Anthony Avedissian

Stocks

Investment Memo: Manchester United

PLC
Esports, VR and NFTs mean profound changes are on the way for Europe’s largest
football clubs

Anthony Avedissian
May 14, 2021 • 7 min read

Stock Symbol: NYSE:MANU

Market Cap: $2.5B
Current Stock Price: $15.4
52-Week Range: $13.3 — $20.2
Anthony’s Price Target: $23.9 (55% growth)
Hold Period: 12-24 months
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I’ve been a fan of Manchester United since childhood and joining the club as a
member of their Board of Directors has been a longstanding ambition of mine. In
spite of this, I’ve always classified football clubs as poor financial investments - and
I’m justified by the fact they rarely outperform markets. 🛑

But I recently changed my mind and bought shares in Manchester United. 🚀

My mindset began to change back in 2018 when Juventus’ share price doubled in
only a few days after they acquired Cristiano Ronaldo. At the time, Cristiano was a
33-year-old striker playing in his twilight years. It got me thinking… how do
football clubs balance the impact a new player will have on the pitch vs off the
pitch? What portion of Ronaldo’s valuation was attributed to his 264M Instagram
followers? And could publicly traded football clubs finally become exciting
investment opportunities? 🤔

Business Description
Manchester United is one of the most popular sports teams in the world, playing
one of the most popular spectator sports on Earth. Through its 142-year heritage,
the club has won 66 trophies, including a record 20 English league titles,
developed one of the world’s leading sports brands, and built a global community
of 1.1B fans and followers. 🌍
Manchester United have 164M social media connections and is the most followed
Facebook page in the United Kingdom, with more followers than the official pages
of the NBA, NFL, NHL and MLB combined.

Manchester United operates as an entertainment and community service. Its large,

passionate community provides it with a worldwide platform to generate
significant revenue from multiple sources. This includes sponsorship,
merchandising, product licensing, broadcasting, match-day revenue, transfers and
prize money. 🤑

Why now?
Football clubs are no longer just sports franchises; they are media and
entertainment outlets. If we think of their fans as customers, Manchester United
seems dramatically undervalued vs companies with similar size followings. While
Pinterest have 460M users ($40B market cap) and TikTok have 700M users
($450B market cap), Manchester United has 1.1B followers (only $2.5B market
cap).

This valuation gap has historically been justified by football clubs’ inability to
capture data and monetise their fan bases. But things might be about to change…

Investment Thesis
Empowered by the digitalisation of content, emerging technologies, and new data
regulations, football clubs are increasingly capable of building direct customer
relationships with their fans and growing Average Revenue Per User (ARPU). 📈

Clubs that transition to a digital future and monetise fan data will unlock vast new
revenue sources. Esports, for example, presents football clubs the opportunity to
duplicate all of their real world revenue in the e-world; sponsorship deals,
advertising, publishing fees, ticket sales for live events, and more. 🔮
Crypto also offers endless new opportunities. One proven example of this is in
NFTs - the NBA has already auctioned off $230M of basketball action to digital
collectors. What would an NFT collection of Manchester United’s televised goal
highlights (over the last 50 years) be worth, in a global market, to collectors of live
goals? $2B? $3B? Copyright law will be complex and we need to work out whether
these pieces of content are owned by the league, club, player, or broadcaster as to
how the cash is divided, but it seems probable that clubs will benefit.

COVID-19 has already catalysed this digital transition. Declining match-day

revenues and broadcasting rights have forced football clubs to explore alternative
revenue streams and reinvent themselves. Radical changes may come sooner than
the market expects.

There’s also a whole new world in the women’s game, which has been growing
steadily in past decades, enjoying greater commercial interest, rising attendance
and broadcaster viewership in league and national team competitions and many
new, high-profile sponsors. 🤵‍♀️

The democratisation and gamification of the stock market increases the probability
of fans buying shares in their own clubs causing rising valuations. The Robinhood-
Gamestop saga demonstrates that publicly traded football clubs may have a very
unique advantage if they receive a hard valuation from retail investors and their
own fans. 🎮

It reasons that football will become a winners-take-all industry. Overseas

broadcasting revenues, for example, are currently split equally in the Premier
League. Long term, however, it seems inevitable that Manchester United will
capture a revenue share closer to their % of attention (i.e. higher than 5%).
Whether in a super-league or otherwise, the top clubs will leave the rest behind.
💨

Wall Street is beginning to take football more seriously. The owners of Liverpool
Football Club sold 10% of their business at a $7.4B valuation in March 2021, and
US private equity giant Silver Lake invested $500M in Manchester City Football
Group at a $5B valuation last year. 💸
Key Themes At Play
Data Capture

The ability of clubs to mine their own fan base and garner data on their supporters
will create great value.

