By Paul Hodgson – CCO and Senior Research Associate
I have to say that listing a soccer team on a U.S. stock exchange, the NYSE in this case, is a bit like listing a ski resort on a stock exchange in the Caribbean. Or for that matter, like listing the Red Sox on the London Stock Exchange (LSE). It doesn’t make intuitive sense unless there are regulatory (or lack thereof) reasons for doing so. So what’s the deal? It appears that the Glazer family, the U.S.-based, debt-laden owners of the club want to retain control over the company, so the shares will be split into two classes, A and B. The Class A shares will be offered for sale on the NYSE while the Glazer family will retain ownership of the Class B shares. The Class B shares have 10 times the voting rights of the Class A shares. Dual class share structured companies are not common in the U.K. which would make the current family control much more difficult to maintain if it listed on the LSE.
Listing in the U.S. means that the club would also appear to signal that it is taking advantage of the Jobs Act to delay or evade reporting requirements because it intends to classify itself as an emerging growth company – hardly a natural classification for a football club that has been around for well over a century. This would allow the company to avoid some key financial reporting requirements, like having to use an external auditor to assess its internal controls. Finally, as if other warning signs were needed, the club is to incorporate itself in the Cayman Islands’ tax haven. All of this is worrisome. Potential investors should be very careful to be aware of the risks inherent in this situation.
As a brand, United is probably the only football team that could be recognizable to a U.S. audience, apart conceivably from Liverpool Football Club. In the interests of full disclosure, you should know that I am a Leeds United fan. And nowadays it takes a lot of guts to own up to that.