In a move that seems like it came out of left field, Man Utd has become the latest addition to Train’s FGT, after the well-known manager was able to access a block of quoted shares from the Glazer family.
Train scored the Premier League team for below $17 per share, a bargain from its record high of $19.4 per share in 2014.
In an update to shareholders, he noted that Man Utd’s “shares have been stuck in a bit of a rut”, despite the fact that its financial position has meaningfully improved.
Since the years of its “moribund share price” pre-tax earnings have effectively doubled, the mega Premier League team has slashed its net debt to circa £366m and halved its interest costs due to successful refinancings. The other obvious kicker is that the firm has begun to pay a dividend.
But another reason Train was so “relieved” to secure this investment is because of the toehold it gives him in the technological arms race between content providers like Amazon and Netflix and traditional broadcasters.
Both Amazon and Netflix have sunk billions of dollars annually into the procurement of new entertainment content. Train doesn’t think it will be long before they realise the entertainment value professional sports teams provide.
He said: “It will not be long now before an internet giant bids against an incumbent football rights holder. The ramifications for traditional media companies will be massive, but through the turmoil we expect the value of strongly-franchised football clubs to rise.
“In this context and the context of the $100s of billions of market capitalisation in global internet and telecommunication companies, we regard the current market cap of MANU, that c$2.7bn, as low. Certainly low relative to the global following and fascination with the MANU franchise and to the priceless (virtually) strategic value to broadcasters of live sports.”
And Train believes professional sports teams are destined to become highly prised entertainment commodities because they are, as The Billionaires Club writer James Montague puts it, a “never-ending series every bit as engrossing as The Wire or The Sopranos that plays out season after season”.
Earlier this month, the Houston Rockets, an NBA team, was sold for $2.2bn, the highest price paid for a basketball franchise. But with its global cachet, Train thinks Man Utd could fetch an even higher price.
“If MANU is as valuable as the Houston Rockets – and we think in truth its global reach makes it far more valuable – then it would command a value of well over $5bn; more than double the current market capitalisation. This is the scale of the opportunity we see.”
