Questor: should Manchester United shares get the red card after its Super League blunder?

·4 min read
Manchester United's Old Trafford stadium - PETER POWELL/EPA-EFE/Shutterstock
Manchester United's Old Trafford stadium - PETER POWELL/EPA-EFE/Shutterstock

In August 2018, as a bit of summer fun, we looked at some of the world’s quoted football clubs, of which there are surprisingly few. Chief among them was Manchester United, who face Villarreal in the Europa League final tonight.

Man Utd’s shares, quoted in New York, have proved volatile. Tipped at $22.10, they almost immediately soared to more than $26 then just as quickly dropped back, and since late September 2018 have remained below the price at which we tipped them. They bottomed at barely $13 in March last year as Covid panic peaked and now trade at $15.55.

The club did itself no favours when it signed up to the short-lived and hugely unpopular European Super League last month. Nick Train, the fund manager whose enthusiasm for Man Utd as a business lay behind our tip, was among those not amused by the initiative.

He said the announcement of the ESL “came as a surprise to us” and in response he had requested meetings with Man Utd and other clubs held in his funds. “At these meetings we expressed our disappointment about the reputational damage [they] have inflicted on themselves,” he told investors earlier this month.

“We asked for clarity about their position regarding the ESL going forward. Most importantly, we urged them to return to respectful negotiations with all members of the football community to work towards mutually beneficial ends. We continue to monitor events closely as they unfold, while considering their implications for our investment case.”

In Questor’s view there are few better judges of the value of this type of company, based on enduring brands and relationships with customers that last generations, than Train. For now he is holding on and we will too.

Questor says: hold

Ticker: NYSE: MANU

Share price at close: $15.55

Update: Vestas Wind Systems

We tipped Vestas, a leader in the manufacture of wind turbines, in September last year at 949.8 Danish kroner on the basis that it was “a high-quality company in an area that’s bound to grow”. But the shares, traded in Copenhagen, closed last night at just 235 kroner. Did we make a terrible mistake?

No: this apparent decline is the fault of that irritant for share tipsters and investors alike, the “share split”. Sometimes companies take it into their head to change the number of shares into which ownership of the business is divided; in this case Vestas decided that on April 28 each of its old shares would become five new shares.

The company as a whole is no less or more valuable as a result, so it follows that the share price after the split is a fifth of the one before it. Hence, in order to make a true comparison with a pre-split share price at the time of our tip, we must multiply the current price by five. This gives us 1,175 kroner, or a gain of 23.7pc relative to the price at which we tipped the stock.

We can therefore breathe a sigh of relief, but must wonder aloud why companies cause such confusion for investors.

Share splits (and “consolidations”, the opposite procedure by which the number of shares is reduced) make before-and-after comparisons needlessly complicated and give rise to doubt over whether historical data have been adjusted (often they are by the data companies, but not always in Questor’s experience).

Of course professional investors, who spend their lives looking at such things and have systems that take it all in their stride, are unlikely to be too bothered and Questor strongly suspects that companies have these investors in mind when they decide to carry out splits and consolidations.

But this column urges listed companies to remember that private savers also provide them with capital by owning their shares and that these investors deserve consideration too. We see splits and consolidations as sources of needless confusion and anxiety for private savers and would like to see them take place far less often.

To return to the case for Vestas as a business, Ben Preston of Orbis Investments, whose holding of the stock prompted our tip, confirmed that he still owned his stake and said there had been “no significant change” in the investment case.

“The [adjusted] share price is up from when we first purchased, as various announcements from national governments – net zero commitments etc – have led the market to appreciate the company’s future opportunities,” he said.

Questor says: hold

Ticker: CPH: VWS

Share price at close: 235 Danish kroner

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