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Was The United IPO Overinflated? Will Glazers Panic?
[account-removed] 2 years ago
Link: www.independent.co.uk/news/business/comment/simon-...

Will the Glazers panic if the Type A share value drops in the NYSE? No, they wouldnt. They fooled investors and already have the money. Plus, they know a fire sale now will fetch a significantly lower full price and they arent stupid businessman. They will ride out the storm and negative PR, as always, and they will do whats in their best business interests in the end. They don't care about public opinion.

Look at it this way, they wanted to sell Type A shares at £16-20, but they are instead selling it at $14. But imo, the true price of Type A shares should be around $1.5, so is the expected share price drop from $16-20 to $14 that bad? Not imo. Its reduces their profit margins, but its still a massively overinflated profit.

The shares that the Glazers have issued are Type A shares which have only one vote each. The Glazers hold Type be shares which has 10 votes each. Assuming that all shares issued have been sold, then roughly 10% of the club has been sold but the Glazers still retain over 98% of the voting rights.

Assuming all the issued IPO shares were sold, then the IPO generated £150 million. Around 10% of the club was sold, so that values all the shares, I.E. The total club, at £1.5 billion. Forbes also values Manchester United at £1.5 billion. That's not a coincidence imo. £1.5 billion is United's current short term value. Its mid to long term value is far higher, when the debts of around £400 million get cleared, which will happen in the mid to long term, then the valuation will jump to £2 billion+ . If we factor in rising commercial revenue and TV money in the mid to long term, then United's value will be more than £2 billion in the mid to long term.

But, we are only concerned with short term at the moment. So, based on overall shares available, the price of $14 per Type A share is fair. But when you factor in that Type A shares have only 1 vote and that Type be shares have 10 votes, then the valuation isn't fair. Using Forbes £1.5 billion valuation as a short term constant, that means based on voting rights the valuations of the clubs shares should be different. I.E.

Type A shares only have 2% of voting rights, so should have a overall valuation of £30 million.
Type be shares have 98% of voting rights, so should have a overall valuation of £147 million, or £1.47 billion.

Based on that, the Type A shares issued in the IPO are massively overpriced. The share price of Type A shares should actually be less than $4. It should be around $1.5 per Type A share. But the Glazers have gotten away with murder, so its a success for them. The Glazers sold weak shares for a massively overpriced share price and they technically hold complete control.

One thing of comfort in the IPO prospectus is that Type be shares can be converted to Type A shares, and that 1 Type be share can be converted to only 1 Type A share. So based on that it looks like the Glazers have plans to leave the club in the mid to long term when the debts are cleared and the valuation of the club jumps to £2 billion+. But, the problem is since Glazers have Type be shares and 98% of the voting rights, they can change the share conversion rate/ratio whenever they like.

The Glazers are bastards, but they arent stupid businessmen. Seriously, £150 million for 2% of the voting power?! They actually succeeded?! Genius! But they are still bastards of the highest order. Imo, they will later list Manchester United in the Asian markets in the future in order to maximise their revenue when they want to completely sell the club. That will happen when:

1.) debts are cleared
2.) valuation jumps to over £2 billion
3.) Type be shares get converted to Type A shares, and when the share conversion ratio is changed.
4.) United monitise further on their brand value, I.E.commercial revenue, which constantly shows signs of annual improvement
5.) United gain more from TV revenue as the Premier League increases in demand and as the Champions League becomes more popular.
6.) when they develop more support in Asia. Its already the highest in world football, but there is still scope for getting more fans from this region in the mid to long term.

For now, Manchester United and its supporters will have to bear with the Glazers because there is nothing more we can do. But, since the Glazers are good at making money from Manchester United, I expect to see them sell the club in the mid to long term when the debts are cleared and valuation spikes over £2 billion
Redsince63 (Manchester United) 2 years ago
Sounds great as long as the mid term begins in dec 2012 and the long term terminates in may 2013 ! Lol if that's the case I'll be getting as pissed as a newt when it happens !
Question is who will pay 2 billion? The only real contenders are middle eastern. all the Asian bidders are usually consortiums and getting one together for the tune of 2B sounds like a tall order
[account-removed] 2 years ago
@Redsince63

Usually in investing, short term is around 1 year. Mid term is around 1-5 years. Long term is around 5+ years.

As for the £2billion. I think the Glazers will sell a lot of the shares to the fans in order to fetch the highest price. They will sell to whoever they can in order to maximise their profit, doesn't matter if its the fans, companies, sugardaddies or a middle east royal family
Redsince63 (Manchester United) 2 years ago
Thanks for explanation mate ! I suppose its a case of patience is a virtue lol, 1 to 5 sound managable !
GingerPrince18 (Manchester United) 2 years ago
Good article. Not Surprised you have not had many responses. Not sure everyone understands this topic that well. Fingers crossed it all goes well



   
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