With a takeover looking likely, is now the time to be buying Man Utd shares?

I have always been passionate about investing in companies that mean something to me. Whether it’s a company building a great product, or developing an extraordinary solution, investment is the fuel that drives change. Owning a stake in a sports team is no different. with Man Utd (NYSE: MANU) stock rallying, is it an investment for me to consider?

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Manchester United is one of the biggest sports franchises in the world, with a history of success in English and European football competitions. Owned by the Glazer family since 2005, the company is 90% private, with 10% listed on the NYSE (New York Stock Exchange.).

Ownership has become increasingly unpopular with teams that have performed poorly on the field, not winning a trophy since 2017. At the same time, rival teams are investing heavily in their respective teams, stadiums, and facilities, gradually overtaking and overtaking Manchester United.

In 2022, the company was sold.

Who took over?

Currently, there are two pioneers. One of them is the founder of INEOS and the richest man in the UK, Sir Jim Ratcliffe, and the other is Sheikh Jassim Bin Hamad Al Thani, Chairman of Qatar Islamic Bank.

Whoever is at the helm, it will likely be the most expensive takeover of a sports team in history. But is it now an investment opportunity?

There has been widespread speculation about the takeover price, with estimates ranging from £3-7bn. With the current share price at $26.33, a successful takeover could see the stock move above $30 as a £5bn takeover would price the stock at $30.47.

However, with the possibility of an objection due to human rights issues in Qatar, or an unpalatable proposal to increase the company’s debt by £680m, there are no guarantees. Speculation that the Glazer family could secure investment from US hedge fund Elliott Management raises the possibility that the current owners will retain control.

As a result, prospective investors must be comfortable with the potential for a deal to fall apart or be too late.

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Takeover speculation has fueled excitement in share prices, nearly tripling since July.

However, the company’s bottom line is lacking. Manchester United are unprofitable, unsustainable in debt, and in a year-long cash crunch. Without intervention, this cannot be changed.

Manchester United lost £126m last year. When considering future cash flows, a fair value of $5.78 is calculated. As a result, Shares can be as much as 355% overvalued!

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Investing in Manchester United on a current basis is effectively speculating on a successful takeover.

If potential buyers back out, the stock price will suffer. Some comparisons can be made for the acquisition of Twitter 2022. In both cases, the rocky foundation can be ignored by a passionate buyer, motivated to tackle the problem, regardless of the cost.

As for the portfolio, I see an opportunity to buy shares at a lower price than the takeover price. But I realized that if the deal fell through, I’d be in for a big drop.

Saudi Arabia’s Public Investment Fund (PIF) purchase of Newcastle United in 2022 suggests a deal is in the offing, but not without controversy, potential delays and some unexpected twists and turns. I have added some Manchester United shares to my portfolio, but will pay attention to the details of the takeover.