Manchester United (NYSE: MANU) shares were up 6.6% on Wednesday and have dropped again 5% Thursday morning on the chaos surrounding the bidding process for the football club. This is one of those share prices which just isn't to be valued through the formal processes of cashflow, profit opportunity and so on. There are rich men and their egos involved here so that's what the valuation is going to depend upon - whose wallet is going to be deployed to what extent to bolster which ego?
It is entirely true that MANU is more than a little different than any other football club. That global reach stemming back decades just is that different thing. But then this is entirely what leads to the ego problem in the valuation. It's a fairly usual thing for a football fan to want to own their own club. Some men are rich enough to be able to achieve this too. But the history of the game is littered with the names of those who did this, bought their club's access to the top echelons and then found that it isn't a profitable endeavour. The reason for this is that football has relegation and promotion, meaning that the economic imperatives are to pay all the money and more to the players. Owners very rarely indeed make a profit and even fewer consistently. It's entirely different from the closed cartels of American sports leagues in this respect.
Manchester United share price from NASDAQThe Glazers have - well, maybe they have - put Manchester United up for sale. There were and are a number of bidders. The price is looking good. But there's a battle going on between the Qataris and Jim Ratcliffe of Ineos (Britain's richest man). So much so that the bidding period has been extended, as there are claims that the latest and finest offers were not, in fact, received.
All of the precise detail of this isn't quite the point though. This isn't a series of decisions being driven wholly by economic rationality. Therefore the price isn't something that can be divined by said economic rationality. At least in part this is about rich men wanting to own their own footie team. Thus the high volatility in the quoted share price - we're all trying to guess how much punishment to wallets will be accepted in pursuit of the glory.
A fun thing to bet upon but not something that can really be called an investment policy.
