☀️☕️ Manchester United off the Block?

📝 Focus

• Manchester United off the Block?

📊 In the Markets

• Bitcoin Bump

• Anger in the SBF Penthouse!

📖 MoneyFitt Explains

🎓 Leveraged Buyouts

📝 Focus

Manchester United off the Block?

Manchester United’s shares sank over 10% on the NYSE as Sheikh Jassim bin Hamad al-Thani of Qatar withdrew his $6bn bid for the club.

The American Glazer family seems to be going with a bid of over $1.5bn for a quarter of the company from home-grown supporter Sir Jim Ratcliffe of privately-owned chemical giant Ineos, valuing the company at about $6.5bn. This is well above the market cap (share price X number of shares) of $2.9bn, but as it’s not a takeover at that valuation, there’s no reason to expect a closing of that discount.

When MANU was first put on the block last November, the family was looking for between £6 and £8 billion, a huge premium over the market value at the time of about £3 billion. Shares are down 21% this year after today’s 10% drop but still up 37% from a year ago.

..... ▷ The Glazer family bought the club for £790m in 2005 and sold 10% of the company when it IPO-ed on the NYSE in 2012.

The Glazers bought the club in a classic private equity leveraged buyout or LBO🎓 in which the acquiring firm takes on massive amounts of debt TO buy the target, but which then becomes the debt OF the acquired target company.

The new owners then proceeded to pull cash out in the form of dividends and interest instead of renovating or redeveloping Old Trafford, the storied, 113-year-old stadium also known as the Theatre of Dreams. (Plans now seem to be underway, though nothing has happened yet.)

But that's the nature of private equity buyers and LBOs!

..... ▷ The price the Glazers wanted for one of the world’s most famous clubs would make it the most expensive sporting institution ever.

In the Premier League, it would be valued far higher than the £2.5 billion paid in May 2022 (plus a £1.8 billion investment commitment) for Chelsea by a consortium fronted by Los Angeles Dodgers part-owner Todd Boehly.

Chelsea is currently placed a lowly eleventh in the 20-team English Premier League.

..... ▷ Just one spot higher at tenth, Manchester United have been one of the most successful clubs in English football history, winning 20 league titles, 12 FA Cups, and 5 European Cups (now the UEFA Champions League).

However, they have not won the Premier League title since 2013, and they have not won the UEFA Champions League since 2008.

The last trophy was the Carabao Cup (League Cup), which they won in February 2023, their sixth League Cup title and their first trophy since winning the UEFA Europa League in 2017.

Any glimmer of success on the pitch and the family, hardly emotionally attached to the club, could well be back on the lookout for a buyer for the 65% they still own.

Cover Image: Irfan Nasir (Kskhh) on Wikimedia Commons

📊 In the Markets

European markets were largely flat following a cautious start to the week in Asia-Pacific markets, with Tokyo's stocks leading the decline. Investors are awaiting key economic data from China and Japan this week.

China's third-quarter GDP data, set to be released on Wednesday, is expected to show a 4.4% year-on-year expansion, down from the previous quarter's 6.3%. Hong Kong and China stocks were also softer ahead of another deadline coming up for Country Garden to make an offshore interest payment.

Meanwhile, wholesale prices in India remained in deflation, with a 0.26% year-on-year decrease in September, down by less than the previous month's 0.52% decline but well below the 0.50% increase that Mumbai’s Finest was expecting. India has now experienced six consecutive months of wholesale price deflation. (Wholesale and producer or “factory gate” prices are more or less the same thing.)

And then US Stocks surged, with optimism for the start of earnings season, despite deepening concerns over the Israeli-Gaza conflict. Traders went on a risk-on binge, sending the price of safe-haven gold and the Cboe Volatility Index down.

US government debt also sold off, reflecting the same risk-off sentiment, sending 10-year Treasury yields up 0.07 percentage points to 4.7% (since bond yields go up when bond prices go down.) The benchmark yield recently hit a 16-year high of 4.81% on Tuesday, October 3rd.

Giant retail broker Charles Schwab shares rose 4.7% after posting quarterly profits down a better-than-expected 46% to 56 cents a share. The drop was mostly from a steep fall in revenues made on interest from clients’ cash deposits, which fell by nearly a quarter to $2.2bn.

Schwab had been hit by the outflow of deposits into higher yielding products like money market funds as rates rose and during the mini-banking crisis in March, which highlights the importance to Schwab of interest income (which it mostly gets from reinvesting in Treasuries, earning a spread). Interest income made up about half of all revenues in 2022 and is usually more stable than trading commission and investment management fees.

Meanwhile, the month-long strike now involving 34,000 UAW union members have cost the Detroit Three automakers, suppliers, dealers and workers a total of $7.7 billion, according to consultants Anderson Economic Group.

Yogawear Warrior Lululemon popped up over 10% on Monday ahead of joining the S&P 500 index, replacing Activision Blizzard, where the long-running antitrust saga around its acquisition by Microsoft is finally drawing to a (slightly dull) close with the UK authorities caving in last Friday.

Bitcoin Bump

Bitcoin surged by 5% to nearly $30,000 following a false report about the approval of BlackRock's spot ETF, before dropping back to around $28,000

A Cointelegraph post had claimed on X/Twitter that "SEC approves iShares bitcoin spot ETF."

The tweet was live for 30 minutes before it was updated to include "reportedly" and later deleted with an apology.

..... ▷ The report was totally untrue, and the SEC is still reviewing BlackRock's application for a spot bitcoin ETF.

The SEC also recently initiated additional proceedings regarding spot bitcoin ETFs, which could lead to further delays of at least another month.

..... ▷ The rumour may have been more credible than usual since just last Friday, the SEC decided NOT to appeal the court ruling that could force the regulator to review Grayscale’s attempt to convert its GBTC fund into a spot bitcoin ETF.

It seems painfully obvious to say it, but the SEC’s decision not to appeal the Grayscale court ruling does not necessarily imply readiness for approval.

..... ▷ There actually are already exchange-traded funds (ETFs) for speculating on Bitcoin and Ether, but they hold Bitcoin or Ether futures, not the actual cryptocurrencies.

(In this setup, funds from investors are held in cash or Treasuries, and the manager engages in trading cash-settled Bitcoin futures on a commodities exchange. These futures periodically expire, and the manager reinvests the proceeds in new futures to maintain the Bitcoin investment. While the ETF would broadly follow Bitcoin's price, there would be frictional costs from futures rolling and some tracking error.)

The SEC has not approved spot ETFs that directly hold cryptocurrencies due to concerns about the unregulated nature of the spot market, which could be manipulated. (As though futures markets can’t?)

However, a federal appeals court ruling in August found this approach "arbitrary and capricious," suggesting that the SEC may soon approve spot Bitcoin ETFs.

Anger in the SBF penthouse!

The last and youngest of Sam Bankman-Fried’s three lieutenants to take the stand against him, Nishad Singh spoke of excessive spending on real estate, celebrity deals and venture capital investments, which he objected to.

Gary Wang and Caroline Ellison had earlier testified that SBF had ordered and orchestrated the theft of customer money from the crypto exchange.

FTX's former head of engineering, who has already pleaded guilty to fraud and campaign finance violations, testified that the exchange had committed to $1.13 billion in sponsorship and endorsement deals just eight months before its collapse in late 2022.

..... ▷ The prosecution used Singh's testimony to highlight Bankman-Fried's lavish lifestyle and extravagant spending on celebrity connections, investments, and luxury homes.

..... ▷ Singh also testified that SBF picked the luxurious $30 mn Bahamas penthouse where he lived with nine roommates and close associates over objections from employees.