Manchester United is one of the most popular sports teams, with diehard fans from all around the world. The company filed for IPO at New York Stock Exchange (it did not pick a ticker symbol yet), and the company's prospectus reveals some impressive numbers. What is even more impressive is the company's fan base, which seems to be ever growing.
First, let's talk about the numbers. The soccer team uses Old Trafford stadium, with a capacity of 75,000. In the last 15 years, the company played with an average capacity of 99%. The team's global fan base is as big as 659 million, and the fans never leave the team alone, no matter how well or badly the team is performing in the field. In the last 3 years, the ticket sales and other "match-day" revenues totaled $513 million. The company's fan base is not limited to England, and the team's games are broadcasted in many countries around the world, generating revenue of $493 million in the last 3 years. The company's broadcasting revenues grow at a rate of 9.4% annually.
As the team's broadcasting revenue increases, its commercial revenue increases at an even faster rate, averaging an annual growth rate of 25% in the last 3 years. In 2009, the company's commercial revenue was $102.3 million, and this number increased to $119.35 million in 2010 and $159.65 million in 2011. In 2009, the company earned $125 million from sale of Cristiano Ronaldo to Spanish giant Real Madrid. In European soccer, teams are able to sell services of the players that are under a contract for a fee, and this number tends to be very large for popular players. Prior to selling Cristiano Ronaldo, the team has sold David Beckham, another globally popular player, for a large fee.
Manchester United's biggest problem is its large amount of debt. Currently, the company owes $664 million, and it will use the money from IPO to cover some of this debt. The company plans to raise $100 million from its IPO. The team's revenues totaled $520 million in the last season.
Manchester United is owned by the Glazer family, who also owns Tampa Bay Buccaneers of NFL. Back in 2005, the Glazer family paid $1.24 billion for the team, which comes down to $1.88 per fan. According to Forbes, the company is actually worth $2.24 billion, which makes it the most expensive sports team in the world, above New York Yankees and Dallas Cowboys. The team has won 60 trophies in its 134 years, including many international championships. Of those 60 trophies, 34 came in the last 20 years after the team's coach, Alex Ferguson, changed the fate of the team in a revolutionary fashion. The team didn't perform that well last year; however, the team's fan base continues to support it regardless of the results in the field. Last year, despite bad results, the team played in a full capacity stadium almost every game. The company issued a warning saying that the team's revenues will mostly depend on its success in the soccer field, however, the team has performed very consistently in the last 20 years, almost always finishing in top 3.
The company will see some growth through broadcasting rights and merchandise distributions around the world. It enjoys a fan base even in countries like the US, India China and Japan, where soccer might not be the most popular sport. For example, in China, the company enjoys 108 million fans, according to marketing research. In Europe, particularly in England, it enjoys a status similar to one of a religion amongst many fans.
Britain has an interesting culture where soccer is one of the most important things in life. Fans respect their teams religiously, and team loyalty is independent of team success. Once, when I was in England, I saw a number of young boys carrying boxed grass in their hands. I got curious and asked them what this grass was, and they said that it belonged to the stadium where their favorite team was playing, and they bought it from the team's fan store. They would keep it for as long as they could as a memorial. I would expect the same treatment for these team's stocks. Many fans will buy stocks of their favorite teams and keep the stocks for the rest of their lives, not expecting to make a profit, but just for the bragging rights of being able to say they "own" their favorite team, even though these stocks will have very limited voting rights.
Knowing that some people will hold onto their stocks forever regardless of circumstances is a relief for investors. In US, only few companies like Apple (AAPL) and Exxon (XOM) enjoy a status where many of their stockholders are likely to hold onto their stocks for as long as these companies exist. Over time, Manchester United's stocks may gain the same status of baseball cards from 1950s and 60s. Of course, this is the speculative side of the story. Besides the speculative side, Manchester United will continue to see growth and it will continue to keep its main fan base. This will be a profitable company for many years.
I would like to share another anecdote regarding the fan base of soccer teams in England. In the US, fans of professional teams usually buy a jersey of their favorite team. They hold onto their jersey for about 4-5 years and wear the same jersey to every game. In England, things work differently. Soccer teams introduce two to three new jersey styles every year, and diehard fans buy every one of these jerseys every year. While an average diehard fan of NFL might buy his favorite team's jersey every 3 years, an average diehard fan of the Premier League (i.e., the top soccer league in Britain) will buy his favorite team's jersey every 4 months. The soccer culture in England and the rest of the Europe makes it rather easy for teams to generate strong revenue. Many times, fans will buy things from their favorite team, even if they don't need those things, just for the sake of "donating" money to their team, as they know that strong revenues for their team will result in bringing-in better players.
Looking at balance sheet of Manchester United along with the soccer fan culture in Europe, I would say that stocks of Manchester United are worth a try. At the moment, no information is available regarding the stock price or the ticker; however it will be interesting to see a British soccer team in NYSE. Personally, I will probably open a small position just to see where it goes. As the IPO gets closer and the more information becomes available, I will write an update to this article to inform the readers regarding the latest developments and my final opinion on the IPO. As of right now, my opinion is slightly positive.
