Is Manchester United stock (NYSE,MANU) a good investment? Invezz

This is a different kind of piece from what we normally produce. However, with the new season kicking into gear, we thought it may be time to revisit one rather interesting corner of the stock market: football.

Namely, the stock of Manchester United Plc (NYSE: MANU), one of the few major football clubs trading publicly.

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We put together a longline report on the club nearly a year ago, examining the controversial ownership under the Glazer family. They took the club over in 2005 via a leveraged buyout that is commonplace in the world of finance, but a little less palatable when it comes to cultural behemoths such as Manchester United, a cornerstone of the UK’s football fabric since it was founded in 1878.

Shortly after our report, in November last year, it was announced that the Glazers were looking to sell the club. What makes this an interesting analysis is that part of the club trades on the stock market. Since the Glazers refinanced in 2012, 10% of Machester United PLC has traded on the New York Stock Exchange.

To be frank, it hasn’t been a good investment (much like the club’s on-field performance during this period). MANU has disappointed investors with a lowly 43% return in the eleven years since a portion of it floated, lagging badly below the S&P 500 which has increased 225% during the same time period.

But why would someone invest in a football club? And what has the takeover meant for all this?

Is Manchester United being sold?

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There is an elephant in the room. And that elephant is that when you Google the owner of Manchester United, the answer you get is the Glazers. Unlike ChatGPT, which has a knowledge cutoff at September 2021, Google is very much up to date; the Glazers are still the majority owners of the club despite the aforementioned “decision” to sell last November.

This has caused the stock to reverberate beyond its normal volatility range. Once the Glazers announced on 22nd November that they would be “commencing a process to explore strategic alternatives”, which the market read as corporate-speak for a sale of the club, the share price took off. Immediately spiking over 70%, investors were suddenly blissfully hopeful of an imminent sale, just like fans who had for years protested against the controversial owners.

And yet, here we are, nine months later, still discussing the possibility of a sale. Not only that, but the issue is no longer in the newspapers daily, with some fans now despondent at the prospect of a sale actually going through. Look no further than the club stalwart who appears every week on TV to discuss all things Premier League – Gary Neville began to raise serious concerns regarding the true intentions of the Glazers earlier this year when it became apparent that the transaction was dragging.

The increase to ticket prices at United is v odd!Why would a seller that’s leaving before the next season starts introduce something that has brought them more hate and they won’t benefit from! Any new buyer would most likely freeze the price in year 1 to stay on side with fans.

— Gary Neville (@GNev2) February 21, 2023

However, reports indicate that the sale is still being negotiated. There are supposedly two competing parties, the first being Jim Radcliffe, chairman of the INEOS chemical group and one of Britian’s richest men. The second competitor is Sheikh Jassim bin Hamad Al Thani, chairman of Qatar Islamic Bank and a member of the Qatari royal family. Sheikh Jassim has recently been seen as the favourite, if reports are to be believed.

This will-they-won’t-they regarding a sale has led the stock to partially turn into a straight bet on whether the club will be bought. The valuation demanded by the Glazers is reportedly £6 billion ($7.7 billion), meaning it would comfortably surpass the most expensive sports transaction ever, currently the sale of NFL franchise Washington Commanders at $6.05 billion, earlier this year.

We can speculate all we like here as to what the Glazers’ true intentions are, but the truest gauge is what the market believes. Despite the buoyant climate for the stock market thus far this year, shares in Manchester United are down 13% year-to-date. The S&P 500 is again used as a benchmark in the below chart, highlighting the lagging performance of MANU – the index is up 18% in the same timeframe.

It is probably fair to say that at least a portion of this is reflective of the large jump that the stock took in Q4 of last year when the sale was announced, and the current concern that the Glazers are dragging their heels.

As Matt Slater writes in the Athletic, “there are only half a dozen people who really know what is happening with the Manchester United takeover and they are all called Glazer”.

‘They are amazing,’ a former Man United employee told Slater. ‘They never leak when the subject is money.”

The saga continues, akin to how Twitter shares began to trade like bets on whether Elon Musk’s protracted takeover would go through (albeit that case was a little more dramatic).

In assessing the stock itself, it’s always odd when there is such a small percentage of the company floating – in this case, 10%. While this 10% trades like any other stock, this is a company that is for sale, a highly illiquid and bespoke asset that requires only buyer to pay a price. When that asset carries so much sentimental and cultural intrigue (Jim Radcliffe is a lifelong Man Utd fan), it becomes harder again to put a price on the club, and hence the 10% of shares that oscillate wildly off the latest takeover news.

Buying football clubs has become a billionaires’ game, vanity projects which are notoriously difficult to generate stable profits from (indeed, the Glazers’ cold treatment of Man Utd as a business, through the use of debt and constant dividend harvesting has been shrewd, but has caused outcry and public vilification). These really aren’t like ordinary businesses.

For ordinary investors looking at stock in public markets, vanity doesn’t come into it given there obviously would not be substantial ownership, nor influence over club decisions. Indeed, very few clubs even trade publicly these days, such is the prevalence of billionaires and, increasingly as of late and again in this case, state ownership.

Whatever happens with the takeover, holding Man Utd stock has been a disaster, as demonstrated with the chart benchmarking its return to the S&P 500 earlier in the piece. We have come through a decade of unprecedented stock market gains, with the economy awash with basement-level interest rates and a warm money printer helping to fuel dizzying gains in risk assets, at least until the music stopped last year.

For Man United investors, it has been a little different. A curious stock, with its small float, lagging performance and the immense cultural impact of the company. If the takeover does go through, for fans it may close the chapter on not only a bad period for Man United’s on-field performance, but also rather abject performance in the stock market, too.

Ultimately, given the opaque nature of the sale negotiations, and the fact that the 10% of shares trading have their value entirely contingent on those negotiations, it is simply impossible to advise whether the stock is a buy at this price. That is, unless you have a direct line to a member of the Qatari royal family, Sir John Radcliffe, or somebody within the Glazer household.

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