It’s a sorry state of affairs when the club we all love and cherish can raise at least $100 million on the stock exchange and not one penny- or cent- goes towards improving the playing squad. News that the Glazer’s have decided to try and raise much needed funds with a stock flotation should be good news but to paraphrase David Brent “it’s irrelevant news.”
Matt Scott writing in the Telegraph notes:
“The sale of shares – through the New York Stock Exchange favoured of the club’s American owners rather than the more obvious choice of London – will therefore effectively guarantee United $100 million in fresh money. This will be used to reduce the club’s debts.”
Scott then goes on to comment:
“Indeed, although United will become a leaner business, paying off up to 15 per cent of their outstanding debt, the new ownership format will not make a transformative difference to the club in anything but its ability to pay down debt.
“Currently, United are paying about £46.5 million a year in net interest; my rough calculations suggest the share issue will reduce that bill by up to £7 million a year in the future, although it may not even be that much.”
Call me negative but the interest payments each year going from £46.5 million to £39 million is hardly cause for jumping up and punching the air. It’s actually enough to make Reds even more disillusioned with the Glazers- if that’s even possible.
The idea that United can no longer compete financially with the likes of City, Real Madrid and Chelsea is hardly revelatory but when we’re raising enough money to feasibly rebuild the squad to Champions League challenging levels – and none of it is even going on players, we’ve actually reached a new nadir.
Sir Alex Ferguson has defended the Glazers since their arrival and has done a wonderful job of buying young talent, such as Chicharito, Phil Jones and the Da Silvas rather than established stars and still making United competitive.
The question is though when the club raises at least $100 million and none of it goes towards transfers is it time to start worrying whether we really are witnessing the start of a long decline should the Glazers remain at United?
Some experts say the club could even earn far more than the $100 million quoted in the Telegraph, but even then the chances of the money being spent on the team seem unlikely at best.
Writing in the Guardian David Conn noted:
[Speaking of the 231 page registration] Some eyewatering detail is provided in the necessary information for investors, besides the already famous admission that United’s debts risk “adversely affecting” the club. Indeed a legendary club, and with 20 years success in the Premier League era, United make huge money, from 76,000 supporters at Old Trafford, TV sales and all the sponsorships and commercial income the Glazers’ executives wring from the “brand”. Yet over the years, £500m has gone out to service the debts, and some of that is broken down.
In the nine months to 31 March this year, finance costs were £35m; in the year ended 30 June, 2011, United paid out £51.3m interest. That followed the hideous £108.6m paid out, in the year to 30 June 2010, when the Glazers last refinanced. That included £16.4m and £19.3m lost on dollar-to-pound exchange rates, and “a £11.9m one-time charge related to terminated interest rate swap agreements”. Supporters asking why Ferguson has not signed top European players to complement his still admirable faith in youth, can peer at that to see where some of their club’s money has gone. This stock market move is intended to reduce the debt and put United in a healthier position, but supporters see the financial interests of the Glazers at the heart of it.
There is an argument that raising more money -be it to furnish the debt or otherwise – can only be good for the club- yet the fact that we now see a statement contradicting the points David Gill and Sir Alex Ferguson have made regarding the Glazer’s ownership is cause for concern.
If enough money is raised then perhaps we will see it be used for players but I seriously doubt that, this to me seems like the Glazers simply trying to dig themselves out of a hole they put both themselves and the club in.
Am I being melodramatic? Is all this old news? Is the flotation actually a step in the right direction?
Answers on a brick through the usual window please- or you can comment below:
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I think this kind of move has been on the glazers mind for quite some time, and as utd didnt win a trophy last year, meaning that their revenue has dropped,for the glazers this seems to be a good moment…the strange thing is is that the shares dont bring much to the buyers(revenue and decision wise), which doesnt make this move that atractive…hey,who knows,it may work out?but i seriously doubt it…
Great. Another fool who thinks he knows what he writes. Are you aware the IPO will raise a lot more than $100m, that no. is just used to calc SEC fees.
How much they receive depends on the clubs value.
Please do your research next time and stop reading the torygraph, thanks.
Oh hello, another Red Issue know-it-all, quick to insult other Reds for daring to question the Glazers.
The Irony of your comment Mark is that even if more is raised -as reported in far more papers than just the Telegraph the money is highly unlikely to be spent on anything other than furnishing the debt.
Why don’t YOU do your research before commenting, thanks.
I don’t really understand the point of this article. The IPO will raise a significant amount more than $100m. As Mark says above, that figure is just used to calculate the SEC fees. Your broad point about none of the proceeds going towards transfers is correct but the reality is that most of the club’s debt is likely to be wed out. Interest figures currently stand at just under £40m for the next 12 months, not the £46m quoted. The removal of the debt and these interest payments will obviously have a massive positive knock on effect on our transfer spending and wages. Apart from being based on incorrect facts the article is also completely off base about the impact of the IPO on the squad itself.
