After a record season on the pitch for Manchester United, June 13 marked another on the stock market.
At the close of trading, United’s stock price on the New York Stock Exchange was $11.07, a figure that has not been touched since the club launched its initial public offering on August 10, 2012. When markets opened on June 14, it fell below $11 for the first time.
The previous low was $12.25 per share, in October 2012. This was just months after Joel and Avram Glazer cheered as they rang the bell on Wall Street – flanked by United executives David Gill, Ed Woodward, Matt Judge and Richard. Arnold, as pictured above – to announce the club’s going public. In between, the price has risen and fallen with the usual trading volatility, but this fall opens up new insights.
As recently as September 27 last year, United’s price closed at $20.50 as investors took advantage of the lingering sign of Cristiano Ronaldo and general optimism about the club’s future. .
So in the space of nine months, the value of United, according to the NYSE, has fallen by £1.32 billion, based on current exchange rates. United’s market capitalization – the total of all shares – stands at £1.8bn, around 46% lower than it was when the team made a promising start to the campaign. Premier League.
Kevin and Edward Glazer selling 9.5 million shares saw the price close at $16.94 on Oct. 6, a week after that recent high, and down $2.68 from the previous day. Owners who offload large holdings in assets inevitably trigger a market crash. The trend was steadily downward over the following weeks.
The Glazer brothers recouped £137m from that sale, with no money going to the club, meaning the family have racked up nearly £450m from United since taking over in 2005 at a personal cost of £270m, while still owning 69 per cent.
Everything indicates that the Glazers are not interested in selling United entirely, and in any case the market valuation would only be a small piece of the puzzle. The bidding process for Chelsea has shown a major appetite for Premier League clubs, with a final price of £4.25billion paid by the consortium of Todd Boehly and Clearlake Capital, even eclipsing market capitalization of £3.1 billion that United reached at their peak last autumn.
United should be a more attractive proposition than Chelsea for potential buyers due to Old Trafford’s scale and global market appeal. British billionaire Sir Jim Ratcliffe has made a belated bid for Chelsea and football people have wondered if he will ever push for United, a team he has pledged allegiance to.
However, United’s weak share price partly reflects the industry’s acceptance that the Glazers are responsible for the long term. Investors could speculate in the hope of a medium-term sell-off and a good profit, but brokers have had little incentive to do so and the trajectory of stocks echoes this.
General market forces are undeniably a factor, with global inflation concerns limiting spending. The Dow Jones, an index of 30 leading publicly traded companies in the United States, is down sharply from January, and Madison Square Garden Sports Corp, owner of the New York Knicks and New York Rangers, has seen a similar drop in price share at United.
And yet, United remains a clear example. As Price of Football podcast host and college lecturer Kieran Maguire pointed out, the Dow Jones has risen 130% since United first listed in New York in 2012. The Nasdaq, another stock exchange, is up 268% . in the same period. In contrast, United shares fell 21%. “So it must have something to do with United,” he argues. “It reflects the quality of United’s decision-making process.”
Maguire believes the crisis is not just because the club is no longer in the market to buy. “Apple shares have risen over the past decade and no one is saying they will be bought,” he adds.
United pays dividends and it has been cited as a way to maintain confidence in the share price. The final installment will be released on June 24, with Glazer’s share usually around £8m in total. This fall, however, shows that a semi-annual payment alone is not enough to arouse the interest of investors. Maguire has a solid theory.
He says: “United get a price surge whenever there’s reason to imagine an increase in revenue: the Super League, Project Big Picture, Ronaldo. It is the stock market that takes future cash flows into account. But that has now evaporated. United will need to invest in the squad of players to reach the Champions League and the emergence of Newcastle means that could become even more difficult.
United are hoping to make Frenkie de Jong their star summer signing, but sources say a deal with Barcelona could still be a long way off. United are fully aware of Camp Nou’s financial difficulties and are prepared to wait to bring prices down, with the Catalans under increasing pressure to sell in order to set their salary cap for next season, as set by La Liga. However, United’s inactivity in the transfer window is unlikely to have much influence on the share price.
United must renovate Old Trafford without being able to use someone else’s money, as promised by the Super League. “You could say the Super League threat has supported the stock price,” adds Maguire. “It was always used as a bargaining tool to extract more money from the Premier League and UEFA. Now it is effectively a dead duck.
There is one last consideration. “Markets are also eyeing higher interest rates on the horizon,” Maguire says. “United are in huge debt, and borrowing extra money should cost them dearly.” Net debt (total debt less cash) currently stands at £495.7m, an increase of 11.8% on the prior year. Gross debt (the total amount of debt) has barely budged in 17 years since the Glazers’ leveraged takeover.
Revenues mean those numbers are manageable, but the share price reflects the wider sentiment around United.
(Top photo: Dario Cantatore/Getty Images via NYSE Euronext)