Manchester United and the Glazers: Expert Commentary from XTB 

Amid recent events surrounding Manchester United FC and the Glazer family and the ensuing protests from fans of the club, Joshua Raymond, Director of the financial brokerage XTB, has provided expert commentary on the current situation as the Glazer family were last week reported to be willing to sell a minority stake in the club.

Some key questions and talking points have been addressed below:

What are the main reasons for the protests?

The protest itself is clearly designed to heap pressure on the Glazer family to sell the club and these protestors have been encouraged by rumours of a potential stake sale to US based hedge fund Apollo. It’s prudent to remember the last time we saw large scale protests that garnered mass media attention, the club was forced to pull out of the controversial European Super League. So, there is now form for this sort of tactic by fans, which will not help the stability around the club as long as bid rumours persist.

What does this mean going forward for Manchester United and the Glazers?

The protests itself will heap pressure on the Glazers from a multitude of factors. Most importantly is the damage to the Manchester Utd brand itself, which is increasing with each passing day and if these protests become a long and drawn out process, there could be medium term implications for the club’s commercial partners, to which the club generates around $230m every year and contributes more than 40% of total revenue.

Additionally, it could give prospective buyers of minority stakes greater leverage to push any sale price down, and in that sense, buyers may be motivated to draw any sales process out even longer.

Are further drops in share price to be expected throughout the season if protests continue?

Currently the Man Utd share price is attracting buyers due to the speculated interest in new investors buying a minority stake. In the past week, prices have risen by more than 20%.  Therefore, all medium term moves in the share price will likely concern this potential event. In this sense, continued protests may not do much to damage the share price as they could ultimately force the owners’ hand to accept a stake sale.

The market capitalisation of the club as per the current share price is around $2.5bn. It’s clear any stake sales would likely put a valuation closer to $6bn. Ultimately if any stake sale puts a higher than expected valuation on the club, this could be beneficial for the price of those shares listed on the New York Stock Exchange.

There is of course a flip side to that coin however in the event a sale doesn’t happen we could see investors react quickly to downsize their risk and take profits after a strong price run in anticipation of a stake sale.

With the Glazers being reported last week to be willing to sell a minority stake, how valuable is Man United and who might be interested in purchasing shares?

It is likely that any stake sale in Manchester United would put a valuation on the club of $6bn or higher and therefore make it the most valuable sports team on the planet. Manchester Utd as a brand is a huge asset. It’s one of the most successful football clubs in the world, plays in the most followed sports league in the world and its commercial revenues are amongst the highest too. So, it’s clear the foundations are there to attract potential buyers.

So, who might be prospective buyers? The sale of Chelsea FC should prove a good proof of concept in that it wasn’t state sponsored funds or companies in the running to buy the club, but rather hedge funds and consortiums. This is likely to be the case also with Manchester United and the speculated interest from Apollo in the US adds weight to that scenario. UK billionaire Sir Jim Ratcliffe has already also spoken of his interest in buying the club.

One aspect which also shouldn’t be ignored is the strength of the US Dollar, which has strengthened in value by 14% since mid-January. Any stake sale will be priced in US Dollar, and this will ultimately make any sale more expensive for European or UK based firms who hold euros or pounds sterling. This adds further prominence to US entities as part of the sales process.

With so much negative press around their ownership from the media high profile figures such as Gary Neville and co, is there any way that the Glazers manage to turn things around and make the share price grow rather than shrink?

Of course, there is certainly an opportunity to turn things around but that will happen on the pitch primarily as success in competitions such as the Premier League and Champions League is vital to secure the long term attractiveness of the brand for consumers and commercial partners. This is one key driver behind the share price over the long term.

The club has badly underperformed in recent years and this is one of the key reasons why there is so much pressure on the Glazer family to sell. But any turnaround will not happen overnight. We should remember this is not the first time the Glazer family has faced immense public pressure. What is different this time however is the widely known speculation that they are finally considering a stake sale. This means any failure to sell part of their ownership to new investors could result in a toxic atmosphere from the club’s fans that we have never seen before.