Markredissue – Mark respectfully, not everyone who writes about the intended IPO is in agreement about its merits or downsides, so it is not easy for those of us Red fans who don’t understand all the things in top finance business deals, to do our research so to speak. Its not really fair to call the author of this article a fool for what you think is him not doing his research. I have read so many different viewpoints from people who do understand the whole business of IPOs etc, and am still confused by it all mate. I am thinking therefore, that if I get my wishes for my favourite club, which are that the IPO is successful and all debts are cleared, so that in future our income at the club will be made available to buy top class players again, then I will be made up about it. At the same time though, I would not be happy that once again the Glazers have had their self made huge debts cleared by other people, and therefore have escaped the responsibility for what debts they loaded onto us as a club. I still can’t see what would entice buyers to purchase Man Utd shares, with virtually no voting rights, and no dividends. It sounds crazy to me that anyone would do that. But hey stranger and dafter things have happened at sea. Then maybe I am not seeing something, and investors will in the long run get their share of incoming Man Utd profits.
I’m in the same boat mate, I’ve read so-called experts saying completely contradictory things, when it comes to the financial impact of the IPO- the reason I’ve quoted two journalists is by my own admission I’m far from certain on the figures and the impact.
As I’ve stated though, I do have my doubts that any of the money will go towards transfers but would be more than happy if I am completely wrong.
Jay – I agree, this will be one time when it will be good for all of us who have some doubts to be proved wrong, because it will mean our great Man Utd will be doing al-RIGHT out of this IPO. You are right about all the conflicting views on the IPO outcome by the experts too.
Just a note of the last comment. The IPO is underwrithen by three banks. The reality is that without sufficient interest the listing wouldn’t have gone ahead. Theoretically though, should the club not attract $100m of investment the banks will be liable for the shortfall.
For those confused, your best port of call for all this stuff is @andersred on twitter. He hates the glazers with every bit if his being but his financial analysis is always clear, accurate and fair.
Richard – Okay, thanks for your last two post comments, and the info. Appreciated mate! Good to know that no matter what the outcome, Man Utd wont suffer any loss from the floating on US stock Market etc. I read somewhere else, that there is a lot of interest in the shares already, so lets hope so eh?
We don’t know for sure but the Glazers wouldn’t have gone ahead with the listing if they hadn’t received positive interest from investors. It was that lack of interest that meant that a listing in Asia wasn’t instigated.
Regardless, they’ve got 90 days to get this away now so we’ll know in three months.
The key is just how much is raised if any at all.
Then how the funds are are used. If any do go towards transfers. Clearly reducing the debt is a main concern. The Glaziers are not the culprits they bought others sold, who recommended the deal etc etc.
The position at the momento is of concern, the slippery slope could be round the corner. So lets close rank. Why not orgainise a fund raising campaign of a magnitude nature worldwide put our hand in our pockets and keep The Red Flag Flying High.
Following below comments regarding the use of IPO fund s to “buy please” seems a strange logic in my honest.
Are you honestly suggesting that the Glazers give up as much as 30% of the company to raise money to buy a player or two. That would leave the club with the same debt levels and same interest payments to service that debt………a very strange suggestion and one I do not understand!!!
The IPO will be used to raise “significant funds” ,, in excess of the cover price of £64 million quoted in the idiotic main stream press.
The funds are then used to reduce debt levels from £423 million to a much more manageable level or best case wiped out all together.
The significantly reduced debt levels = significantly reduced interest payments
reduced interest payments leaves the club with less expenditure and in a much healthier cash position over the long term.
In turn this much healthier cash position leaves more money to finance wages and transfers of the best players available and united in a much more competitive …..its very simple…you raise funds from investors whom want to share in the long term success and growth of the club without having to pay them interest/dividends and use that money to clear the debts thus creating a much more profitable business in the long run, one that would benefit the owns and more importantly the fans as the club is much healthier and competitive….far better than a sugar daddy model thats for sure!!!
You seem to know a bit about what you’re saying.
So then can you tell me why anyone would want to invest in the Glazer’s plan if the shares come with virtually no voting rights, no dividends, and no interest? Where’s the incentive to a potential investor?
p.s Matt Scott of the telegraph needs to do his own research because finance clearly is not his strong point, if it was he would be doing my job and not writing for main stream newspapers!
if the press know markets and IPO’s why they working all hours god sends for the press when they could be billionaire successful investors….
as warren buffet once said; if you had listened to the main stream press over the last 10 years you could have a million dollars right now, however you would of started with 10 million to achieve that!!!