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The Facebook (NASDAQ:FB) initial public offering debacle is still burned into memories and timelines around the investing community. The social media giant went public in mid-May at a price of $38 a share, but quickly lost momentum as shares hit the secondary market. Now, sports enthusiasts turned investors may be making the same mistake with another fan favorite.
In an effort to raise capital and reduce debt from a $1.47 billion leveraged buyout in 2005, Manchester United (NYSE:MANU) went public Thursday evening at a price of $14 per share. The English soccer club, with a record 19 championships, sold 16.7 million shares in a deal that valued the organization at $2.3 billion. However, the IPO priced below its initial $16-$20 range and raised about $233 million, falling well short of the $334 million at the top end of expectations.
“We priced below the range because as you sort of took a step back and looked at the book, the huge number of high-quality institutional investors that were there at $14 just made us more comfortable in terms of the longer-term view here with regard to the type of investor base we wanted,” said Ed Woodward, vice chairman of Manchester United, according to Reuters. Jefferies Group became the lead underwriter after Morgan Stanley (NYSE:MS) bowed out once Manchester decided to list on the New York Stock Exchange instead of Singapore earlier this year. Other underwriters included Credit Suisse (NYSE:CS), JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC).
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Manchester United shares began trading on the Big Board on Friday, but much like Facebook’s debut on the Nasdaq (NASDAQ:QQQ), shareholders had plenty to worry about heading into the weekend. Manchester’s stock price did not receive the traditional pop on the secondary market. In fact, the stock price barely budged at all. Shares ticked slightly higher to $14.19, but ultimately finished the day at $14, unchanged from its IPO price. In comparison, Facebook also had a lackluster opening after finishing just 23 cents higher than its $38 IPO price.
Facebook boasts a user base of more than 900 million, making it the most popular social media company in cyberspace, but its valuation was simply priced too high for a company with slowing growth and monetization doubts. Manchester is also the most popular organization in its field. However, growth concerns may also be weighing on its stock price. David Gill, Manchester’s CEO, recently said that the company is still “very much a growth story,” but according to the S-1, it expects revenue for fiscal year 2012 to decline to 315 million pounds to 320 million pounds ($495 million to $503 million). This represents a 3 percent to 5 percent decrease from the previous year, not exactly an open net growth story.
Although Manchester shares did not immediately fall below their IPO price on Friday, the trading action was eerily similar to Facebook, and that alone should be cause for concern. Underwriters most likely intervened and supported the share price, because it looks embarrassing to have the stock price decline so early in its life. However, as seen with Facebook, once underwriter support is removed, the results can be disastrous.
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