Jefferies takes an early lead on Man United flotation

 
David Hellier
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When the US bank Jefferies last year decided to lead the world famous Manchester United football club to a flotation on the New York Stock Exchange, few predicted a happy outcome.

United’s bank advisers had already tried a flotation in the far east and decided against the idea, partly unsteadied by the decision by Graff Diamonds, another quintessentially British name, to cancel its listing in the region.

The London IPO market was as good as closed. And football clubs, once feted by stock market investors for a brief period in the 1990s, were no longer considered fit for investing in by private stakeholders. Revenues in the football industry may have been following a seemingly upwards trend, but so too have players’ salaries.

Undaunted by this, or criticism of the controlling Glazer family by many of the football club’s own fans, Jefferies, together with Credit Suisse, JP Morgan, Bank of America Merrill Lynch and Deutsche Bank (but not joined by Morgan Stanley, who had originally been advising on a possible far eastern flotation), pressed ahead with a flotation plan. Crucially it was in the US, a decision no doubt influenced by figures showing there was still a healthy appetite for new share issues stateside.

There was a total of 75 listings on the New York Stock Exchange in 2012 compared with just 11 here, according to figures from Thomson Reuters, and meanwhile US investors still formed a large component of those wishing to invest in IPOs in London. For example a staggering 47 per cent of the investment in the Direct Line flotation came from American investors.

When the advisers revealed they were dropping the issue price from the $16-$20 range, to $14 a share (still valuing Manchester United at a healthy $2.3bn) critics had a field day.

But the months since the IPO have been kind to investors. Far from collapsing, shares dipped a little but then rallied. The stock has performed steadily of late and is currently trading in the $17 a share range, lending credibility to the notion that US investors have a much stronger appetite for growth companies than their European counterparts.

Manchester United’s assertion that it has 659m worldwide followers might be questionable but there is no doubt of the brand’s global appeal.

“I wonder how many people in the UK thought the business was worth this much and expected the share price to trade up 25 per cent since the IPO,” Albert Ganyushin, NYSE Euronext’s head of international listings observes.

There is another aspect to this story, which is the extent to which the New York Stock Exchange (NYSE) has become an option for European companies wishing to list their shares publicly. Last year the NYSE saw 11 companies from the Europe, Middle East and Africa (EMEA) region list.

In London, the IPO door, that was so firmly closed last year, has re-opened a little this year but Manchester United’s experience shows there is fierce competition out there from exchanges wishing to host exciting UK companies.

david.hellier@cityam.com