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If I had invested £2k in Manchester United shares 5 years ago, this is what I would have now

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Manchester United (NYSE: MANU) The football club has won more league titles than any other team in English football. However, the club has struggled to live up to its glorious past in recent years, failing to win a single trophy since 2017. So how would I fare if I bought £2,000 worth of Manchester United shares and kept them for those five years?

Losing action

A £2,000 investment in Manchester United shares half a decade ago (at the exchange rate at the time) would have bought me 145 shares. The price then was $18.25 per share. Today, one share is $13.06, which means I’ll be looking at a 28% loss. My 145 shares will be worth just £1,630.

The shares would pay me a small dividend along the way, but it would only be just over £100. It still wouldn’t get me back to break even. So, like a football team, this stock has not won in the last five years.

Just for context, if I invested my £2,000 in the S&P 500 index fund instead today I would have £2,833 excluding dividends. That’s because the 500 largest US companies have grown by 50% in five years.

With a current market capitalization of $2.15 billion, Manchester United is too small to be included in the S&P 500 index.

Financial indicators

In his recent financial results for the 2022 financial year, the company reported an 18% year-on-year increase in total revenue of £583.2 million. It marked a return to full stadiums after two seasons hit by the pandemic.

However, the club’s net debt increased by 22.7%, from £419.5m to a staggering £514.9m. This growth is due in part to “revolving line of credit,” the club used to recoup nearly £200m lost during the pandemic. Annual operating losses amounted to £87.4 million.

On the field

Manchester United’s stock performance ultimately depends on how the team performs on the pitch. And things haven’t been going so well for the team since long-time manager Sir Alex Ferguson retired in 2013.

Winning cup competitions means more games, which means more revenue from broadcasts and matchdays. But after failing last season to qualify for the Champions League (the highest level of European football, both competitively and financially), the club today remains in the less prestigious Europa League.

It was unimaginable ten years ago, which shows how far the club’s competitive position has fallen.

Probable change of owner

Malcolm Glazer acquired control of the club in a buyout from existing shareholders for approximately $790 million in 2005. However, the ownership has been unpopular with a large proportion of the club’s fans almost from day one.

Some recent reports suggest that the Glazer family may finally be ready to sell. One of the rumored buyers is Sir Jim Ratcliffe, Britain’s richest man and founder of chemical company Ineos Group. If such a sale had been announced, I can imagine the stock would have gone much higher.

However, the club’s net debt of £514m, combined with the fact that the team lost their status as top dog on the pitch years ago, means I won’t be adding Manchester United shares to my portfolio. I’ll be watching this action from the sidelines.

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