Tuesday, 21 August 2012

Manchester United's shares in issue: a quick guide

The news that George and Robert Soros own 3,114,588 shares in Manchester United has led to some confusion about the number of shares the club has and hence the relative size of this stake. This is a quick guide.

Before the IPO on 9th August, the club's share structure was reorganised to create two classes of shares, "A" Shares and "B" Shares. 

Red Football LLC, the Glazers' Delaware company owned 100% of each class of share.

The IPO - two elements
The IPO was an offer of a total of 16,666,667 "A" Shares at $14 per share. No "B" Shares were offered. 

This total offer had two separate elements, the issue of 8,333,334 new "A" Shares by the company and the sale of 8,333,333 existing "A" Shares by the Glazers. The first element had the effect of increasing the total number of "A" Shares from the 31,352,366 before the offer to 39,685,700 afterwards. The number of "B" Shares remained unchanged.

The Glazers therefore ended up owning 58% of the "A" Shares and 100% of the "B" Shares, so 90% of all the shares in issue. Third party investors own 42% of the "A" Shares and none of the "B" Shares, so 10% of all the shares in issue.

Votes or lack of them
Each "B" Share has 10 votes, and each "A" Share has 1 vote. Because of this structure the 10% of total shares owned by third parties only command 1.3% of the company's votes. In aggregate all the "A" Shares representing 24% of the company, only command 3.1% of the votes.

The Soros position
The Soros family bought 3,114,588 "A" Shares in the IPO. That is a pretty significant 18.7% of the shares sold in the IPO, but only 7.85% of the total number of "A" Shares and 1.9% of the whole company. Being "A" Shares this stake only has 0.24% of the votes.

At a price of $14 per share, the Soros family paid $43.6m for this stake. At yesterday's closing price of $13.06, the stake is now worth c. $40.7m.



Anonymous said...

So, do you think this means that Soros is expecting someone to bid for the club or maybe Soros himself?

Although he doesn't have the voting rights, he seems to have spent a reasonably large amount on the IPO.

Kuldeep.kalonia said...
This comment has been removed by a blog administrator.
Kanonier said...

$ 43.6m does not sound reasonably large for someone like Soros. Seems to be more of a favor for the Glazer family as in "look even Soros is buying!".

Anonymous said...

what I'm reading from this is the Glaziers has 23k A Shares to cash in. Either to prop themselves up or the Man Utd - though I doubt it's the latter.

andersred said...

23m actually but yes. No doubt they will hope to release those in future years....

Anonymous said...

stand corrected :-)

I might be wrong but can they "convert" B shares into A shares if they chose ie. take 6m B shares and create 60m A shares for further sell offs? or offer 'B' shares at nearly 10 times the price?

andersred said...

They could convert Bs to As. When they convert, they would convert 1:1 but would attract 10% of the votes.

Frankly they can do whatever they want.

Anonymous said...

Manchester United; owned and registered in the Cayman Islands.
Paying US tax, not UK.
As transparent as treacle.
FA....where is your 'fit and proper' person/s test eh? Eh?
Laughable if it wasn't so serious.


Anonymous said...

FFS Park!

Paul said...

Everything ok Andy? Your unusually quiet and personally I love your analysis and reports. Hope all well and look forwards to your future articles.

Anonymous said...

"Manchester United; owned and registered in the Cayman Islands.
Paying US tax, not UK.
As transparent as treacle.
FA....where is your 'fit and proper' person/s test eh? Eh?
Laughable if it wasn't so serious."

Tax is paid in the jurisdiction in which the income is earned - in United's case that is the UK. (Although, given the tax losses established as a result of our initial financial structure, we're not going to pay much in the way of taxes in any jurisdiction for a few years.)

The fact that Manchester United plc (Cayman) will pay US taxes is not relevant except in the case that earnings are repatriated - this would involve the operating entity in the UK (Red Football Holdings Ltd) essentially paying dividends to Manchester United plc. This is actually no different from the situation before the IPO where our ultimate owners (Red Football LLC, a Delaware company) would have been liable for US taxes on any profits repatriated by Red Football Shareholder Ltd (the UK parent).

I know this is complicated, but the bottom line is fairly simple. Our tax situation has not changed in any material way - our ultimate parent is still subject to US taxes, while our operating entity will pay UK taxes.

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