MANCHESTER United’s attempt to float in the far east is being monitored carefully in the City. After all, there are not many IPOs going on in the moribund London market right now.
A number of football club boards will be looking on to see if United, led on the financial advisory side by Credit Suisse, manages to pull it off, with talk that others may follow the eastern road to riches.
In the 1990s a host of football clubs ventured onto the London stock market, spawning an ancillary industry of football research analysts, now all subsumed into leisure teams.
Somewhat amazingly it wasn’t just the big glamour clubs, but the likes of Charlton, Southampton, Aston Villa and Sunderland who were also tempted by the public markets, in the hope they could persuade institutional shareholders to invest in their businesses, whose revenues were being boosted massively for the first time by pay television.
But the bubble burst when it became obvious that as much as the revenues were rising, they were fast disappearing into players’ pockets or going on crazy transfer fees. Share prices of most clubs bombed and ultimately they were either taken private or bought by new owners.
Manchester United’s current plan to spin off 20-30 per cent of the company is mocked by some investment bankers who argue that the club, despite being one of the most powerful sports franchises in the world, can not present a credible investment case.
And they fail to see how a mooted valuation of around £2bn can possibly make sense for a business that is loss-making most years.
Others say the decision to list in Singapore, rather than Hong Kong where Prada, Samsonite and Glencore recently floated, is an odd one.
Yet there is some reason to think the float may just happen, even if advisers are ultimately forced to revise their valuation of the business downwards.
The retail demand for shares in companies that have brand kudos is huge in the far east; United has a massive following there; and its latest set of financial results showed impressive (though unpredictable) growth in turnover and profitability.
The deal might be a difficult one to pull off but it is probably wise not to write off Manchester United’s far eastern financial adventure too soon. It will be a blow to London if it flies.