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Manchester United IPO: Great Team, Bad Investment Says Najarian


Hoping to capitalize on whatever remaining buzz surrounds the Euro 2012 soccer tournament, the famed Manchester United Ltd is planning to go public on the New York Stock Exchange (NYX) this week. Controlled by American Malcom Glazer and his family, Man U is expected to price August 9th and beginning trading the next day under ticker symbol (MANU).

According to the recently amended S1 document, MANU plans to sell roughly 10% of the company for $333 million. At the implied value of $3.3 billion, MANU would be trading for 95x earnings and over 6x revenues. In a modification of the original terms Glazer and his family would take about half the IPO proceeds rather than using all the funds to pay down team debt. Glazer purchased Man U for $1.47b in 2005.

Man U is arguably the world's most popular sports franchise, boasting a curiously specific 659 million fans in its IPO filing. Measuring the size of a fan or user base in the 100s of millions is a challenge, as seen by Facebook's (FB) recent confession that nearly 10% of its user base is fictional. Assuming 10% of the world's population follows Man U and, on average, is worth about $5 worth of market cap a piece is a reach, to be generous.

With markets taking a dim view of IPOs in general can Man U, with seemingly inflated "user" data and a valuation bordering on the ludicrous, possibly reach the open market? Jon Najarian, co-founder of OptionMonster.com thinks it can.

"I think they can get public with it" says Najarian in the attached video. "This is one of the most popular brands in the world."

Even allowing for a little fudging, Man U has more fans just in Europe and China than the NFL has in the entire world, says the former Chicago Bear. "And they make a ton of money on all the sponsorship deals." The ball, shoes, jerseys and every available inch of Man U's stadium are covered in ads, generating over $150 million per year, by Najarian's math.

For the record, Forbes says the Dallas Cowboys, with a new stadium and unmatched concession and marketing rights, is worth $1.85 billion, tying them with the New York Yankees as the most valuable U.S. sports franchises.

Najarian is as staunch a defender of the deal as you'll find outside of the underwriters, but even he has a limit.

"The real issue is that this is an overpriced offer, quite frankly, and the Glazers are smart to take money off the table. I would if I were them," he says.

Bottom line: Unless you're looking for stock certificate wallpaper to paste up next to your Green Bay Packer and Boston Celtic shares, it may be best to cheer this deal on from afar.

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