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Manchester United (NYSE: Manu) stock surged in November after owners of the Glazer family said they were willing to listen to bids. The stock jumped from about $13 to $21 and went higher in January.
Speculation over whether the club will be sold has created considerable volatility. Most recently, the stock has regained some of its gains with reports that the club may not be sold.
I don’t want to focus today on acquisition speculation, but on how the market values the football club and whether or not to add this stock to our portfolio.
NFL vs EPL
According to data, the three most valuable sports teams in the NFL (National Football League) are the Dallas Cowboys, New England Patriots and Los Angeles Rams. The top 12 teams are all American teams and play in either the NFL, the National Basketball Association (NBA) League, or Major League Baseball (MLB).
So why is this? First of all, there is no relegation threat in the NFL or its baseball and basketball equivalents. This means that clubs, or businesses/franchises within the state, are protected from the financial challenges that relegation poses.
By comparison, relegation from the English Premier League (EPL) would take a huge financial toll on the club. His EPL 20 club average earnings in 2018/2019 was £250m, while the Championship club (former Second Division) saw him earn only £32.7m.
Failure to qualify for the lucrative European Champions League (the top four teams in the EPL) brings additional uncertainty to the big clubs.
And there’s the simple truth that Americans are doing better in the business of sports. And that’s not what we always like in the UK. He is one of the few fans who appreciates the sustained investment in structure. On the one hand, I can’t stand what Liberty Media has done to his F1 motor his racing.
Finally, British fans don’t seem to like the team making a profit. When that happens, they ask for more call forwarding.
For the reasons mentioned above, English football clubs have a history of huge losses. And it’s not attractive to investors.
But there is great potential here. We’re talking about the world’s most watched sports league and a sizeable wealthy domestic population.
Traditional ways of evaluating companies — discounted cash flow Analytics and short-term metrics — less applicable to soccer teams.
One way to evaluate a club is Markham multivariate modelwas developed in 2013.
That’s because EPL continues to grow commercially. This is a big success. For example, TV revenue has tripled from £1.7 billion in 2010-2013 to £5.1 billion in 2016-2019. And I only see this growing further.
However, despite being the most watched league in the world, total revenue lags far behind American leagues, especially the NFL, which earns more than twice as much.
With money pouring into the EPL and interest in an increasingly competitive league, an EPL club could be a good investment. Manchester United is his only EPL club listed.
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