This Manchester United flotation is fantasy football

The Glazers are hoping to find buyers for Man U shares at six times revenues – a rating associated with tech stocks

by Nils Pratley 9 months ago

Among the many reasons not to buy shares in Manchester United in the forthcoming flotation on the New York Stock Exchange are the pure, cold financial numbers. The updated prospectus shows what happens when the team flops in the Champions League: ignoring a one-off tax credit, the club will report a small operating loss from continuing operations for the 12 months to June this year; and revenues will be about 4% lower than the previous year at £315m-£320m.

Yet the Glazers hope buyers can be found for Man Utd at a price tag of almost $3bn (£1.9bn). Six times revenues! That's a rating associated with go-go technology stocks where income doubles every couple of years. At Man United, despite the Glazer camp's boasts about greater commercial adventure and bigger sponsorship deals, revenues have advanced by a grand total of 14% over the course of the past three years.

But, of course, tThere are other reasons to ignore the listing. There's no dividend for shareholders or plans to pay one. V; voting rights are unequal, with the family hoarding the class of stock with supercharged powers. And the club will still be indebted to the tune of £345m even after £80m or so is raised to pay off a slice of borrowings with a new share issue.

From an investment point of view, the only reason to take a punt on Man United at the proposed price is the hope that one day a zillionaire will make the Glazers an offer they can't refuse. The trophy asset argument, in other words. But it rests on wishful thinking, rather than sound investment logic.

Indeed, the biggest risk factor may be one that the prospectus doesn't mention: the presence of Sheikh Mansour at Manchester City may reduce to a trickle the number of billionaires willing to pay silly money for the right to play financial games.