Opinion and Analysis
Man United’s New York listing crowns race to the bottom
Posted Wednesday, June 27 2012 at 20:48
If Manchester United kicks off its public stock offering in New York this year, it will probably be touted as a triumph for US capital markets.
This is, after all, England’s top soccer team, and of all the listing venues the club could have chosen, not least London’s, it looks like Man U is coming to America.
But this apparent financial score isn’t worth cheering like an extra-time win.
While US exchanges dwarf the competition in raising capital this year, there’s a dark side to this distinction that investors should heed.
Man U won’t be choosing New York because Americans are gaga for the sport. Just one per cent of respondents in a recent Harris Interactive poll called soccer their favourite sport.
Rather, the Glazer family, which also owns the NFL’s Tampa Bay Buccaneers, will be taking advantage of the leeway America’s listing standards offer companies to practice poor corporate governance.
New York’s stock markets permit companies to categorize their shareholders into different classes, allowing founders and owners to sell shares while maintaining control.
In London, such a setup gets you excluded from key indexes. It’s an aberration of democratic capitalism, which in its purest form gives one vote per share.
The mechanism lets Mark Zuckerberg hold shares in Facebook with 10 times the voting power of those available to the investing masses.
Similar structures enable Rupert Murdoch, the Sulzbergers at the New York Times, the Ford family, and dozens of others to keep a grip on their companies that is far greater than the capital they have at stake.
Facebook, which raised $16 billion and promptly saw its shares tumble, was the biggest of the bunch, but it wasn’t alone.
All of this is amply disclosed ahead of time, so buyers can beware. And there are sometimes perfectly good reasons, such as tax advantages, for owning the equivalent of coach-class securities like the ones Man U will likely be peddling.
But winning a race to the bottom by selling out the rights of shareholders is hardly worth celebrating.
The author is a Reuters Breakingviews columnist