Manchester United owners unload $ 186 million in shares
The world’s most valuable Premier League club saw its shares fall 14% on Tuesday as the property sold shares below market value.
In the most recent episode of “What’s up with Manchester United?” the Glazer brothers have decided to get rid of another part of the squad, marking the second time the brothers have sold shares this year.
From the highs of Cristiano Ronaldo’s return to the club, to the lows of the Super League, Man U have faced their fair share of volatility this year. You just have to look at the course of their action. The stock has hovered between $ 14 and $ 21 since the first quarter, with the latest bout of volatility resulting in a total loss of market cap of $ 476 million. Ouch.
But that only scratches the surface. 2021 was an absolute roller coaster for the club.
- March: The team reports second quarter financial results and exceeds revenue estimates by $ 31 million.
- March: The Glazer family gets rid of $ 96 million in stock, which is about a 3% reduction in its total stake.
- March: A jersey sponsorship deal with global tech company Team Viewer is announced for $ 55 million per year, a reduction of $ 16 million from their previous deal with Chevrolet.
- April: The Super League plot causes significant price volatility, ultimately leading to the departure of top Manchester United executive (and former JPMorgan investment banker) Ed Woodward.
- April: The Glazers announce that they are ready to sell the club at a price of $ 4 billion.
- June: Man U allows fans to buy club shares with the same voting rights as the property.
- August: The club announce the return of Ronaldo and the action climbs by 7%.
- September: Ariel Investments, which previously owned 5% of Manchester United, increases its stake to 13.8% through a share buyback.
- October: The Glazers sell another $ 186 million in stock.
With all this noise, what do we think of Manchester United’s current valuation?
As of now, the club have returned to full capacity at Old Trafford for the 2021-22 season, a sign that Door revenues are expected to normalize as the first quarter of 2022 approaches.
Additionally, as the club experienced a reduction in overall revenue during the pandemic, it saw a 81% increase in broadcast revenues – from $ 140 million to $ 255 million – due to improved results in the Champions League, Premier League, Europa League and FA Cup.
The club also received a vote of confidence from prominent investment firm Ariel Investments in the form of a $ 103 million share purchase on the NYSE in September. The move made Ariel the third largest owner of Manchester United common stock.
- The investment, it seems, is indicative of the company’s belief that exposure to sports properties can generate alpha relative to the broader market – or, in other words, the teams. sports have an explosive potential as attractive as crypto.
- Professional sports franchises tend to trade at market caps that are significantly discounted from their valuations.
Manchester United currently has a market capitalization of $ 2.75 billion while its valuation is close 1.6x that, and Ariel probably bought with that in mind.
For the twelve months ended June 30, 2021, United reported revenue of $ 494 million, down 3% from the same period a year earlier, although much of the decline or due to the reduction in ticket sales linked to COVID.
Operating result turned negative with a reduction from $ 5 million in 2020 to minus $ 37 million in 2021. This was due, in large part, to increased player salaries.
Taxes were the main culprit in the bottom line 397% drop for the year. The club was fortunate enough to move from a 19% to 25% tax bracket for fiscal 2021. Reducing a deferred tax asset to the tune of $ 66 million has not helped no more.
The ugly one
Debt, Coverage, and the Glazers.
The company has accumulated significant debt – which wouldn’t be a problem if they could pay it back. The numbers indicate that they are not necessarily in a good position to do so.
Coverage – a company’s ability to cover its interest costs with available cash – is currently negative. It’s not entirely uncommon, but United have increased their total long-term borrowing over the past year as profits have dwindled.
I’m no mathematician, but when your numerator goes down (earnings before interest and taxes, or “EBIT”) and your denominator goes up (interest charges on long-term debt), that seems to be a problem.
Then there are the Glazers. The gradual shedding of stocks could have many implications. However, it is generally not a good sign for the market when team owners are offloading the stock and not reinvesting the profits from the sale back into the team.
Manchester United’s debt and interest coverage issues are real and deserve to be addressed.
Having said that, if you combine more normalized match income with increased broadcast income and the club remain at the top of the Premier League table, there is a chance that we will see them not only improve their financial situation but also improve their financial situation. win the first three most valuable football franchises.
Until I see how that goes, I will continue to enjoy the best United have to offer – a lot of Ronaldo.