Manchester United's Billion Dollar Problem

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(Photo: Andy Barton via SOPA Images)

Hey Friends,

Manchester United is off to a tough start this year. They currently sit last in the Premier League standings and have lost their first two matches by a combined five goals to Brighton and Brentford, despite spending nearly 8x more on their starting lineup than the latter ($514 million vs. $66 million).

They haven’t won a single Premier League title since Sir Alex Ferguson retired in 2013 after winning thirteen titles in twenty-six years. Their stock price ($MANU) is slightly down from their IPO in 2012, compared to a positive 200% gain for the S&P 500, and Manchester United’s market cap currently sits at $2.3 billion, despite many financial analysts estimating the club might be worth as much as $6 billion.

But despite a lack of titles on the pitch and poor equity performance over the last decade, the Glazer family has made an absolute killing since acquiring one of the world’s most iconic football clubs in 2005.

How is that possible? Well, equity performance and Premier League titles don’t tell the whole story. Instead, you have to take a deeper look at the numbers to understand the frustration of a Man Utd fan. So let’s dig in.

(Photo: Carl Recine via Reuters)

The Glazer family isn’t new to sports ownership. They have owned the NFL’s Tampa Bay Buccaneers since 1995 and have watched the value of that asset appreciate from $192 million at the time of purchase to $3.3 billion today (11.1% CAGR).

But the root of fan frustration at Manchester United comes from how the Glazer family purchased the club. Rather than using a healthy mix of cash and debt to facilitate the purchase, the Glazer family conducted a leveraged buyout to acquire the club in 2005—aka they funded it with more debt than usual.

The family spent about £270 million of their own money to buy the club but then loaded the club up with debt to fund the rest of the £790 million purchase. This was a stark contrast to the team’s current balance sheet, which had no debt at the time of the purchase.

(Chart: The Athletic)

Now that’s not to say debt is inherently bad. It can often be a less expensive source of growth capital, and unlike traditional equity financing, it doesn’t cause dilution to the owners’ equity position in the business. That can be a good thing, for sure.

But ultimately, that’s not what is happening at Manchester United.

The Glazer family will argue they have spent more than $1.5 billion on players over the last decade, including $82.5 million for Ángel Di María in 2014/15, $115.5 million for Paul Pogba in 2016/17, $93.1 million for Romelu Lukaku in 2017/18, $95.7 million for Harry Maguire in 2019/20, and $93.5 million for Jadon Sancho in 2021/22.

They will say annual revenue at the club has increased from $366 million in 2009 to nearly $800 million in 2019—before COVID-19 screwed things up. And without a doubt, they will point to their jam-packed 75,000-seat stadium and say everything is going fine and well.

But the reality is quite the opposite. Sure, they did spend $1.5 billion-plus on players over the last decade. But they have gone through eight managers since Sir Alex Ferguson retired in 2013, haven’t won a Premier League trophy during that time, and their overall debt today sits nearly identical to where it was when they first purchased the club via leveraged buyout in 2006—that’s sixteen years ago!

And even worse, Swiss Ramble estimates that the Glazers have taken out ~$1.3 billion from Manchester United since their initial purchase:

• Interest: $886 million

• Debt repayments: $175 million 

• Dividends: $198 million

• Board of directors fees: $65 million  

• Management fees for a consultancy agreement: $27 million 

In total, over the past decade, no other ownership group in the Premier League has taken out more money from their club than the Glazers, according to Swiss Ramble.

But that’s without even mentioning two critical caveats.

First, let’s start with dividends. Manchester United’s dividends are paid twice a year, in January and June, but it’s really just another way for the family to take cash off the table. How? Considering the six Glazer family members still own about 70% of the club, collectively, they receive the vast majority of each dividend payment.

For example, Manchester United paid about £11 million in dividends last year, and the Glazer family netted about £8 million of the total. And, of course, none of that money goes back into the club—it goes straight from Man Utd’s bank account to the Glazer’s.

But secondly, the Glazer family has also made a fortune selling stock. The family has collectively sold $686 million worth of Class A shares since the club’s IPO in August 2012. And again, that’s money that goes directly to the Glazer family.

So all in, it’s estimated that the Glazer family’s ownership of Manchester United has cost the club about £1.6 billion ($1.9 billion) since they took control in 2006.

But while fans continue to protest every single week and Bloomberg reports that the Glazer family is considering a minority equity sale, I wouldn’t expect the family of six to be leaving Old Trafford anytime soon.

This will probably go down as one of the most profitable sports transactions in history. And if we’re being honest, no one wants to leave the party early.

I hope everyone has a great weekend. We’ll talk on Monday.

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