After a season of record lows on the pitch for Manchester United, June 13 marked another in the stock market.
When trading closed, United’s share price on the New York Stock Exchange was $11.07, a figure not touched since the club launched its initial public offering on August 10, 2012. When trading opened on June 14 it dipped below $11 for the first time.
The previous low was $12.25 per share, which came in October 2012. This was just a couple of months after Joel and Avram Glazer had applauded themselves ringing the bell on Wall Street — flanked by United executives David Gill, Ed Woodward, Matt Judge and Richard Arnold, as pictured above — to announce the club’s arrival on the stock exchange. In between, the price has risen and fallen with the customary volatility of trading, but this plunge breaks new ground.
As recently as September 27 last year, United’s price closed at $20.50, with investors basking in the afterglow of Cristiano Ronaldo’s signing and the general optimism about the club’s future.
So in the space of nine months United’s value, according to the NYSE, has fallen by £1.32 billion, according to current exchange rates. United’s market cap — the total of all shares — stands at £1.8 billion, some 46 percent down on what it was when the team had made a promising start to the Premier League campaign.
Kevin and Edward Glazer selling 9.5 million shares saw the price close at $16.94 on October 6, a week after that recent high, and down $2.68 from the previous day. Owners offloading significant stakes in assets inevitably triggers a fall in the market. The trend has been steadily downwards as the subsequent weeks have passed by.
The Glazer brothers recovered £137 million from that sale, with none of the money going to the club, meaning the family have cumulatively made close to £450 million from United since taking over in 2005 at a personal cost of £270 million, while still owning 69 percent.
All indications are that the Glazers are not interested in selling United entirely, and in any case the stock market valuation would only be a small piece of the puzzle. The competitive bidding process for Chelsea showed a major appetite for Premier League clubs, with a final price of £4.25 billion paid by Todd Boehly and Clearlake Capital’s consortium dwarfing even the £3.1 billion market cap United achieved at their high point last autumn.
United ought to be a more attractive proposition than Chelsea for potential buyers due to the scale of Old Trafford and their worldwide commercial pull. British billionaire Sir Jim Ratcliffe made a late proposal for Chelsea and people in football have wondered whether he will one day make a push for United, a team for which he has shown an allegiance.
United’s low share price, however, in part reflects the industry acceptance that the Glazers are in charge for the long haul. Investors might speculate in the hope of a sale in the medium term, and good profit, but brokers have been given little encouragement to that end and the stock trajectory echoes this.
General market forces are undeniably a factor, with worries over global inflation limiting spending. The Dow Jones, an index of 30 prominent companies listed on stock exchanges in the United States, is significantly down from January, and Madison Square Garden Sports Corp, owners of the New York Knicks and New York Rangers, has seen a similar decline in share price to United.
And yet United remains a specific example. As Kieran Maguire, host of the Price of Football podcast and university lecturer, pointed out, the Dow Jones has increased by 130 per cent since United first listed in New York in 2012. The Nasdaq, another stock exchange, has risen by 268 per cent in the same period. By contrast, United’s shares have fallen 21 percent. “So it must be something to do with United,” he argued. “That is a reflection of the quality of United’s decision-making process.”
Maguire believes the slump is not just about the club being off the market for purchase. “Apple shares have gone up over the last decade and nobody is saying they will be bought,” he adds.
United will pay dividends and that has been cited as a way of maintaining confidence in the share price. The latest tranche will go out on June 24, with the Glazer share typically about £8 million in total. This fall shows a biannual payout is not enough alone to generate interest among investors, however. Maguire has a sound theory.
He says: “United get a price spike every time there is a reason to imagine a jump in earnings: the Super League, Project Big Picture, Ronaldo. That is the stock market factoring in future cash flows. But that has now evaporated. United will have to invest in the playing squad to reach the Champions League and Newcastle’s emergence means that could get even tougher.”
United are hoping to make Frenkie de Jong the marquee summer signing, but sources say an agreement with Barcelona could be some way off yet. United are fully aware of the financial difficulties at the Nou Camp and are prepared to wait to bring the price down, with the Catalans under increasing pressure to sell to fix their wage cap for next season as set by La Liga. United’s inactivity so far in the transfer window is unlikely to be influencing the share price to any great degree, however.
Of greater impact is United having to renovate Old Trafford without being able to use somebody else’s money, as the Super League promised. “It could be argued that the threat of the Super League propped up the share price,” Maguire adds. “It was always something used as a negotiating tool to extract more money from the Premier League and UEFA. Now that is effectively a dead duck.”
There is one final consideration. “The markets also look at higher interest rates on the horizon,” Maguire says. “United have a huge amount of debt, and borrowing any extra money is set to cost them.” The net debt (total debt minus cash assets) currently stands at £495.7 million, an increase of 11.8 percent on the previous year. The gross debt (the total amount of debt) has barely moved in 17 years since the Glazers’ leveraged takeover.
Revenues mean those figures are manageable, but the share price is a reflection of the wider feeling around United.
(Top photo: Dario Cantatore/Getty Images via NYSE Euronext)