Caveat Emptor: The Glazers Prepare To Float Manchester United
There is a certain irony to Manchester United announcing their IPO in the same week as the Supporters Direct annual conference is held in London. While there are those that amongst us that still believe that the route towards a successful, inclusive and financially sustainable future lays in giving the supporters of clubs an active role in their running, the behemoth that has sat astride the Premier League for the last two decades is taking another step away from accountability and a step towards having, effectively, somebody else pay for their debts whilst having no say in the running of the club.
“Our indebtedness could adversely affect our financial health and competitive position”, says the document filed with the New York Stock Exchange in preparation for the clubs flotation, without, of course, asking the question of how one of the richest football clubs could possibly have found itself a little over £423m in debt. Since the Glazer family took advantage of the rules of the stock exchange over £500m has been spent on servicing the debt, including £108.6m in one year – to the end of June 2010 – as the Glazers refinanced the clubs debts. It is impossible to reach any conclusion other than that the club has found itself in the financial position in which it is today because of circumstances entirely brought about by the Glazers themselves.
What would investors be getting for their money, though? It’s a question that is worth asking, because anybody could get involved with this, and with times being hard and all stock markets being capable of quite volatile, few would wish to see a repeat of the stock market adventures of English football clubs in the late 1990s when many, many people – including but not limited to supporters of the clubs themselves – got their fingers burned by clubs that floated themselves having massively overvalued themselves with their share prices. At Aston Villa, for example, shares in the club at the time of its flotation in May 1997 – with it having finished the two previous seasons in the Premier League in fourth and fifth place – were valued at £11 each. By 2004, those shares were worth less than £3 each, and this was a pattern that was repeated elsewhere.
Well, the answer to that question is, from a purely investment point of view, not a great deal, on the surface at least. Well, investors won’t find themselves getting an annual dividend from the club at any time soon – Red Football LLC, the legal vehicle which owns the club, has already confirmed that it won’t be paying any dividends in the foreseeable future. Nor will they have much in the way of voting rights. Investors will be invited to buy a class of shares in that company which will carry one-tenth the voting rights of those being issued to the Glazers themselves. So if you are an investor in the club and they start making an absolute hash of the way that the club is being run, you wouldn’t have any right to do anything other than watch balefully as your investment pours down the drain.
The share offer is dependent upon investors having their attention drawn by the share values increasing over time, but there is no guarantee of this happening and previous experience of football clubs and the stock market has not, as we have already seen above, been a particularly happy one. Manchester United themselves, of course, were the exception to this rule, but even they were hastily removed from it not long after the Glazers finalised their purchase – well, take-over – of the club.
The only conclusion that can be drawn from all of the above is that the Glazers want, ultimately, to have their cake and eat it. They want to retain absolute control of the club and they don’t want to pay out the sort of dividends to share-holders that they have been getting themselves - £23 million in personal loans and consultancy fees out of Manchester United between 2006 and 2010. The question is quite a simple one: will the investors of the New York Stock Exchange let them?
Most supporters, however, do not care for such matters. The majority are primarily concerned with what happens on the pitch. Manchester United supporters will need little reminding of the way in which last season ended, but did it have to be that way, and could this offer be a signal for the end of an era for the club? That Alex Ferguson has, broadly speaking, continued the clubs success with what has – in comparison with the other giants of European football, for that is the stage upon which they now play – occasionally felt over the last few years is something of a given, but it is possible that Fergusons replacement – and, much as it is something that the clubs supporters may not wish to countenance, Ferguson will have to go eventually – will not be as generous in his acceptance of the purse-strings being tightly guarded as the current manager is.
But both Ferguson and the club have spent a considerable amount of time over the last few years denying, that the debt leveraged against United by the Glazers upon their buying it was detrimental the club’s financial operations and clout in the transfer market. That the club is floating to reduce that debt would seem to contradict that statement, and the fact that this debt will now likely be paid down offers no guarantees of fresh investment in a team that was creaking towards the end of last season.
So, in the week of the annual conference of the body charged with the often thankless task of promoting transparency within football and the positive aspects of supporter ownership in football, Englands biggest club prepares to float itself on the New York Stock Exchange with registered offices in Delaware – the corporation tax state – and the Cayman Islands to pay off a debt that was acquired as the cost of a leveraged take-over which has netted the club no tangible benefit in itself. When people talk of the madness of modern football finances, it is surely this sort of thing that they are describing. Back in London tomorrow, though, there will be a club represented with strong community roots, firm convictions and an unswerving belief in making friends rather than millionaires. For the disillusioned of Old Trafford, FC United of Manchester remains a suitable bolt hole should this madness get too much.
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