Almost every kid at some point has dreamed of owning a professional sports team. However, for most people, that's a dream that will go unfulfilled. The realm of billionaires and large corporations, owning a professional sports team (especially a storied franchise) is just out of reach for the average Joe. It's just too expensive of a proposition. That is until this week's latest initial public offering.
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With more than 19 English Premier League Championships to its name, the 134-year-old superstar soccer club Manchester United (NYSE:MANU) is now a public company. A mystery to most Americans, the club is a household name in the majority of the world- including more than 100 million followers in China. The club listed on a U.S. exchange after pulling a planned IPO in Singapore earlier this year. Overall, Manchester United sold 16.7 million shares at a price of $14 each, below the expected range of $16 to $20.
While there has been plenty of negativity focused on the IPO from the financial media- specifically concerning the current ownership structure and the club's relatively high debt- there are plenty of bullish factors that could potentially make an investment in Man U make your portfolio chant "Ole Ole Ole."
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One of Sport's Biggest Franchises
While soccer/football in the United States and Canada remains buried in obscurity, the game continues to be the world's most played sport. From South Africa and Europe to Latin America and Asia, soccer has surpassed borders and created diehard fans. While much of that rooting is focused on national and city teams, a few have become international favorites. Enter our newly IPO'd team.
Manchester United is one of those sports franchises. In its 134-year history, the team has won more than 60 trophies and 19 Premier League Championships. These wins, along with having superstar players like David Beckham and manager Sir Alex Ferguson on its roster, has helped the football franchise create a global fan base in excess of 650 million followers worldwide. This includes more than 200 officially recognized branches of the Manchester United Supporters Club (MUSC), in at least 24 countries.
At home in Old Trafford stadium, the team has one of the highest average attendance records in all of Europe. Those rabid "Red Devils" purchased more than 5 million items of Manchester United branded licensed products last year, including over 2 million Manchester United jerseys. According to the deal inked with Nike (NYSE:NKE) to manage the team's merchandise sales, those jerseys brought in roughly $39 million annually for team.
These factors have helped Man U become the most valuable global sports franchise in the world. According to Forbes, Manchester United is now worth nearly $2.23 billion, or roughly 19% more than number two on list, Spanish soccer club Real Madrid. Baseball's New York Yankees rank third at $1.85 billion (tied with the NFL's Dallas Cowboys).
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That position at the top of list has helped Man U rack up a host of lucrative sponsorships. Insurer Aon has been paying $31 million a year to put its name on the team's jerseys in a deal that runs through 2014. More recently, General Motors (NYSE:GM) will pay United $559 million through 2021 for the team to carry the Chevrolet logo on its jerseys starting in the 2014 season. Additionally, in the first case of a practice jersey sponsorship, DHL Express inked a four-year deal with the club worth a reported $62 million to sponsor Manchester United's practice attire.
Betting on Proven Winner
Despite the negatives and potential bearish case associated with Manchester United's IPO, investors have the opportunity to bet on a proven winner. At the end of the day, the ultimate goal of a sports team is not to be a good business, but to win trophies. In the case of Man U, its objective is one in the same. The team has been one of the best performing sports franchises of all time. Those trophies directly impact its bottom line as higher league placements result in a greater share of television rights. Success on the soccer pitch generates greater income for the club.
Since the inception of the Premier League and BskyB's broadcasting deal, Manchester United has received the largest share of the revenue generated from these rights. Manchester United has also consistently enjoyed the highest commercial income of any English club.
Adding in Man U's rabid fan base and lucrative merchandising/sponsorship deals to its long history of winning, and it's easy to see how the team could be the sports investment du jour. The NFL's Green Bay Packers (a quasi-public entity) and Italy's Juventus Football Club (OTC:JVTSF) are the only similar options for individual investors. But they don't even come close to Man U's global reach.
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The Bottom Line
For anyone who has ever wanted to own a piece of a fabled sport team, the recent Manchester United IPO could be directly up your alley way. Sure, there are a few warts on the face of shares, but the team's history of winning and huge fan base makes it an interesting bet for investors. The long-term picture for the team should be rosy as long as it can keep winning games and attracting fans.
At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.