When soccer fans typically think about ownership of the top clubs in Europe, people imagine billionaires such as Roman Abramovich (Chelsea), the Glazers (Manchester United), and Stanley Kroenke (Arsenal). However, what might not come immediately to mind are people like you and me.
Football clubs used to earn the majority of their revenue simply from fans coming to watch their games and buying concessions. But in today’s day and age of sponsorship and broadcasting rights, clubs are finding newer sources of revenue that exceed their ticket sales alone. A few of these teams have decided to sell off some of their ownership in the club through an initial public offering, or IPO, as another method of raising capital. Let’s take a look at an example from European giant Manchester United.
On August 10th, 2012, Manchester United raised $233 million during its IPO. The Glaziers sold 16.6 million of its shares in the Red Devils at $14 dollars a share. From their IPO, the team was valued at around $2.3 billion, making it the largest IPO ever among professional sports teams. What would a sports team like Manchester United do with all the capital raised? Some of it will help pay down its debt like any other company. It had accumulated about $662 million in debt as of March 31, 2012. Now, investors can buy stock, and effectively ownership, in Manchester United on the New York Stock Exchange under the ticker MANU. However, the only person to hold 10% or more of the voting rights is still the Glazer family.
There a few reasons as to why someone might invest in a publicly traded sports team. Some support the team’s brand and use it to express a form of loyalty. Others, such as fund manager Nick Train who has managed to turn £1,000 into £7,775, consider it a wise financial investment. However, many have pushed back on this opinion and still consider investing in sports teams risky given the inherent unpredictability and impact emotions have on the game.
A key example of this in recent years has been Juventus FC. When the first transfer rumors broke out and were confirmed that Portuguese superstar Cristiano Ronaldo would sign for “the Old Lady” in early July, the club’s stock price rose by 11% the next day. Similarly, Ronaldo’s hat-trick heroics in the second leg fixture of the 2019 Champions League Round of 16 match secured Juventus a spot in the quarterfinals despite coming into the game on a 2-0 deficit. Juve’s stock price went soaring. The share price rose as much as 30%, single-handedly increasing the club’s market capitalization by €373 million to €1.6 billion. It is understandable to see investor concerns however, as the stock price tumbled 9.3% a few weeks earlier following the first leg loss to Atlético on February 2nd, 2019.
If you’ve always been a longtime supporter of Cristiano Ronaldo, consider investing in Juventus ahead of their second leg quarter-final match against Ajax tomorrow.
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