Commercialisation

The ability to sell a broader range of products both physical (e.g. apparel, nutrition,
work out videos) and digital (e.g. NFTs and Esports) has great potential value.

Fan Inclusion

The gamification and socialisation of the stock market lends itself to broader based
share ownership medium-term giving public clubs a hard currency.

Value Drivers
The digitisation of content empowers the fan-club relationship.

Digital interactions create vast data trails for clubs to leverage.

Regulators are keen to break Facebook and Google’s data duopoly, thereby
enabling clubs direct access to fan data.

Decline of broadcasting rights is forcing clubs to seek new revenue

streams.

Football will increasingly become a winner-takes-all industry and value

will accrue to Europe’s elite teams.

The rapid growth of Esports presents clubs with the opportunity to

double-down on marketing, merchandising and advertising strategies.

Emerging technology will provide clubs with other paths to monetisation

such as fan wearables and VR.

Socialisation of football through platforms like Reddit will inevitably lead

to fans wanting to participate in their team’s economic upside.
 By giving owners a financial return, fans are more likely to take back
control of their club.

Key Risks
Publicly traded football clubs rarely outperform the market.

Fans are constantly calling for more emphasis on what is happening on the
pitch than off it.

The Glazers, Manchester United’s powerful owners, mean there is not

much protection for independent shareholders.

Dispute over TV rights at the domestic and European level could fragment
the games of major leagues.

European competitions cannot be relied upon as a source of income.

Manchester United’s digital media strategy is unproven and may not

generate anticipated revenues.

The rise of Fortnite and other Esports may lead to a relative decline in the
popularity of football.

Copyright laws and privacy concerns around NFTs and VR will be complex
and may diminish upside potential.

Conclusion
With billions of Esport gamers worldwide, emerging VR technologies, and a
rapidly evolving NFT market, there are some really profound changes on the way
for Europe’s largest football clubs. As Manchester United continue gathering fan
data and begin to explore avenues such as NFT’s and VR, these opportunities
should no doubt manifest themselves in the value of the Club. 💫

While the stock market remains ignorant, US Private Equity has already taken
notice. RedBird Capital’s investment in Liverpool and Silver Lake’s investment in
Manchester City evidence to me that Manchester United’s stock could see a
sizeable value uplift over the next 12-24 months. 🚀
I’d Love To Hear From You
What do you think about the growth story behind sports franchises and football
clubs? Would you consider investing in your favourite team or club? You can reach
me on Twitter or email: anthony@djangodigital.co.uk.

Key Resources
Videos

Nick Train interview: One of the clearest bull markets in the world today
(00:14:50)

The Crypto World Cup: Footballers In Blockchain (00:01:15)

What are the benefits of floating a football club to public markets?

(00:07:00)

Why Manchester United’s profit mustn’t drop below £65m (00:07:10)

Esports is growing into a $1 billion industry | CNBC Sports (00:07:47)

The rise of Esports | TEDx (00:18:14)

Socios.com - Get Fan Tokens, vote on exclusive team surveys & be

rewarded (00:02:30)

Vaneck eSport Webinar (01:01:44)

Investment Literature

Manchester United Annual and Financial Reports

Manchester United 2020 20-F Form

Deloitte Football Money League 2021

Juventus Annual and Financial Reports

Borussia Dortmund Annual and Financial Reports

Edison Q2 ‘21 Borussia Dortmund Update

 Esports: Why now is the time to invest | VanEck

Articles

The world’s most valuable soccer teams

Premier League football club enters VR partnership with crypto betting

site

AC Milan Fans to use blockchain tokens to vote on soccer club motto

Soccer fan tokens on the march as Poland’s biggest club adopts crypto

AC Milan to allow fans to choose motto to appear in home dressing room

The rise of professional FIFA Esports teams: scouting, weights training

Manchester United: Growth, an elusive goal; adequacy, a strong defense

Manchester United Is Still Not A Buy Amid European Super League

11 football clubs that are publicly listed and why you should not invest in
them

A FIFPRO report on women’s football

Podcasts

Glazers & FSG: what next after latest backlash? (00:47:36)

Ex-United CEO on collapse of Super League & Glazers (00:56:31)

Explained: How a football club is valued (00:45:17)

Man United’s financial results & The Football Index crash (00:45:58)

Barcelona top the Deloitte Money League but still face financial peril
(00:47:17)

Thank you so much for reading this article. If you enjoyed it, be sure to share it
with your friends and spread the word.

I want to be able to deliver the best content I can to all of you. To that end, I’d love
to hear your thoughts on what’s working, what isn’t, and what you’d like more of.
You can reach me on Twitter or email: anthony@djangodigital.co.uk.
Cheers,
Anthony

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