United success forecast in IPO but concerns remain
The initial public offering (IPO) of Manchester United is set to be finalised this evening. The club is offering 16.7m Class A shares which are set to be priced at between $16 and $20 each before listing on the New York Stock Exchange tomorrow.
Instiutional investors are said to have shown strong interest. The ratio of conversion from attendance at roadshow events to firm indications of interest has been better than usual.
At the high end of its price range the IPO would raise $330m and value the club at $3.3bn. At $18 a share Manchester United would have a market capitalisation of $2.95bn with an enterprise value including debt of $3.38bn.
According to data provider Morningstar 'shares could trade at a significant premium to our fair value estimate [of $10 a share] if the market values the soccer team in line with other successful sport franchises.'
Some institutional investors are concerned about the dual class voting structure which will see the Glazer family retain control through shares that have 10 times more voting power than publicly traded shares. A successful IPO would result in investors owning 42 per cent of the A shares but only carrying voting rights of 1.3 per cent.
Critics of dual equity structures argue that they are inequitable, privileging one group of shareholders at the expense of others. In the UK, most have been abolished. In the US tolerance is higher, reflecting respect for entrepreneurs, but the Glazers bought United with debt. Academic research shows that dual share businesses tend to under perform, financially that is, rather than on the pitch.