As starts to the season go, Manchester United’s could not be defined as a sprint from the blocks.
Not on the field of play, as yet, but on the floor of the New York Stock Exchange. The club’s flotation is hardly a runaway success. Together with Facebook, they are in danger of sinking into the stock market relegation zone, on the point of ejection from the big time.
Hoping to sell off 10 per cent of their holdings in order to pay off some debt and channel some cash into their other failing businesses, the Glazer family anticipated that United shares would spin off at around $14 a piece. Some fanciful claims were made in order to flog the shares, not least the suggestion that the club has 659 million followers worldwide. 659 million followers? It’s a football club not an ant colony.
The NYSE was not impressed by such accounting. Nor were they by the figures coming out of the club about the cost of Glazer ownership.
Chelsea and Manchester City both went into huge debt in order to finance the purchase of players and coaches, Arsenal went into debt to pay for a new stadium, United were plunged into borrowing simply in order to facilitate the Glazer takeover.
The money chucked away during their ownership is now estimated at £553 million, comprising £295 million interest payments, £128 million debt repayments, £101 million for various bits of financial re-engineering (fees for takeover, refinancing, interest swap termination, bond issue and IPO) and £29 million payments to the Glazer family via consultancy fees and dividends.
In the last nine months alone, £79 million has disappeared from the club accounts: interest £43 million, bond buybacks £28 million, IPO professional fees £5 million and £3 million consultancy fees, not to mention £10 million dividends to the Glazer family to repay loans taken out previously.
Sure, if the club had remained a PLC, dividends and tax would have had to be paid. But Andy Green, the financial blogger, reckons if you take away what would have had to be paid out in PLC costs, the club has forked out £330million more than they would otherwise have done since the Americans parked their mortgage in the forecourt.
Investors don’t like such figures. Nor do they like the admission in the flotation prospectus that “our indebtedness could adversely affect our financial health and competitive position”. No s**t, Malcolm.
If you want to know how much the Glazers have affected United’s on-field competitiveness check out these figures: since 2005/06 United’s net spend in the transfer market is £68million. In the same period, Chelsea’s net spend is nearly £300 million while Manchester City’s is over £400 million. In 2008, United’s wage bill was £67 million higher than City’s. Now it is £21 million lower, a turnaround of £88 million in just three years.
Even the parasites themselves appreciate that debt needed to be removed from the club as a matter of urgency. But far from using the money accrued from the sale to pay down the borrowings, the Glazers revealed that half of it would be siphoned off elsewhere to prop up their fading property empire.
Ultimately only about 12 per cent of the debt is likely to be addressed by the float. Less major surgery of the problem at the heart of their ownership than a mild local anaesthetic.
Nor were potential buyers particularly thrilled by the Glazer offer involved in these shares. Ten per cent of the ownership was to be floated off but in return the buyer got nothing. No voting rights, no dividend. The only purpose in purchasing a share was the hope it might increase in value and thus there could be profit in its resale.
Well so far – despite some vigorous panic buying by the banks behind the flotation – it is not accruing what was hoped. The problem with such a flotation is it puts the Glazers’ assumption of what their asset is worth is being put in stark new perspective.
Forbes magazine recently reckoned United the “most valuable sports franchise” in the world, worth just over £1.6billion. If the stock price trades at somewhere closer to the £5 a share that more gloomy experts anticipate rather than the current bank-backed £14, the total would be put at somewhere closer to £500million. That is a dangerously low figure.
Sadly, what such a chastening flotation means is this: the Glazers are likely to hang around, dig in further for the long haul. Look at this logically. The family did not buy United because they loved football, were moved by the story of the Busby Babes or wanted to experience the atmosphere when Liverpool come to Old Trafford.
They bought it to make money. Bailing out now, when the club is approaching its lowest assumed value in a decade, would make no sense. They need independent valuation of somewhere north of £1.5billion to be tempted to part with the club.
Particularly as the torrent of cash generated by Sir Alex Ferguson’s operation shows no sign of abating. Where else in their empire of debt can the family members accrue management fees totting up to £20million? The money coming from fans’ pockets is the life-support system their leveraged-out business requires.
Of course, a Middle Eastern state development fund might be watching what is happening with City and think they too want a part of the Premier League’s promotional possibilities and might be prepared to part with silly money to get hold of the world’s biggest football brand.
But frankly that is the only way the Glazers will depart the scene any time soon.
And until they do go, it is United’s fans who will pick up the tab for the honour of being owned by the world’s biggest sporting asset strippers.
They will be the ones obliged to watch as Chelsea, City, Barcelona and Madrid continue to move away over the horizon.
But hey, who are they to complain? After all, as their manager has pointed out, “proper fans” will recognise that the Glazers have been good for United.
Which, as observations go, is a bit like an oncologist telling his patient that, if he only stopped moaning and looked at the bigger picture, the rampant cancer currently ravaging his liver has been good for his body.