Skip to main content

Why United is like a rare painting

Orthodox ways of valuing Manchester United (or any other leading football club) fail to come up with figures that reflect the distorted realities of the bidding process.  It's like looking in a hall of distorted mirrors which puff up your size.

The Financial Times admits as much in a 'Lex in Depth' look at the club's valuation.   Out come discounted cash flow and other tried and tested techniques to arrive at a figure of $1.6bn which the Pink 'Un admits is 'very low'.  What works in other economic sectors does not fit football.

The share price implies a valuation of $4.5bn, although that is hard to justify in terms of the underlying financials.     However, that does not account of the potential for growth through non fungible tokens and sports betting.   Even so, people may start to see through NFTs as a gimmick and sports betting faces some challenges.  

Chelsea's sale went through at five times its revenue, although in United's case that would produce a figure of just $4.3bn.

Whoever buys United will have to refurbish Old Trafford and the training ground, although Chelsea's owners face a bigger challenge at their more constrained site.  United does at least own a substantial amount of land around its stadium which could offer future development potential.

United's revenue streams from broadcast income - its biggest source of revenue - and commercial income from sponsorship deals have both plateaued.   Operating costs, primarily player wages, keep going up.

So are we at the top of the market for trophy assets?   I think the best analogy is a painting by a leading artist, still fashionable, whose work rarely comes on to the market.  The price obtained generally exceeds estimates by the auctioneer.   Opportunities to own truly global sporting franchises like United are rare.

So I think United is worth at least $5bn and perhaps $6bn.   The Glazers won't accept less and may end up with a minority investment deal with an activist hedge fund or specialist financier.

Kieran Maguire reports on Monday afternoon: 'Manchester United share price has fallen another 12.9% today as market gets jitters that Glazers will not sell. Market value of club has fallen by $1.2 billion in just over a week .'

Labels:

Comments

Post a Comment

Popular posts from this blog

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s...
1 comment
Read more

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to ...
Post a Comment
Read more

Millwall punch above their weight

Millwall’s season was overshadowed by the tragic death of owner John Berylson following a car accident. The American had been an exemplary owner, beloved by the fans for his leadership, passion and generosity. Millwall’s finances had been pretty good during his tenure, which we shall explore by looking at the most recent accounts from the 2022/23 season, when the club narrowly missed out on a place in the play-offs after finishing 8th. Millwall’s pre-tax loss slightly reduced from £12.6m to £12.2m, as revenue rose £0.8m (4%) from £18.6m to a club record £19.4m and player sales improved from a £0.1m loss to £2.5m profit. However, other operating income dropped from by £1.1m from £1.3m to £0.2m, while operating expenses increased £1.7m (5%) from £31.6m to £33.3m. The main driver of the revenue increase was broadcasting, which rose £1.1m (12%) from £9.1m to £10.2m, though match day was also up £0.4m (7%) from £5.8m to £6.2m. In contrast, commercial fell £0.7m (19%) from £3.7m to £3....
Post a Comment
Read more