Berko: Kick soccer investment to the curb
Stocks columnist Malcolm Berko says investing in the British football club Manchester United won't be very profitable in the end.
DEAR MR. BERKO: I placed an order to buy 2,000 shares of Manchester United when it came public at $14. My broker and I had thought it would be very difficult to get because the demand was so strong. A day before it came public, my broker told me that he could get 2,000 shares but became concerned because it was too easily available and suggested I reduce my order to 500. I hoped to buy the stock and then flip it at a higher price and make a good short-term profit. Are there any big sports teams that went public and trade at a price higher than their offering price? Manchester is trading at $14.25, and I'd like your opinion about whether you think this would be a good long-term investment — whether I should add to my 500 shares or keep what I have.
HE, Wilmington, N.C.
DEAR HE: Manchester United (MANU-$14.25) is probably the most well-known soccer team east or west of the prime meridian and is owned by a Palm Beach, Fla., billionaire who is loved by his mother (I think), his children, his cousins, his aunts and sycophants and reviled by English sports fans. MANU, which has won a record 19 championships, was taken public by three members of the New York financial mafia (Merrill Lynch, Morgan Stanley and JPMorgan Chase) at a disappointing $14 a share after investors refused it at $22, laughed at $18 and spat on it at $16. The initial public offering raised only $233 million, far short of the $350 million promised to the team's owner, Malcolm Glazer, and minor shareholders by the banksters of the New York financial mafia. Initially, the demand was very strong, but the IPO was eerily reminiscent of the farcical Facebook offering a few months back and a textbook example of superbly inept management by the banksters at Goldman Sachs.
MANU's 2012 revenues of $495 million were down from last year's $505 million, and it is definitely not a “great, profitable growth company” as its gung-ho CEO, David Gill, claims. Certainly, the weak response to the MANU IPO is suggestive of its prospects for the coming couple of years. Seeing as MANU is already on top of its heap, I doubt there's enough revenue and profit growth to attract continuing interests. So considering annual salaries averaging $4.3 million per player, MANU made about $20 million last year from continuing operations such as sponsorships, retail sales, merchandising, media platforms, etc. Sports franchises don't make big profits. Rather, they usually make small profits or losses, and franchise values function like owning a piece of real estate. There are some good years, some bad years and some boring years.
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