After our last post on club ownership, some curious readers and tweeters have asked - what exactly is a "partial flotation" on a stock market? What does Manchester United plan to do? Generally, the Red Devils want to go public, but not as publicly as we'd like. They want cash, but not transparency. How can we tell? For starters, they have chosen the Singapore Stock Exchange, which has less disclosure requirements than the LSE. Secondly, I've glanced at a few recent Singapore IPO listings, brushed up on international finance 101, and brainstormed a few possible permutations for this alleged "partial flotation."
Things do not look pretty. Here are the likely forms and results:
First Partial-Flotation Variation: Huckleberry Finn's Raft
A partial flotation is a quick cash grab. You usually have a big but floundering parent company, and a studly subsidiary. The parent company sells a minority interest in the subsidiary looking cash in on "the good son." This raises some cash but also a dilemma - how can a shareholder truly value this somewhat removed fraction of an interest in a spin-off? Uncertainty leads to volatility, like the choppy waters of the Mississippi in Mark Twain's classic "The Adventures of Huckleberry Finn."
The Glazer's Singaore IPO certainly has shades of the escapades of the Duke & King from Huck Finn. The American owners have royally angered England-based fans, so what do they do? They hop on over to the next town down the river and try a new trick to raise funds. Overseas, far away from the local fans who have filled Old Trafford for decades, who knows what the Glazers will do if we turn a blind eye? What will they sell? Like the last few chapters of Huck Finn, this ending could be unsatisfactory on various levels.
Second Partial-Flotation Variation: Captain Jack Sparrow's Ship
Another major risk for a partial IPO in a subsidiary is that instead of price volatility, it simply flops. Investors could be concerned about two issues: First, who calls the shots at the subsidiary? After all, an executive Board holds the Parent Company in check (in theory), but does that same Board have a say in the Subsidiary? What about possible conflicts of interest between the studly Subsidiary and plodding Parent? On a general level, isn't it odd that the Parent Company is slowly sinking but the Subsidiary is a Black Pearl of profit?
Then there's the biggest risk - like the first Pirates of the Caribbean, success breeds shitty sequels intended to squeeze more dimes out of a bored populace. If the Glazers raise some cash in Singapore, then will a partial IPO in Bangladesh be next on the agenda? Perhaps they could go to Barbados, canvass door-to-door, and raffle off certificates of ownership to local residents! And, ad nauseum, this will further dilute the value of the "what the fuck are these exactly" shares already sold.
Third Partial-Flotation Variation: the Barge from Apocalypse Now
The Glazers really haven't made many friends in England. Let's just imagine that their "unfriendliness" leads to a few local enemies in Singapore, who then pull strings to make United's ownership on the Stock Exchange a living hell. After all, the former American owners of Liverpool got ran out of town on a horse. In Singapore, things could end even messier.
Why? Well, the alcoholic beverages advertised on the Singapore Corporate Counsel Association website gives an impression of an entrenched "Old Boys" culture. "Let's take a few shots of Jim Beam and wax fiduciary duties, dude!" This is not a land to get mired into a messy corporate battle. Nor a place where you will probably get the fairest of shakes in a dispute. An exit could be tedious, costly, and worse than the benefit of entry.
Fourth Partial-Flotation Variation: Willy Gets Freed, Kinda
Another risk in selling a minority share in a subsidiary is that the subsidiary gains enough momentum to break free from the parent company. This is the least likely and most fascinating scenario. What if Manchester United manages to break free from the Glazers and...falls into Singapore investors hands? Technically, a partial flotation will require the Glazers to create or use a legally distinct subsidiary and then sell shares in that entity. If there's enough cash, and, crucially, belligerent shareholders, then the parent company could be swept away in Tsunami of money & boardroom politics & lawsuits. Granted, the two-tiered voting structure is meant to impede this. Not likely, but we can hope.
The great irony, of course, is that thousands of Englishmen & women love Manchester United and would love to own a part of the club. The Glazers want that cash, but not the responsibility. Even now, I can imagine local Singapore subsidiaries being created to allow for English investors to own a piece via the Singapore IPO. I'm sure the English are somewhat happy with United's success, but, like the end of Free Willy, are sad to see a friend go away.
In sum, the IPO partial-flotation has several possibilities. It's unlikely that the Singapore IPO will free United from the Glazers, but we can dream. In a few weeks or months, the Red Devils will go public. We can only pray for the best results. Will you be there?