(Bloomberg) — A Wall Street analyst has aired the potential of Manchester United Plc being demoted from the top division of English soccer as among possible reasons that the owners, the Glazer family, might seek to put the club up for sale.
The Glazers, who own about 75% of the business, may be “assessing their risk profile,” Gabelli & Co.’s John Tinker said in a note Thursday. He also cited a row between the National Basketball Association and China which he said demonstrates the fragility of the Asian nation as a revenue source to a team that says it has about 100 million fans there.
Under manager Ole Gunnar Solskjaer, United has made its worst start to a season for 30 years and sits in 12th place in the 20-team Premier League, with the bottom three being relegated when the season ends in May.
“The combination of potential relegation to the lower Championship division with severe financial penalties and the possibility of a negative tweet affecting the EPL’s China relationship may open the possibility of a sale,” Gabelli wrote. Speaking by phone, Tinker said he doesn’t think the team will be demoted.
A Manchester United spokesman declined to comment.
United reported its first annual sales decline since 2015 last month, partly blamed on the team’s failure to qualify for Europe’s top competition, the UEFA Champions League. U.K. bookmakers quote odds as large as 100/1 on United being relegated, though that’s far less than the 275/1 some firms offer on smaller club Leicester City going down.
The company’s share price has tumbled since the record high of August 2018 when the team, under the guidance of coach Jose Mourinho, headed into a new season having finished runners up last time around. That was its highest position since manager Alex Ferguson left the club 5 years earlier.
But despite winning on the opening day of the season, a poor run culminating in a loss to bitter rivals Liverpool FC saw the club part company with Mourinho in December 2018. The decision didn’t come cheap, with the club reporting a payout of $25 million to the Portuguese manager and his staff in February.
A revival under Solskjaer later spurred a recovery in the stock price, but that too would prove short-lived as the Norwegian’s players faltered.
United in January announced plans to open interactive entertainment venues in Beijing, Shanghai and Shenyang. Chinese companies are starting to cut ties to the NBA after Daryl Morey, general manager of the Houston Rockets, tweeted an image of a slogan supporting Hong Kong’s pro-democracy protesters.
Tinker said that while there’s currently nothing to suggest a breakdown in relations between the club and China, “the risk-reward is changing” for the Glazers, who also control the Tampa Bay Buccaneers football team.
“A sale by the controlling Glazer family should generate a significant premium,” Tinker said in his note, giving the club a private market valuation (PMV) of 3.5 billion pounds ($4.3 billion). He has a buy recommendation and a PMV per share of $26.
(Adds company declining to comment, details on recent share performance.)
–With assistance from Joshua Fineman and Kasper Viita.
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