MANCHESTER UNITED was first listed in 1991 on the London Stock Exchange where it remained for 14 years. Seven years after it was delisted, the Glazer family has listed the football club again, this time on the New York Stock Exchange.
We look at the IPOs of Manchester United, Facebook and Glencore International – three very different, but some might say equally successful, brands across three very different industries – and consider what reasons were given for each listing.
There are a number of common reasons that a company would list its shares on a stock exchange. These can be crudely divided into two categories: financial and non-financial.
Non-financial drivers may include raising the profile of the company and lending credibility to a brand, or perhaps seeking to attract, retain and incentivise employees through the ability to liquidize shareholdings through a competitive and liquid market.
For many corporates, the main financial driver is the ability to raise finance for proposed investment opportunities. By listing its shares a company takes the benefit of a diversified equity base and access to a market for its shares to be freely traded, thereby having the opportunity to create capital growth both at the time of the IPO and in the future by way of subsequent fundraisings. Another reason may be pressure from existing shareholders seeking to realise their investments either upon IPO or by subsequently taking advantage of a market through which they can sell their holdings in an uncomplicated manner, at the most financially prudent time.
Glencore International’s IPO fits the mould when considering these particular financial drivers. The company’s UK 2011 prospectus cited using additional capital to grow its business as key to its financial strategy. At the time Glencore proposed to use the additional IPO shares and a proportion of the cash proceeds to fund an additional acquisition in Kazzinc, a major zinc provider, key to Glencore’s business. It also declared that $5bn (£3bn) would be used to fund capital expenditure for three years, including expansion of Kazzinc and other industrial assets. At the time of the IPO, Glencore made no secret that acquisition firepower was one of its main motivations behind the IPO. This has recently been demonstrated by Glencore’s continuing interest in acquiring the FTSE 100 miner, Xstrata.
In contrast, Manchester United raised funds to grow and exploit the brand. However it has been widely reported that the funds were raised to assist the re-payment of the £416.7m debt accrued by the company since the Glazer family’s heavily leveraged takeover in 2005. Cutting the debt the Glazers loaded on the club has been a challenge but the 134-year-old-club is one of the most successful sports teams in the world with approximately 659 million followers (according to its prospectus) and its IPO was highly anticipated. Forbes magazine called it the most valuable sports team in the world, valued £1.43bn.
Facebook listed on the NASDAQ in May 2012 following huge expectation. A major benefit from the company’s IPO was the reward and retention of its staff. As a tech company Facebook’s workforce is key so retaining and incentivise its staff (especially when some of those staff purportedly received bonuses only by way of restricted or “phantom” stocks) is directly connected to its financial success. Employees could finally (and easily) cash in on the hugely popular brand.
Another factor could have been the size of Facebook’s shareholder base. If it hadn’t listed, an SEC requirement would have imposed on it the same strict financial regulation and disclosure requirements as a public company but without the benefits that go with it.
Where to list?
Access to different markets and investors’ appetite for different investments is a key decision for a company seeking to IPO. Manchester United had previously sought to IPO on the Asian markets until it was recognised that there was not the demand for investment. Instead it chose the NYSE; an interesting choice given the history and location of the club. The state of the European markets no doubt was a factor and regulation played a role (as perhaps did the nationality and experience of the Glazer family) with Manchester United taking advantage of the JOBS (Jumpstart Our Business Startups) Act, passed in the US in April 2012. The legislation allows the company to benefit from a reduced reporting and financial regime for up to five years.
Liquidity or valuations are often factors in determining where a company lists. However, with the main global markets now being so established and sophisticated, there are limited differences between them as far as these factors are concerned. Investors will “travel” for the right investment.
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Although Manchester United has listed in a difficult market, investor appetite remains positive. Manchester United sold 16.7 million shares at IPO and has already attracted some big name, billionaire investors. Looking at the huge sums raised by Manchester United, Facebook and Glencore, it’s clear that the markets remain open to a variety of investments.
Kate Ball-Dodd is a partner and Megan Paul a senior associate in the corporate group at global law firm Mayer Brown