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Cayman-Structured IPO Of Man United Falls Short

Tuesday, August 14, 2012

A Cayman entity was used to structure what has become the largest Initial Public Offering (IPO) of a sports team on record, that of UK soccer team Manchester United.

The IPO, which sold around 10% of the club to investors, underperformed against targets set by the club's management, the Glazer Family, which targeted a sale price of between USD16-20. Following criticism of what was on offer to prospective investors, the share price was cut pre-trading to USD14, and the IPO eventually raised USD233.2m, USD100m less than hoped, valuing the club at USD2.3bn.

New shareholders in the company hold Class A shares, which have ten times fewer voting rights than the Glazer family, who retain Class B shares under the deal. There are no plans for dividend payments, with the management instead stating investors would benefit as the value of the Manchester United brand appreciates.

Despite being the world's most valuable sports entity, the club is saddled with USD633m in debt, costing it some USD80m in interest and associated costs in 2011. Analysts said purchasing shares was financially nonsensical, and claimed the bulk of investors would comprise of fans. The Glazer Family too drew criticism from the club's fan base as just over half of the proceeds from the IPO is reportedly to be reinvested with the remainder to be retained by the owners.

Prior to the IPO, the Glazer family filed a registration document with the United States Securities Exchange Commission, notifying it of its intention to restructure Manchester United as a subsidiary of a holding company, Manchester United Ltd, in the Caymans. The Cayman corporation was established on April 30, 2012. Previously the club was incorporated as Red Football Shareholder Limited in the US state of Delaware.

Manchester United Ltd will begin trading on the New York Stock Exchange under the ticker 'MANU' from August 17, 2012.