Dividend Stocks

Why Is Manchester United (MANU) Stock Up 6% Today?

Source: shutterstock.com/amirraizat

World famous football club Manchester United (NYSE:MANU) is generating headlines on Thursday as anonymous sources indicate that the sports team is in the middle of negotiating a deal worth more than $6 billion. This potential agreement would grant exclusivity to a consortium led by Qatar’s Sheikh Jassim bin Hamad al-Thani. As a result, MANU stock is popping in the anticipation of an eventual closed deal.

According to Reuters, an agreement remains uncertain. However, today’s rumored progress still represents a significant milestone for Sheikh Jassim, the son of Qatar’s former prime minister “who is one of the richest men in the Gulf state.” Jassim has apparently broadcast clear ambitions to take over the globally recognized sports brand.

At the moment, members of the Glazer family carry minority stakes in MANU stock but control the underlying enterprise due to a dual-class share structure. Based on the terms of the proposed deal, the members would be cashing out.

Interestingly, Reuters reports that the Glazers view the Qatari offer more favorably than a competing bid. That other offer originates from British billionaire and Ineos founder Jim Ratcliffe. According to the outlet, “Ratcliffe’s offer envisions that the Glazers would keep some interest in Manchester United.”

Should an exclusivity period be granted, Manchester United would not be allowed to negotiate with any bidder aside from Sheikh Jassim. However, the BBC reports that — in contrast to other claims — exclusivity has not yet been granted.

Controversy After Controversy Follows MANU Stock

Since the day that late U.S. businessman Malcolm Glazer gained control of Manchester United, fans of the club have been up in arms. Theoretically, then, the sale of the team should represent great news for MANU stock and fans of the franchise. However, this deal might turn into a case of one controversy following another.

According to Bleacher Report, Glazer started acquiring shares of Manchester United back in 2003. Per the sports journal:

“Following a couple of failed bids, Glazer took advantage of a dispute between Sir Alex Ferguson and the Irish Coolmore horse racing organisation, who owned around 28 percent of the club. He bought up their share and won control of Manchester United on 12 May 2005.”

However, as The Indian Express states, the Glazer family’s control of Manchester United has sparked fury among fans. In particular, the family borrowed 600 million pounds to acquire the team in a leveraged buyout, “then loaded their debt onto the club,” which it has been paying off since.

Fundamentally, a sale to the Qatari consortium may address this financial drain. However, Qatar also suffers from its own controversies. Leading up to hosting the World Cup last year, the nation courted intense criticism across a range of issues.

Why It Matters

Notably, only one analyst — Jefferies’ Randal Konik — has covered MANU stock during the past three months. Konik pegs MANU stock as a “buy,” although the analyst offers a $25 price target that may soon be eclipsed. Thanks to today’s sharp rise, shares are now up about 8% on a year-to-date (YTD) basis.

On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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