The British soccer team Manchester United has made a poor showing on the field this season.
Now the British hedge fund manager Crispin Odey is making a multimillion-dollar bet that the club’s New York-listed shares are destined for a similar trajectory.
Odey Asset Management, Mr. Odey’s fund, has taken a $22 million short position against Manchester United shares. Investors take short positions by borrowing a company’s stock and then selling it in anticipation of pocketing a profit by buying the stock back at a lower price.
Mr. Odey’s bet pits him against several hedge fund investors who remain strong supporters of the team. George Soros has a 5.3 percent stake, while GLG, a division of the world’s biggest hedge fund Man Group, has a 2.2 percent stake.
But Manchester United’s journey since its initial public offering on the New York Stock Exchange in August 2012 has been a tale of two teams.
On the field, the club has fallen from the top of the English Premiere League rankings last season to ninth this year. A series of management changes, including the retirement of the legendary manager Sir Alex Ferguson and its chief executive, David Gill, has caused upheaval at the 135-year-old club. During Mr. Ferguson’s 27-year tenure, Manchester United transformed itself from an underdog to a champion, winning 38 trophies along the way. David Moyes, its current manager, is under pressure to push the team back to the top of the league.
Off the field, in the stock market, the club has experienced steady growth. After its debut at $14 a share, the stock is now trading at $17 a share. With a strong brand and 659 million fans around the world â€" its fastest growing fan base is in Asia â€" the club reported record revenue in 2013. In its latest quarterly results, Manchester United said its sponsorship revenue had risen 63 percent compared with the figure in the period a year earlier.
But Mr. Odey, who is well known in London for his brief marriage to Rupert Murdoch’s eldest daughter and for having a sausage named after him in Ross-on-Wye, is not the only investor to turn bearish on the company. Five percent of Manchester United’s stocks are out on loan, a proxy indicator for how much of the stock is being shorted, according to data collected by Markit.
Fears that the team’s relatively poor performance this year will seep into its balance sheet are not unfounded, according to some analysts. Among the risk factors listed in the team’s prospectus filed with the Securities and Exchange Commission, Manchester United said it was “highly dependent on members of our management, coaching staff and our players.â€
The company is also saddled with £389.2 million in debt, and investors have little say in what management does. The shareholders have no voting rights. This reality was underscored in September, when the Glazer family, which owns Manchester United, filed documentation that would allow the company to undertake a $400 million share sale - a move that would dilute the value of current shareholdings.
