Manchester United on New York Stock Exchange? Soccer GIANT an Emerging Growth Company Under Obama JOBS Act
The average American sports enthusiast typically struggles to come to grips with the fact that “sport” exists outside the realm of the NFL, NBA, MLB, and NCAA. Check out the reaction every time Forbes throws out a list of the Most Valuable Sports Franchises or Highest Paid Athletes if you don’t believe me. The fact that soccer even makes the list(s) is mind-boggling to some. Because of that, it should come as no surprise that many just don’t get the buzz around Manchester United’s latest move; or even know there is in fact a “buzz” in the first place.
That aside, the English football giant is about to venture into the world of financial scrutiny and speculation that Mark Zuckerberg and Facebook stumbled into some weeks ago leaving many supporters worried the club may find a similar fate.
WSJ: English soccer club Manchester United’s shares are expected to begin trading on the New York Stock Exchange late next week. The company is aiming to sell 16.7 million shares in its initial public offering at a price between $16 to $20 each. The shares are set to price Thursday.
Manchester United, one of the most successful teams in professional soccer, would be the first sports teams to go public in the U.S. in quite some time. The last team to do so was the Cleveland Indians Baseball Co., which launched in 1998, according to data tracker Dealogic, and was later taken private.
Manchester called off plans for a $1 billion initial public offering in Singapore last year amid volatile markets.
Just in case you need a quick summary, check out the Roger Bennett piece at ESPN.com. Here’s a taste…
Roger Bennett @ ESPN: Until the 1980s, English football was run by an innocuous assortment of local businessmen who demonstrated a distinct lack of national ambition. Their financial model amounted to little more than “putting bums on seats” for home games. The creation of the English Premier League in 1992 changed everything, triggering a gluttonous gold rush. Some of the most sophisticated global sports business minds poured into English football to exploit the new frontiers of domestic, international and digital rights, and the exploding universe of commercial opportunities.
On Aug. 10, this global gold rush will break new ground as the Florida-based Glazer family, which owns Manchester United, seeks to sell 10 percent of the club as an IPO on the New York Stock Exchange. Three months ago, Manchester United was transformed into an “emerging growth company” registered in the Cayman Islands. Now, the Old Trafford club is poised to become the ticker symbol MANU, traded on New York’s Big Board.
The IPO will make 16.7 million shares available at an expected price of between $16 and $20, raising approximately $300 million, and driving the club’s total valuation to $3 billion. It’s a remarkable sum, twice the $1.2 billion the Glazers paid to acquire the club in 2005 when they took the club off the London Stock Exchange and saddled it with debt, last reported at $656 million, in a leveraged buy-out.
I think it’s safe to say not everyone is exactly thrilled with the move…
Manchester United supporters opposed to the flotation of the English football club in New York called on Friday for a boycott of sponsors’ products to put pressure on the Glazer family to ditch the plan.
The call risks embarrassing the club just days after it signed a record-breaking shirt sponsorship deal with U.S. auto company General Motors.
“The boycott strategy is intended to send a loud and clear message to the Glazer family and club sponsors that without the support and purchasing power of the fans – the global strength of the Manchester United brand doesn’t actually exist,” the Manchester United Supporters Trust (MUST) said in a statement
MUST has accused the American Glazers of hurting the team’s performance by saddling it with debt in a 790 million pound ($1.23 billion) takeover in 2005.
Reservations not just reserved to fans…
The projected pricing range of $16-20 a share has also shocked many analysts, including Guardian financial editor Nils Pratley. “Six times revenues,” he exclaimed. “That’s a rating associated with go-go technology stocks where income doubles every couple of years.”
“They are not a good investment at the rumored sale price as there are so many red flags on the balance sheet and in their dual-class voting structure,” he explained before referring to the poor performance of the Boston Celtics, Cleveland Indians and Florida Panthers during their brief experiences on the public market. Aama added, “historically, sports franchises have not proven to be good investments in the United States.”
Here’s another scary tidbit…
In April 2012, President Barack Obama signed the JOBS Act into law. JOBS is actually an acronym for “Jumpstart Our Business Startups,” and, yes, this is oddly related to United’s public offering.
The JOBS Act was partially intended to ease the regulatory burden on small companies. Notable among the key provisions was one that exempts small businesses from parts of the Sarbanes-Oxley law, which was passed in the wake of the accounting scandals at several large corporations (Enron, WorldCom, Adelphia, etc.). Its basic goal: increase requirements for financial reporting so that such scandals wouldn’t happen again. “Small” for JOBS, however, means “less than $1 billion” in revenue.
For that reason, Manchester United is considered “small” (technically, an “emerging growth company”) and thus isn’t subject to Section 404 of Sarbanes-Oxley, a provision that requires companies to have an assessment of internal controls. Basically it’s management saying that, yes, their financial statements are indeed reliable and not works of light fiction.
What does that mean for United? Less regulation. In general, those regulations cost money to adhere to, but they also exist to safeguard against companies getting creative with their books. Just because the Glazers are exempting themselves doesn’t mean they are witch doctors, but if you are already suspicious of the way the club is being run, the opt-out probably isn’t reassuring.
Think about the reality of this for a minute. Even if MAN U qualifies as the type of enterprise the legislation intended to cover; now the Jumpstart Our Business Startups Act (JOBS Act) is being used to “create jobs” overseas?
WSJ: But in the latest strange twist to the new law, the spirit of U.S. job creation will be embodied by none other than Manchester United, the British soccer club.
Next week, “Man U” is expected to net $300 million by offering shares to U.S. investors on the New York Stock Exchange. Never mind that the team is based in the land of bangers and mash; because it has revenues under $1 billion, it qualifies to sell its stock and report its financial results under the provisions of a law intended to help U.S. companies create American jobs.
Another $300 million for Man U should amply equip 11 strong men, a few substitutes and some coaches to keep soccer balls flying across grassy fields in Europe. It also could enable the company’s management to disclose fewer financial details to American investors. But how this kind of IPO will create jobs in the U.S. is anybody’s guess. A spokeswoman for Man U declined to comment, as is customary on the eve of a securities offering.
The Romney camp should love that.
Oh wait, he stepped in it the last time he talked about professional sports. Maybe not.
DAILY FINANCE: (“Ugliest IPO of the Year”) In a rare display of congressional bipartisanship, the Jumpstart Our Business Startups Act became law earlier in 2012. Among other things, the legislation eased regulations so that so-called “emerging” or “high-growth” companies had fewer barriers to going public.
Next week, fabled English soccer club Manchester United will be taking advantage of the JOBS Act’s relaxed rules by listing its shares on the New York Stock Exchange. It’s seeking to raise roughly $300 million in an IPO (ticker symbol: MANU).
Was Manchester United the sort of IPO that the JOBS Act authors had in mind when dreaming of job-creation and jumpstarting startups (if that’s even possible)? I sincerely hope not.