Like so many unathletic American males in or near the financial industry, I follow European soccer*, so for me the Manchester United IPO is the most exciting IPO since that other IPO. And that’s not the only connection: United seems to have learned a lot from Facebook about how to conduct a successful IPO, er, an IPO. For instance, there’s its use of a dual-class stock structure, and its efforts to distract investors from daunting yet generally accepted financial metrics that are a bit daunting – e.g. a 50 P/E at the midpoint of the range – with the strategic use of vague happy-feeling metrics. Facebook was valued on Price/Likes, and United is hoping to monetize its “659 million followers,” who seem to have met an even lower standard than clicking a button on a computer screen:
References to our “659 million followers” are based on a survey conducted by Kantar Media (a division of WPP plc) and paid for by us. As in the survey conducted by Kantar Media, we define the term “followers” as those individuals who answered survey questions, unprompted, with the answer that Manchester United was either their favorite football team in the world or a football team that they enjoyed following in addition to their favorite football team. For example, we and Kantar Media included in the definition of “follower” a respondent who either watched live Manchester United matches, followed highlights coverage or read or talked about Manchester United regularly.
If you have read this far you are now a Manchester United follower, so, y’know, 659,000,026.
That fuzziness is actually a bit incongruous because this IPO has some cold hard financial accounting here that you will not see in most public company filings. Imagine working for a company that discloses this:
Don’t be fooled by “players’ registrations” – that just means “players.” In European soccer you don’t trade for players you want, you buy them – you pay their current club a pile of cash money and in exchange you get the rights to the remainder of their contract. And for the last two years Manchester United has bought more valuable players than it’s sold, unlike certain of their competitors I could name but won’t. In addition to the raw numbers you get specifics about individuals – for instance, in 2009 United was selling more than they were buying, but don’t expect a repeat:
Profit on disposal of players’ registrations for the year ended June 30, 2010 was £13.4 million, a decrease of £66.8 million from £80.2 million for the year ended June 30, 2009. This reflects the sale of Cristiano Ronaldo, a particularly valuable player, in 2009, which resulted in an unusually high profit for that fiscal year.
Coming from another industry that basically monetizes human capital, it’s hard not to project here. Imagine working for a company that when you left said “this reflects the departure of Joe Blow, a particularly valuable fixed-income trader” and then said how much you were worth.** The structure of the industry forces United to be pretty open about its talent management abilities: it has to reveal how much it pays for its personnel, and whether they gain or lose value during their time with the team. The answer seems to be “lose value,” by the way***, but that’s not that surprising given that (1) humans age and (2) these humans have to run around all day kicking stuff. Presumably financial services employees depreciate less rapidly though perhaps that’s wrong.
Elsewhere in the filing (page F-28) you get wage and employee numbers; Manchester United paid £135.6mm in 2011 to 628 employees, or about £216,000 per employee, making it just a bit worse than Goldman Sachs. As at Goldman, some employees, particularly the 29 first-team soccer players, probably did a bit better than the average.
Manchester United Seeks Up To $333 Million In IPO [Bloomberg]
Manchester United Ltd. – Amendment No. 2 to Form F-1 [EDGAR]
* All discussion of the word “football” is confined to this footnote. Also diving, 0-0 draws, etc. etc.
** As opposed to “this reflects the departure of Joe Blow, a particularly valueless executive, who left in disgrace and with $20mm in severance.” That, of course, is common.
*** This is not especially scientific, but look at that cash flow. Also the income statement: Profit = (amount you sell for) – (amount you buy for) – (amount you amortize over the life of the contract); if you look at the last few years, ex Cristiano Ronaldo, amortization exceeds profit so I’m guesstimating you’re worth less when you leave than when you arrive.