Manchester United shares surge as Moyes sacked

April 23: Manchester United's New York Stock Exchange-listed shares [NYSE:MANU] surged 6.5% this morning on news manager David Moyes has been sacked.

Some fans wanted the Scot to be given more time to settle in. But NBR predicted (below) the Florida-based Glazer family, which owns a controlling stake in the club, would have no patience if the English Premier League club failed to make the top four, meaning no Champions League football in Europe next year, and the huge revenue that comes with it. In the classic manner of corporate raiders, the Glazers funded their acquisition by piling £700 million of debt onto Man U; they were never going to stand for the earnings hit from finishing outside the top four.

Moyes had a potential get-out-of-jail free card if Man U won this year's UEFA Cup, gaining automatic entry to the 2015/2016 Champions League. But in the event, it lost its quarter final tie with Bayern Munich.

Veteran player-coach Ryan Giggs (40) has been put in temporary charge of the club, but the BBC reports he is not in the running to replace Moyes long term.

Moyes has become a business textbook case study on the perils of a club being publicly listed, and the short-term shareholder thinking that comes with it, and the drawbacks of allowing a retiring boss (Sir Alex Ferguson) to have full control over appointing his successor.

He was just 10 months into his six-year contract, and will receive one year's salary £4.5 million in compensation

Manu U fans hire plane with anti-Moyes protest banner

March 29 / UPDATED: The protest plane flew over in the first minute of game, followed by a second with a banner that read: "Fergie back in 6/1 Paddy Power"- a reference to bookmakers' odds of Sir Alex Ferguson returning as manager. Manchester United came from behind to beat Aston Villa 4-1.

March 29 / EARLIER: Some fans' frustration at new Manchester United manager David Moyes has reached a surreal new level.

A banner with the words: "Wrong One - Moyes Out" in seven-foot high red lettering will be flown above Old Trafford before Saturday's game against Aston Villa game, the BBC reports (that'll be Sunday morning, NZ time). The plane was hired by a disgrunted group of Man U supporters.

And ratcheting up the craziness, a second plane has been hired to fly over the stadium - but its backers' intent is not clear.

It's easy to see what's got Man U fans have their backs up.

Last year, under Sir Alex Ferguson, the club won the English Premier League, finishing 11 points ahead of second-placed Manchester City.

Under Moyes, Man U is seventh. The team's low points this season defy summary in a single paragraph, but include Moyes' decision to buy Juan Mata for £38 million then play him out of position; being knocked out of the FA Cup and the League Cup; a 3-0 loss to some scousers and, most painfully, going down last weekend 3-0 to Manchester City - a result that would have been worse had City players not got bored and lost focus. Only the 2 - 1 loss to Tottenham is readily explicable.

The business story behind the football story
But fans aren't the only stakeholders here.

Manchester United was listed in 1990. The Florida-based Glazer family (which already owned a US grid iron football team, the Tampa Bay Buccaneers, gradually built up a majority stake, then took club private in 1995 in a deal worth around £700 million.

In the grand tradition of private equity raiders (hello, MYOB), the Glazers piled debt on their new acquisition. 

They borrowed  £525m million to fund their highly leveraged takeoover of the club; in January this year, Man U was  £700 million in debt. In August 2012 the Glazers relisted the club, this time on the New York Stock Exchange [NYSE:MANU]. It started trading at $US14.05 a share.

Now (leaving aside the millstone of interest payments) Man  U finances are still pretty good; in fact the club's in slightly better shape than the final year of Sir Alex's 26-year rein.

Adjusted profit for the three months to December 31 was £19.8 million , or 12.08 pence per share, compared with £19 million, or 11.60 pence, in the year-earlier period. Higher sponsorship income helped to boost total revenue 12% to £122.9 million.

As I type, shares are up 1.06% on the day to $US17.19 for a market cap of $US2.8 billion - roughly the midpoint of its 52-week trading range ($US14.26 - $US19.18). Shares have trended down, a little, since Moyes took the reigns, but it's been no means disastrous. After all, bums are still on seats, sponsors are all still in place, and TV audiences have held up - even if now their watching through their fingers.

But at some point investors have to wake up to the fact that Manchester United will finish outside the top four in the Premier League.

That means it might not get to play in the UEFA Champions League next season - a disaster not just for fans, but for TV, sponsorship and ticket revenue. No more games against big-name European clubs would certainly mean no more Moyes.

There is a get-out-of-jail card for the new manager. If Manu wins this season's Champions League, it will automatically be included for 2014/2015, even if it finishes outside the top four in its home league. Hope is not extinguished; the team has made the final eight of the knockout phase.

But if Man U is knocked out of Europe, it won't matter that Sir Alex continues to defend Moyes (there's a bit of ego involved; Moyes was handpicked by Sir Alex as his successor). Investors will want Moyes out on his bum.

ckeall@nbr.co.nz

Follow @ChrisKeall