KEY POINTS
- Manchester United announced last night that it is exploring “strategic alternatives” for its stock.
- This is usually code for “exploring a sale.”
- Investors are hoping that Manchester United will not only sell to an acquirer — but at a premium price.
Sometimes, even a great sports team can be a lousy stock.
What happened
Shares of Britain’s publicly traded Manchester United (MANU 23.57%) football club soared for a second straight day in early Tuesday trading, gaining another 13.5% through 10 a.m. EST after rising nearly 15% on Tuesday.
The reason: Yesterday after close of trading, Manchester United announced that it will explore “strategic alternatives to enhance the club’s growth.”
So what
Now, that all sounds a bit vague, but in investing circles, “exploring strategic alternatives” is often code for “looking to sell the company” — generally at a premium price — and that’s what’s getting investors excited about this stock.
There aren’t a whole lot of publicly traded sports teams available for ordinary investors to buy into, after all. In addition to Manchester United, the easiest to own are probably baseball franchises like the Toronto Blue Jays, owned by Rogers Communications, or the Atlanta Braves, part of The Liberty Braves Group, or for basketball and hockey fans, the New York Knicks and Rangers, respectively, both owned by Madison Square Garden Entertainment.
Or more famously, the Green Bay Packers. (The Packers are a fine football team, by the way, but they’re also kind of a lousy investment.)
Now what
But this is a story about Manchester United. How excited should you get about Manchester United’s announcement that it may be for sale?
Answer: Perhaps not too excited. For one thing, while “strategic alternatives” probably implies a for-sale sign, management cautions that “there can be no assurance that the review being undertaken will result in any transaction involving the Company,” nor is there a guarantee that any sale will be at a price higher than what Manchester United stock fetches today. For that matter, management may decide not to sell at all, but simply attract new investment into the company — investment that would probably be dilutive to existing shareholders.
Also worth considering is the reason Manchester United might feel it needs new investment, to wit, the fact that the company has lost money in four of the past five years — and indeed, according to analysts polled by S&P Global Market Intelligence, is expected to keep on losing money for at least the next three years.
Simply put, as a stock, Manchester United has long been a loser. If I were you, I’d think long and hard before deciding to pay 30% more than the stock cost on Monday to own it.
Should you invest $1,000 in Manchester United right now?
Before you consider Manchester United, you’ll want to hear this.
The Wagon Stocks Tita Advisor analyst team just revealed the best investment .. and Manchester United wasn’t one of them.
Wagon Stocks Tita Advisor is the online investing service that has beaten the stock market by 3x since 2018*. And the team just revealed the best investment
