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Old 26th July 2012, 22:18   #1
Paul Brooks

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Default Manchester United's New York setback exposes failings of Glazers plan

Halting of Manchester United's New York IPO has illustrated the unattractiveness to investors and fans of the club's model

Stuart James
Stuart James, Thursday 26 July 2012 19.10 BST

Another day, another reality check for the Glazers. Manchester United, described as "one of the world's leading brands" in the 231-page registration document filed earlier this month in preparation for the club's flotation on the New York stock exchange, may not be quite as attractive as its owners like to believe.

After a proposed float in Singapore was pulled last year, it has emerged that United's planned initial public offering (IPO) in New York has been temporarily postponed because of volatile US markets. While United and Jefferies, the investment bank signed up to lead the flotation, remain tight-lipped about the process, those that forensically examine the Premier League club's accounts are questioning whether the latest setback is about more than the fiscal shockwaves triggered by another turbulent week in the eurozone.

"Obviously it's a tough time economically but the US stock market has barely changed from where it was when they published the original prospectus," said Andy Green, a financial analyst who writes the "andersred blog" about football ownership and is an adviser to the Manchester United Supporters Trust (Must). "Although it's hard to see inside a process like this, they're obviously having problems, and I get the impression from people that I'm talking to in the market that it's at high risk of being cancelled."

Should that happen, it will put paid to the Glazers' hopes that fresh investment will cover a sizeable chunk of the 423m debt they loaded on to a club that have fallen well behind their Premier League rivals when it comes to competing in the transfer market.

One of the primary reasons for that in the eyes of many United supporters is that the Glazers have taken 500m out of the club, in interest, bank charges and fees, to service the debt. "The latest figures we've got is that they've spent 71m on the debt in the first nine months of the financial year," Green said. "And obviously supporters were hoping that the IPO would lead to an end to a lot of those costs and more money being available to the manager.

"But in the short term, the real question is: if they do have to pull this IPO, what does it say about investors' perceptions of Manchester United? The Glazers have had talks with various parties in the past and never been able to agree on a price and this would be a real slap in the face for them if they take it to the biggest stock market in the world and they can't get it away."

In truth, it would hardly come as a surprise if United's shares prove to be a hard sell. The shares will carry a tenth of the voting rights of the shares the Glazers will issue to themselves and there is no plan to pay dividends. The Glazers, in other words, will remain in complete control and are offering precious little in return.

"It's a tough sell to start with, with very little voting rights, no annual general meetings where you can quiz the management, no dividend. But on top of that obviously there is the question of what valuation they're putting on it, and if they're trying to put a very high price on the club and all those things I've mentioned, then it becomes very, very difficult," Green said.

Must have called on the Glazer family to launch a full flotation, which would no doubt prompt a very different response, in particular from United supporters. Duncan Drasdo, the Must chief executive, said: "Should they choose to do this, with no strings attached, we would support such a flotation wholeheartedly and encourage the global fan base of Manchester United to seize such an historic opportunity to secure a meaningful fan ownership stake where the priorities of the club are the same as the fans not absentee owners."

Green, however, believes the prospects of that happening are slim. "I don't see [any possibility of that happening in the short term] but I think the trust are right, the Glazers are making a big mistake. They're trying to do this at this huge price and with keeping total control. Actually, there is a natural buyer for these shares if they want to get more money into the club from the outside to get the debt down the supporter base which they reckon is 600m around the world.

"I'm sure there are at least a million football fans around the world who would like to own a stake in the club. The Glazers are far too short-sighted for that. They're too greedy and too controlling. I do think if this IPO falls apart, that it could be a real turning point because the Qataris, the Red Knights and now the world's institutional investors will all have said to the Glazers: 'No, the club is not worth as much as you think it is.'"
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