Shares of British soccer club Manchester United (NYSE: MANU) closed flat Friday, a disappointing debut in U.S. markets for the world’s most popular professional sports team.
After hovering all day at or near the initial public offering price of $14, the stock closed exactly where it was priced Thursday night. The stock only fell below the IPO price in after-hours trading, dipping 7 cents to $13.93.
Analysts had widely predicted a lukewarm welcome for shares of the beloved 134-year-old British soccer institution.
That prediction came true when weak demand from institutional investors ahead of last night’s pricing forced lead underwriter Jefferies (NYSE: JEF) to lower the price below the initially anticipated range of $16 to $20.
Manchester United, or Man U, as they are affectionately called by their millions of fans, raised $233 million through the sale of 16.7 million shares.
The team’s owners, the family of American businessman Malcolm Glazer, had initially hoped to raise more than $300 million, with half of the proceeds going to pay down team debt and the other half straight into the pockets of the owners.
The latter didn’t play well with many analysts, nor did the fact that Glazer family structured the deal such that new shareholders get no say whatsoever in future decisions regarding the team. The Glazer family retained virtually all voting power after the IPO.
The IPO values the team at $2.3 billion, just above the $2 billion paid earlier this year for the Los Angeles Dodgers of Major League Baseball, the highest sum ever paid for a professional team. The Glazer family paid $1.47 billion for the team in 2005 in a highly leveraged deal.
Analysts have balked at such a lofty valuation for the team, which equates to a price to earnings ratio of about 75, very high for a mature company and hardly justified by the team’s recent record of revenue and profit growth.
The team claimed in its IPO filing that it plans to leverage its position as one of the most popular teams in the world’s most popular sport to increase revenues from sponsorships, merchandise and increased viewership fees from newer technologies such as smartphone apps.
IPOs of professional sports team have a losing record in U.S. markets. The last team to go public was the Cleveland Indians of MLB in 1998 and the stock’s debut was remarkably similar to Manchester United’s. The Indians’ deal generated lots of publicity and caused quite a stir among fans of the team, but not much demand from real investors.