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Saturday, 11 August 2012

Worse Than Facebook's: Manchester United IPO

Posted on 06:50 by Unknown
I guess all's bad that starts badly. In recent years as an erstwhile follower of the English Premier League, I have pondered the dastardly dealings of the rapacious Ameriscum owners of Manchester United [1, 2, 3]. When you hear the words "American" and "finance" mentioned together nowadays, your gut response is that something malodorous is afoot. And so it has been with the means the Glazer family came to acquire England's most storied football club--by leveraged buyout--and their subsequent "management" of it--by saddling it with hundreds of millions of dollars in debt.

Having failed in tricking Hong Kong and Singapore into issuing their IPO, they then headed to America where European professional football (soccer) enjoys less name recognition than the "lingerie football league." Wayne Rooney...who dat? There have been any number of dubious reasons cited for the IPO. Let's start with fundraising. Estimates of the debt saddled onto previously financially team finances vary from $650 million to $1 billion. Make no mistake that this disastrous IPO--again, worse than even the Facebook fiasco if you consider management's ludicrously optimistic opening price target--will fail to pay off any significant amount of IOUs even at the conservative $650 million level. Some background on what's happened: 
The failure of the shares to “pop” on its trading debut on the New York Stock Exchange was a second blow for the listing, after underwriters lowered the price to $14 late on Thursday, after pitching the offering to investors with a range of $16 to $20 [and you can call me "Bun E. Carlos"]. The stock eventually peaked at $14.20 and closed at $14 on turnover of more than 30m shares, then dipped below the offer price in after hours trade to $13.90.

It means the football club and its owners raised about $234m from the sale of 16.7m shares. That is nearly $100m lower than the $330m implied at the top end of the price range. The sale of the 10 per cent stake leaves the club with a market capitalisation of less than $2.3bn....
Mind you, of the comparatively puny $234 million (before IPO fees) raised by one of the world's most storied football clubs, half will go straight into the pockets of the reviled Glazer clan, leaving what, $650M - $117M = $533M in debt outstanding at the very least:
What has so outraged fans – aside from the continued Glazer ownership, of course – is that the Americans have backtracked on a promise that all the money raised from a stock listing would go to pay down the roughly $650 million debt the club carries from their leveraged purchase of the team. The new plan will see only half the money used to pay down the debt, leaving the rest for Malcolm Glazer and his sons to feast on
How pathetic was thing listing? The underwriter had to repeatedly intervene on Friday to keep its price above $14 (which it did anyway after hours):
According to one person familiar with the listing, Jefferies, the lead underwriter on the IPO, was forced to step in and buy the shares to prevent the stock slipping below $14 during the regular trading session. “Jefferies is stabilising the shares,” said the person.
These damn Yanquis already went home, yet they are hated even there. As even US media has noticed, it's a junk issue all around. First, "shareholders" will receive no dividends. Second, they will receive no voting rights. Add those to continued Glazer "management" and a stock price sure to drop in the coming days and, well, I guess those who were dumb enough to buy this stock will get what they fully deserve for such an idiotic purchase.

I just hope these dupes don't have the cheek to sue anyone for their lack of due diligence in making such a pathetic purchase. What a joke.

13/8 UPDATE: But don't take my word for it. Your humble blogger notes that other commentators have duly followed in my footsteps in making comparisons to the Facebook fiasco. ESPN quotes an independent financial analyst who believes the fair market value of this joke of a stock is $4.97, or less than a quarter of what the (delusional) Glazers believed the stock was worth. Based on a 10% flotation and a share price of $4.97, the market value of Manchester United would be even less than what the Glazers acquired the club for by borrowing hundreds of millions back in 2005:
The club's current share price is $14 but millions of shares have been bought by the seven banks underwriting the IPO, and PrivCo calculated their true value is just $4.97 each - giving United a value of around $800 million, rather than the $3.3 billion that they want The Glazers paid just under £800 million to complete their takeover in 2005.

"Manchester United's valuation using several accurate valuation methodologies is a mere $4.97/share, only about one third of its $14/share offering price (which is also the price at which it closed its first trading day, but only because IPO underwriters placed large open-market bids at $14/share to prevent the stock from closing below the IPO price)," PrivCo said.
So let me get this straight: Had the underwriters not gamed the market by trading it at $14/share, it would have collapsed from day one? There are few things you can be certain of in this life, but that this stock will dive in the coming months Facebook-style is pretty much guaranteed. I guess we'll be seeing how the market judges the Glazers' value-added [sic] over the course of eight financially miserable years.

Somehow, I do not feel sorry for anyone involved in this disaster



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