United follows the market – The Economic Times

0
162
By Jake Cohen

Following the announcement that Manchester United had parted ways with manager Jose Mourinho on Tuesday, the club’s share price had increased by 3.3 percent within the first fifteen minutes of trading on the New York Stock Exchange.

The club’s stock closed at $18.30, up 5.78 percent on the day. As of the opening bell on Thursday, the stock had climbed further, up over 10 percent since the club’s announcement.

What exactly does this mean and is the rise in Manchester United’s stock a direct result of parting ways with its manager? Or, is it a coincidence driven by other market forces?

Manchester United’s final investor prospectus prior to launching its IPO in August 2014 specifically highlighted Louis van Gaal’s strengths as a manager before mentioning any other relevant key performance indicators or unique selling points.

It was only after establishing Van Gaal’s history of success and the likelihood of him replicating that success at Manchester United did the club proceed to outline its business model and numerous commercial advantages.

This example serves to highlight the importance of the manager with respect to investor confidence in Manchester United.

The manager at Manchester United arguably has the largest impact on driving on-pitch results. On-pitch results, at least in the short term, may not have a direct negative effect on the share price. In the long term, however, results will have a substantial impact on putting the club at an advantageous or disadvantageous position with regards to profits or losses, depending on the outcome of those results.

The club, and more specifically, the club’s board of directors is held to a fundamental obligation, and that is to adhere to the overarching principle of representing the interests of the shareholders in its decision making processes. In practical terms, what this means is that Manchester United’s decision-makers are legally obligated to make the decision that they believe, in good faith, will lead to the most profitable outcome.

In order to fully understand Manchester United’s business model, it is important to realise that above all else, decisions are made in the pursuit of profits, not trophies. Fortunately, on-pitch success and off-pitch profitability are not mutually exclusive. Since going public in August 2012, the club have won the Premier League, the Europa League, the FA Cup and the League Cup. However, during that time period, domestic rivals Manchester City and Chelsea have both won more trophies.

Manchester United’s stock could see another short-term bump in the lead-up to, and when the club’s new permanent manager is announced for next season, provided that the choice inspires confidence in United remaining in the Champions League and retaining (and ideally growing) its enviable commercial appeal to prospective sponsors.

2018-12-22 06:08:00

Read more from source here…

LEAVE A REPLY

Please enter your comment!
Please enter your name here