Just a week after Real Madrid and Barcelona pipped Manchester United to the highest annual revenue for the year 2011-12 (according to accountant Deloitte LLP), Old Trafford outfit has become the first sports team in the world with a $3 billion evaluation according to Forbes,
Shares of the English soccer team, which were offered to the public last August at $14, did poorly at first but have soared the past few days. Closing at just under $17, Manchester United’s stock has outperformed the S&P 500 since its IPO. The recent increase in its stock price has pushed up Manchester United’s enterprise value (equity plus debt) to $3.3 billion, the highest value of any team in the world. The second most valuable sport team in the world are the NFL’s Dallas Cowboys, worth $2.1 billion.
Last week, Deloitte said in its 16th annual “Money League” report of the sport’s highest-earning clubs that Real Madrid, a record nine-time Champions League winner topped the ranking for the richest soccer team by revenue for the eighth year. Interestingly, Real’s eight years at the top of the ranking matches Manchester United’s run, which began with initial list in 1996-97. The accounting firm concluded that reasons for the drop in annual figures of Manchester United were due to its failure to advance to latter stages of the Champions League which led to reduction in television income and finishing without a trophy as they were pipped to the Premier League title by rivals Manchester City, who ironically have made the biggest jump in the Deloitte List.
Despite a drop in the first quarter earnings because of a reduction in television revenue, the appetite for shares of the 19-time English champions has increased due to better earnings, new sponsorship deals with Japan’s Kansai, and China Construction Bank, and the potential of much more lucrative English Premiership (Manchester United currently is in first place) and Champions League payouts this year. Manchester United has been busy lately trying to forge new partnerships in Asia, trying to expand its already existing strong fan base in the continent. According to the club’s internal research findings, Asia accounts for 325 million fans which incidentally is nearly half of the global fan base (659 million), which it claims. A major significant sponsorship includes deal with Chinese Construction Bank who will enjoy the exclusive rights to offer an official Reds branded credit card to more than 100 million of its customers courtesy of the three-year deal. Another new inroad into China for the Reds is with drink maker Wahaha, which also signed a three-year sponsorship deal two weeks ago. “We know from our visits there, including to Shanghai last summer, that our Chinese followers have always been among the most supportive” Man Utd Commercial Director Richard Arnold said in a statement.
United has been criticized for diluting their brand by negotiating so many sponsorship deals, also there is ($A540 million) shirt sponsorship contract with US car giant Chevrolet, which is due to commence in 2014 which many believe are the reason why United are posting such massive commercial figures. Manchester United are also said to be looking to negotiate sports merchandising giants Nike's biggest-ever sponsorship deal when they begin renewal talks over Old Trafford kit supply in February. The 13-year Nike agreement with United that expires in 2015 is worth £303million, plus a profit share on retail sales, these potential figures - which could even see a £1billion deal. But the club’s marketing manager seemed to suggest that such figures demonstrate they are not over – extending themselves by accumulating multiple sponsorship deals and those they always remain ahead of the game.
Publicly traded sports teams have traditionally been bad investments. But thus far the Red Devils are bucking that trend despite well publicized £359.7m gross debt. Who knows may be Usain Bolt may not be such a bad investment after all.