Football is big business. The sport which was once the preserve of the working man is now a multi-billion pound industry and results on the park are inextricably linked to financial well-being.
This connection is particularly strong at Manchester United. As one of the richest clubs in the world there is a demand for them to spend big money and win trophies.
However, when they endure a fallow spell as they did under manager David Moyes, the lack of success is reflected sharply in their share price. So how have shares in Manchester United performed in the last year and is there any sign of change under new manager Louis Van Gaal?
When it was announced that David Moyes was to take charge at Manchester United the share price dropped slightly from 18.44 to 18.02. This was no real surprise given that Moyes was replacing their most successful ever manager and, with the greatest of respect to Moyes, perhaps wasn’t the big name manager that many fans craved.
Unfortunately for United this was to be the start of a long downward trend. As results suffered on the park, so too did the share price. This culminated in shares in Manchester United hitting a low of 14.50 in mid-February 2014 following draws against Fulham and Arsenal.
These results left Manchester United 23 points worse off than at the corresponding stage of the previous season and all but killed off any hope of reaching the following season’s Champions League.
Following this low the share price started to recover, but it wasn’t until Moyes’ dismissal on 22 April 2013 when it spiked to 18.78 that share prices reached the pre-Moyes levels.
Van Gaal Appointment
Following Moyes’ departure share prices once again began to drop, but the appointment of Louis Van Gaal as manager saw Manchester United’s share price jump back up to 18.78. Following another lull there was further good news when Van Gaal guided Netherlands to the semi-final of the World Cup.
The market was obviously encouraged by United’s appointment of a manager of such renown and prices continued to increase until they reached 19.42 at the end of July.
Unfortunately for Manchester United, this was just before it all started to go wrong again. Defeat on the opening day of the season against Swansea followed by elimination from the Capital One Cup ten days later saw share prices fall once again and by 10 September reach 15.19.
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In football it’s fairly simple: poor results mean drop in revenue from tickets and merchandise sales and the need for increased costs for investment in players. Ironically, Manchester United posted record annual revenue of £433 million for the 2013/2014 season.
However, it is expected that the absence of European football will impact United to the tune of a 10% drop in revenue for the current season and having spent over £150 million and already struggling in the Premier League it is unlikely they will make a profit for season 2014/2015.
Manchester United are in a precarious position. Although they have massive worldwide support and merchandising revenues, it is very much dependant on their success on the park. Should they continue to under-perform they could find support in the international markets dwindle.
It isn’t all doom and gloom however. They recently signed a record breaking £750 million sponsorship deal with Adidas and with a manager of Van Gaal’s experience at the helm success on the pitch probably won’t be far away.