Manchester United 'worth $2.2bn less than Glazers believe'
Manchester United's shares are worth just $5, well below the $14 they floated at on Friday, according to a US reseach team.
The shares closed up 1.1pc at $14.15 on Monday after listing in New York well below initial estimates of a range of $16 to $20.
PrivCo, the Private Company Financial Data Authority, says Manchester United is suffering from the “Facebook effect”, as investors fear that buying into consumer-led businesses could leave them with heavy losses.
Shares in Facebook have dropped from the $38 IPO price to close at $21.60 on Monday in what has been hailed as the most disastrous start to trading of any major flotation in the past decade.
“The ‘Facebook effect’ causes consumers to grow wary after suffering repeated losses on retail-investor targeted IPOs with unrealistic valuations," PrivCo said.
“Manchester IPO’s overpricing by some 280pc had no reasonable economic basis, as companies and bankers counting on a ‘retail investor put’ in light of the team’s large fanbase to place a floor under the stock’s price failed to materialise."
The firm said a fair value for the shares is $4.97, valuing the company at $800m (£510m), far below the $3bn that the Glazer family, who own the club, were hoping for.
Manchester United shares were flat on their first day of trading.
The club initially planned to float in the Far East but then focused on the US after the uncertain economic environment hindered a listing last year.
The initial public offering has raised $233m (£149m) through the sale of 16.7m shares. Half of the proceeds will go to the football club to pay down debt, and half to the Glazer family.
Despite the lower-then-expected pricing, the float still established Manchester United as the world’s most valuable football club.
Manchester United’s co-chairmen Avram and Joel Glazer and chief executive David Gill rang the bell at the New York Stock Exchange as trading in the football club began on Friday.
However, the float has created further anger among fans of the club, who are unhappy at the way the Glazer family are running it.
Duncan Drasdo, chief executive of the Manchester United Supporters Trust (MUST), a group set up in opposition to the Glazers, said: “It would seem all the analysis of the true valuation was correct; the Glazers and their advisers were being far too ambitious - or perhaps greedy - and the true value of the shares should be around $10 rather than the $20 the Glazers were seeking.
“It means less money coming into the club to pay down the Glazers’ debt and, more annoyingly, the Glazers still take further money out of the club for their own personal means.”
The Glazers hired heavyweight banks, including JP Morgan Chase, Credit Suisse and Deutsche Bank, to pitch the shares to investors.
Andrew Caldwell, a partner in valuation and accountacy group BDO, said: “The Manchester United IPO mimics Facebook in trying to capture value from market sentiment, but it doesn’t have the same room for income growth potential that Facebook, allegedly, has. It has a much smaller worldwide people franchise.
"The majority of the company’s income, approximately two thirds, is generated from broadcasting rights and matchday income. These are relatively fixed, so growth must be increased substantially over the remaining third.
"Interestingly enough , attempts to float on the stockmarkets in the areas in which that growth is supposed to be derived, were resoundingly unsuccessful. If the worry was that that there wasn’t enough interest to buy the share, what’s the likelihood of them buying the shirt?
"Football club valuations are notoriously dependent on factors other than financial ratios, particularly fan support and success on the field. When these start falling away, so does the value.
"It is quite clear that for clubs to be successful in the Premier league, substantial new investment in the club itself is required. This isn’t happening here, and how long before this has an impact on the success and support, is anyone’s guess."
