MANCHESTER United shares closed up yesterday, having traded consistently above their reduced float price, despite widespread claims that the shares were grossly overvalued.
The footballing giant’s IPO opened on a valuation of $14 on Friday, down from an initially planned $16 to $20 range, but analysts at PrivCo reckon shares are worth less than $5 each.
“The magnitude of the overvaluation of Manchester United’s IPO – and therefore the potential for a disastrous collapse in the company’s stock – is reminiscent of IPOs from Zynga and Groupon,” said PrivCo chief Sam Hamadeh.
Talking to City A.M., Hamadeh also suggested the lack of voting rights or a dividend, combined with the gargantuan debt burden, as further reasons the share price will head down.
Looking at nine comparable firms and using three different methods to value the shares, PrivCo comes up with a value of $4.97, less than two-fifths of the initial price.
But the analyst puts the current relative buoyancy of the shares down to the fact that underwriters continue to maintain $14 buy orders.
“Over the short term the shares can trade at a premium to what they’re worth,” Ken Perkins, an analyst at Morningstar, told City A.M. “[They] potentially could have gone lower but people are stepping in any time it threatens to go beneath $14.”
But in the coming days and weeks PrivCo and others expect financial fundamentals to reassert themselves as lead bank Jefferies & Co withdraw their support. Jefferies declined to comment.