Why City shares could be good valueUpdated: December 20th, 2006
Recent rises in City’s share price is causing a buzz on the talkboards. Since July 24th, shares in Manchester City Plc have jumped from 19p to 22.5p. At the start of the year they were trading at 14p.
Even after the latest rises the club is still valued at just £12.17million. Considering the £57m price tag for Aston Villa and the recent sale of Portsmouth for £32m, City’s valuation appears far too low.
As this table shows, City’s value does not seem to represent either its income or the size of the fanbase (supporter figures come from Roy Morgan Research):
The club would certainly be for sale at the right price. In an interview on mcfc.co.uk in May shareholder David Makin declared: “What we have to aim for is that a big hitter comes our way, as it has with Chelsea.” Director Mark Boler, who controls his family’s 18.75% stake, has also declared an interest in selling up. In 2003 he told EN magazine: “My father bought it as an investment and at the moment the share price is not as high as it should be. There are no plans to sell, but if someone offered a great price…”
Cleveland Browns owner Randy Lerner - worth an estimated £720m - is in the market for a Premiership club having been rebuffed by Villa chairman Doug Ellis and Portsmouth’s new owner Alexandre Gaydamak is unlikely to be the last Russian-speaker to show an interest in our league.
Of course, there is no guarantee that anyone will come in to buy City. And the fact that the club does not own its stadium, has relatively high debts and hasn’t paid a dividend for several years could keep the share price low over the long term.
A look at City’s share price over the last four years at Plus Markets (formerly OFEX) shows what a rollercoaster ride it has been for shareholders. After peaking at 50.5p in Jan 2002 the price plummeted to 14p in Jun 2003 before soaring to a brief high of 51.5p in October that year.
It’s quite possible the rollercoaster will continue. And a disaster such as relegation could send the shares nosediving. But as a long-term investment they could prove to be good value.
If you’re interested in buying City shares The Share Centre’s charges start at £7.50. For a full list of brokers click here.
City are one of the few British clubs not to have a supporters’ trust, which pools the shares owned by fans into one legal body. For more information about how they work visit Supporters Direct.