'Facebook IPO flop shows no guarantees for Manchester United' - Glazer plans to ease debt far from fail-safe

The owners are set to float the club on the New York Stock Exchange, but an investment banker warns it will not necessarily make the Premier League side stronger financially

On Tuesday evening, the Glazer family moved to list Manchester United on the New York Stock Exchange (NYSE) in their latest attempt to alleviate some of the debt that has engorged the club.

The floatation aims to raise additional funds by holding an initial public offering (IPO) of stock and selling shares in the club. While the Glazers will remain in control of the club, it offers investors a chance to gain a stake in the football club. Though it is unlikely to completely wipe off the £423 million debt currently hanging over the club, there is the hope that it will significantly reduce the burden.

The initial registration statement – a 231 page document – made to the American government showed the club were hoping to raise $100m from the move.

But just what does it mean to the average fan? The man on the street? If the club are reducing their debt, surely that would translate to the supporters – of which the club claim to boast 659 million worldwide?

However, the recent trend of reducing clubs to billionaire playthings has meant the welfare of the fan has almost become an after-thought. Where in the past, supporters were treasured for their commitment and unswerving loyalty, the modern game tends to view them as commodities and a source of funding.

A London-based investment banker told Goal.com: “Provided that the IPO is successful, it should mean that United is able to erase a large proportion of its debt.

“That said, there’s no guarantee it will be successful – IPO markets are tough at the moment and being a massive brand is not enough – just look at Facebook.

“What people really buy into is solid financial performance.

“Look at Facebook, they have gone public but for the average person like you and me, what’s the difference?

“Nothing at all. There’s talk about them charging people for certain services, but if that comes in it won’t be because they’re all of a sudden a public company, it’ll be because they have realised they can charge people for the services and make money.”

The Glazers initially sought to float the club on the Hong Kong and then Singapore stock exchange but were put off by a perceived weak market and turned to the US. However, there are lingering doubts over how much interest a nation that still struggles to embrace football will have in the club.

The IPO target of $100m is not set in stone and could be surpassed and lead to a revised figure being taken to market but given the owners initially targeted a $1 billion listing, they would hope that is the case.

“I don’t think the IPO is about the average punter,” added our source.

“It’s not about shafting them or making things cheaper for them – the Glazers don’t have them in mind, it’s simply about paying debt and making interest charges lower.

“For the man on the street not much will change.

“Public or private companies are all about maximising profits, therefore the rises in ticket prices and Man Utd merchandise should remain fairly constant."

Since the Glazers acquired United in 2005 and loaded it with debt upwards of £700m, there have been doubts as to whether the club could compete financially with their super-rich Premier League rivals – first Chelsea and now Manchester City.
4/6 Manchester United are 4/6 to win no trophies in 2012-13 with Paddy Power

This summer has seen Sir Alex Ferguson swoop for Japan's Shinji Kagawa and Crewe Alexandra's Nick Powell for approximately £18m. It would perhaps be cynical to suggest the signing of Kagawa is as much to do with his talent as it is to further raise United's profile in the Far East, but it appears to be more than a happy coincidence.

The question is whether or not a successful stock market float will lead to additional transfer funds for Ferguson.

“With regards to financial clout, it should make United stronger than its current position,” our source continued.

“If a lot of debt has been paid down, then more of the money the club generates can be used to buy players.”

Sounds simple enough. But becoming a listed company allows any supporter with an interest in the financial future of the club a peek at the accounts, as our source explains: “Being a public company means that all of United’s financials are on show to the world [as they’ll have to report them publicly] – which means greater transparency for everyone.”

Asked about a future change in ownership, he added: “Because of the two tier structure people are expecting, it’s likely the Glazers will remain in control, however, being public means that it gives other parties the chance to buy shares in United.

“It allows other billionaires to build up significant stakes in United if they were interested in owning the club one day.”

There are further issues that engulf this latest move by the US-owned club but ultimately the average fan would just like to know where they stand. Based on our research, it looks like they should expect more of the same under the Glazer ownership.