Manchester United, the English soccer team with an adoring fan base in Europe and Asia, is filing to go public in the US. But the initial public offering is not a reflection of Americans’ increasing love of soccer. Instead, it is a reflection of American regulators’ light touch. I’m not kidding. The US, which has long been criticised for its harsh rules surrounding IPO’s, is now the place where foreign companies go to avoid regulation.
Manchester United may be the world’s most popular soccer club, with 659 million fans according to the team’s own estimates. In 2005, the American businessman Malcolm Glazer and his family bought control of the team, loading it up with hundreds of millions of dollars in debt. Now, the company is selling shares to raise money and reduce its debt, which stands at about $655 million.
But the Glazers do not want to give up voting control since, among other reasons, Manchester United fans appear eager to buy back the team from the still-unpopular family. In 2010, a prominent group of Manchester United fans were said to have tried to form a consortium to repurchase the club. The Glazers have uniformly given the same response: the team is not for sale. Now, the Glazers are venue-shopping for their stock.
They passed over the Hong Kong Stock Exchange because it would not give the team a waiver to allow two classes of shares, with different voting rights. The London Stock Exchange also does not allow such share structures, perhaps the reason this natural home was skipped over by the Glazers. Manchester United declined to comment for this article.
The Singapore Exchange seemed more amenable to the Glazers’ plan to list Manchester United and keep control through a dual-class structure. But after the exchange delayed final signoff on the dual-class shares and the Asian markets cooled, the Singapore plans were derailed, according to an article in Reuters.
The soccer team has recently found a home for its stock in the US. Manchester United filed the papers this month for its initial public offering on the New York Stock Exchange, and the Glazers are taking advantage of the country’s willingness to be more flexible when it comes to shareholder rights. Manchester United is proposing a corporate structure that would give the Glazers shares with 10 votes apiece. Public investors would receive one vote for each share.
While the Securities and Exchange Commission tried to ban this type of dual-class voting stock in the 1980s, a federal appeals court struck down the rules. Since then, the structure has become increasingly common. Facebook, LinkedIn and Google all have dual-class shares. The New York Times also has a dual-class voting structure. In 2011, 28 offerings featured dual-class structures that gave greater voting rights to certain shareholders, according to the research firm Dealogic.
The Manchester United offering is a case study in how the American markets have evolved toward deregulation in the past decade.
The company is a beneficiary of the newly enacted Jumpstart Our Business Start-Ups Act, known as the JOBS Act, designed to help private companies raise capital and go public. Although the team was founded in 1878, the JOBS Act classifies Manchester United as an emerging growth company since it has less than $1 billion in revenue. As such, the company, which is incorporated in the Cayman Islands, does not face the same hurdles as American businesses.
The JOBS Act builds on earlier efforts by the SEC to loosen the rules governing IPO’s of foreign companies. Under pressure from stock exchanges, the agency has exempted foreign issuers like Manchester United from large parts of American securities laws. Manchester United will not need to file quarterly reports, report material events, file proxy statements or disclose extensive compensation information, all of which American companies must do.