Premier League giants Manchester United have created history by becoming the first sports team in the world with a $3 billion valuation.
The shares of the club offered to the public last August at $14 did poorly in the beginning but the price has soared up in the last few days touching at $17.
Only in November of last year, the club’s gargantuan debts have fallen below £400 million for the first time since the Glazers took over at the club in May 2005.
The Florida based owners, borrowed £515 million in completing the takeover of the club at £790 million seven years ago and have been re-financing the debts since through public offerings or IPO and bonds in New York. At the time of the IPO, serious concerns were raised around the prudence of financial investment into a debt-laden sports team and football journalists and fans, unhappy at Manchester United’s leveraged takeover and the damage it has done to United’s finances, predicted a poor outcome.
However, the worth of Manchester United as a global brand and a remarkable increase in sponsorships since the Glazer takeover were not to be under-estimated. At an initial value of $14 per share, Manchester United was one of the safest of financial bets that you could make in 2012. The club was generating sufficient revenues to stay competitive on the pitch and keep paying down the loans. No other club in England could make it work.
Now, according to Forbes, Manchester United’s stock has outperformed the S&P 500, which is basically a stock market index based on the market capitalizations of 500 leading publicly traded companies in the U.S. stock market, as a result of which it has pushed up the club’s enterprise value to $3.3 billion (debts included), which is the highest value for any team in the world. NFL’s Dallas Cowboys are second most valuable team in the world, worth $2.1 billion.
Manchester United however, remained third in the Deloitte Money League table for 2012/13 behind La Liga giants Real Madrid and Barcelona.
The revenue had declined by at least 3% but a culmination of Premier League (leading the current league table) and Champions League pay outs and some outstanding commercial deals have improved their earnings.
The commercial revenue has increased by 14% taking the total income in that sector to £117.6 million that amounts to 37% of their total income.
The new sponsorship deals with Japanese paint manufacturer Kansai, and China Construction Bank, world-record £357 million deal with General Motors for Chervolet that will become their exclusive shirt sponsor from 2014/15, improved deals (almost double) with AON, lucrative deals with DHL (training kit deal) etc. have put them in a great position financially.