What happened
The family that controls Manchester United (NYSE: MANU) is reportedly leaning toward bringing in a minority investor, and not selling out of the famed British soccer club. Investors hoping to cash in on a premium valuation are disappointed, sending shares of Man U down as much as 14% on Monday morning.
So what
Manchester United is perhaps one of the best-known sports brands globally, and trophy assets like the club do not come on the market all that often. The club is also unusual in that its shares trade on the New York Stock Exchange. Although the Glazer family owns a controlling stake, retail investors have a chance to buy into the club's ownership.
Shares of Man U spiked last fall after reports surfaced that the Glazers had hired bankers to explore options for the club, and jumped again in February on rumors that both billionaire businessman Jim Ratcliffe and an unnamed sovereign wealth fund based in the Middle East were interested in bidding. In theory, a number of deep-pocketed bidders could have led to a bidding war that upped the valuation all holders, including retail, would receive in a sale.
But there would be no premium paid out to shareholders if Manchester United takes on a minority partner instead of agreeing to a sale. The shares are down on Monday after a report in the Daily Express said the Glazers are "leaning toward" staying in control and bringing in a minority investor.
Now what
The auction is still ongoing, so this could be an attempt to extract a higher price out of one of the bidders. But investors had reason to worry this would be the outcome from the start.
The Glazers together own a controlling stake, but that stake is split among a number of family members who reportedly have different levels of desire to stay involved in the club. In such a scenario it likely makes more sense to find an investor and liquidate those who want to sell their shares, allowing those who want to remain involved to keep control of the club.
Even after Monday's fall, shares of Manchester United are up more than 35% from when the buyout rumors first surfaced. Expect investors to remain at the edge of their seats while this off-field drama goes into added time.
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