The Glazer family’s very long mooted Manchester United flotation may be off for a third time after the Financial Times confirmed that an initial public offering (IPO) planned for New York this summer is on “pause” for an undetermined period. Citing volatile market conditions, the FT says that the IPO may now not take place before the new football season kicks off in August. The Manchester United Supporters Trust (MUST) and blogger Andy Green claim the IPO is now ‘dead in the water’.
But after failing to get the listing away in both Hong Kong and Singapore, there is suspicion an age-old problem has risen its head: Glazer family greed, and an over-valuation of the club.
United executives had planned to hit the road this week, meeting investors in Europe and Asia, before heading to the States to sell the listing amid a rash of negative articles in the financial press on both sides of the pond. But referencing insider sources, the FT claims that the Glazers have been spooked by a downturn in market conditions and increased volatility this week.
“The pause comes as US markets have been unsettled by further concerns over debt and economic growth in the eurozone, with the S&P 500 index falling 2 per cent since the start of the week,” said the paper’s editorial on Wednesday.
“People familiar with United’s IPO plans suggested the current delay had to do with market conditions. The Vix index, a widely monitored measure of implied volatility on the US market, has risen by more than 23 per cent since Monday. Bankers consider a sudden rise in the Vix as a sign of potential risk aversion from investors, making them less likely to participate in new offerings.”
The delay means a valuation is unlikely to be set until mid-August at the earliest; the smart money suggests the listing is to be pulled in its current form.
This comes just days after reports emerged that the Glazer family was keen to list before the new football season begins, with Sir Alex Ferguson repeatedly wheeled out to the defend the Americans in the past week. The owners’ enthusiasm to avoid another round of ‘Green and Gold’ style protests at Old Trafford ahead of listing, and a seeming desperation to get the listing away, were perhaps behind the media blitzkrieg.
Yet, volatility and poor market conditions are excuses that will fool few, with the two per cent S&P index fall barely a blip in historical terms. Meanwhile, the Vix has been running at around 20 this week – far lower than in previous months this year. Indeed, the Vix – an aggregated market nervousness score amusingly dubbed the “fear index” – has jogged between 15 and 20 this month, but up to 48 in the past year, and at 80 during the widespread market panic in October 2008.
The pandemonium, if there is any, resides in the United boardroom, not the NYSE floor.
But if market conditions are not genuinely to blame for delay – temporary or permanent – then lack of institutional interest in the sale is almost certainly a factor. The family’s dual-class share structure, determination to pay no dividends, a market unfamiliar with UK sports ‘franchises’ and the aggressive valuation consistently demanded by the Glazers are all in play.
In fact, a consistent pattern has emerged in the past 18 months, with the family willing to sell at least part of the club, but unwilling to lower a £2 billion plus valuation that neither the Qatari Royal family, Red Knights, nor institutional investors in two continents are willing to match.
Whether the family reinvigorates the IPO in the coming weeks is the real question, of course, with the FT casting doubt that the process can be completed in the current market window if the club is not priced by August. After all, if the market has spoken, the Glazers cannot return to New York without amending the structure and value of the listing. As the Wall Street Journal argued on Wednesday, while the fans love United whatever the financial outlook, US investors most certainly do not.
What next? Time for a full listing, with single class share structure that could bring partial ownership to the United fanbase, says MUST.
“The Glazers have been forced to pull the New York flotation of Manchester United due to lack of interest at the valuation they were placing on the club,” said ceo Duncan Drasdo on Wednesday.
“We now call on the Glazers to come back with a full flotation of Manchester United with a single class of full voting shares. 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.”
In the short-term United’s failure, once again, to list means that the club will continue haemorrhage money in interest and bond buy-backs – around £71 million in the first three quarters of the financial year. In the longer term the Glazers may be forced to re-value the club before sale, or flotation.
Much, of course, depends on just how much the family borrowed to refinance the Payment in Kind (PIK) loans last year, and whether the financial strain has become significant. In other words, not what motivated the Glazer family to change track and seek an IPO in the first place, but how big the financial need has become.