The Buzz

All markets and investing news all the time

Few fans show up for Manchester United's IPO

August 10, 2012: 2:43 PM ET

Manchester United's IPO raised $233 million for the club and its billionaire owners.

Manchester United didn't have many fans cheering for the 134-year-old British soccer team when it made its debut on the New York Stock Exchange (NYX) Friday.

Shares of Manchester United (MANU) barely budged above their $14 initial public offering price. The stock opened at $14.05 and stuck mostly around that level for most of the day. The stock closed its first day of trading precisely at its $14 IPO price.

Manchester United had trouble getting investors excited during its road show and was forced to lower its IPO price to $14 Thursday night from its estimated range of $16 to $20 a share.

Sam Hamadeh, CEO of private company research firm PrivCo, attributes the stock's lackluster debut to overall wariness among retail investors after Facebook's (FB) botched IPO.

"What we're seeing today is a buyer's strike on overvalued IPOs," said Hamadeh. "This is a new paradigm, because often with brands people know well, there's a first day pop," he said.

Investors had many reason to be wary of the team's prospects as a public company. The $233 million in proceeds from the IPO will be used to pay down roughly $662 million in debt and pay a dividend to the team's owners, the billionaire Glazer family.

Related: ManU IPO ranks team world's most valuable

Of the 16.6 million shares offered in the IPO, half were sold by the club. The rest were sold by the Glazers, who also own the NFL's Tampa Bay Buccaneers. The Glazers bought ManU for $1.47 billion in a debt-financed takeover in 2005.

Manchester United will become part of a small club of publicly traded sports teams, joining the likes of Italian soccer team Juventus.

U.S. basketball team the Boston Celtics and baseball team the Cleveland Indians were public, but have since become private after their stocks failed to take off.

Related: The rise of confidential IPOs

"Sports teams are usually there to win and spend as much money they can to do that," said Philip Hall, managing director at Inner Circle Sports, an investment banker who has worked on numerous sports transactions. "That usually isn't good for a team's profits."

Morningstar analysts noted in a report that despite Manchester United's iconic brand and loyal fans, "the unpredictable nature of sports" will likely undercut the team's ability to provide consistent profits to investors. Morningstar put the "fair value" of the ManU's stock at $10.

The IPO gives the Red Devils, as the club is known, a market value of about $2.3 billion.

Join the Conversation
Fear & Greed
Sponsored by
About This Author
Maureen Farrell
Maureen Farrell
Staff writer, CNNMoney

Maureen Farrell is a staff writer at CNNMoney and covers Wall Street, banking, mergers and the stock and bond markets. Prior to joining CNNMoney, she covered venture capital and entrepreneurs for Forbes, and mergers and bankruptcy for Mergermarket and Debtwire, both divisions of the Financial Times.

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! Yes, Urban Outfitters may be finally turnings things around. But $URBN up 17%? Seems a bit excessive, no?
Most Popular
Powered by VIP.