rightly sends shivers down the spines of most corporate governance experts and it is for that reason that such structures are banned on the London Stock Exchange.
On top of that, the Glazers have also chosen to list the shares on a separate bit of the NY stock exchange which focuses on new, high growth companies, typically start-ups. A funny place to list a football club that is more than a 100 years old, but it also means that new shareholders have even less rights than normal. And the club isn’t required to file as many financial statements as normal, which puts investors’ hairs on end.
And it’s this that has angered fans too. They have never had a good relationship with the Glazers since the American family bought the club in 2005 and saddled it with nearly £800m of debt.
Now, not only is Manchester United raising less than the Glazers’ originally intended, but they’re keeping all the power too. Oh, and the money as well.
Half of the proceeds will go to the club, to help pay down their $423m debt pile. But the other half will go straight in the Glazers’ back pockets. The fans would have wanted more to go to the club, not just to pay off the debt but also to invest in new players given their lacklustre performance last season.
The proof will come over the next few weeks and months, as Man U’s shares start to trade hands. Many predict they will fall from their $14 debut. As one investor told told it, Man U’s shares are a “dreadful investment…” and one to “avoid at all costs”. Not exactly what the Glazers want to hear on day one.