16/08/2012

What Do PT Barnum and the Glazers Have in Common?

According to Wikipedia, it wasn't the legendary showman PT Barnum who coined the phrase "there's a sucker born every minute", but let's not this question of authorship get in the way of a good story.

We've recently come across article in the Wall Street Journal (yet another paper by everyone's favourite Australian media tycoon) in which lawyer Marc Jaffe who helped the Glazers structure and sell the Manchester United to the investment (and whose other clients included the WWE) provides a behind-the-scenes look at the IPO.

Jaffe said it was a challenge to sell the club to U.S. investors, who are less versed in soccer than European counterparts and who find the Premier League that Manchester United plays in somewhat opaque. But he said the goal was to convince potential investors that the company was “a global powerful brand a name that meant something off the field.” ... Jaffe said the company chose the U.S., after examining a possible IPO in Singapore last year, because the U.S. offered more liquidity.

Apart from his artful explanation of why the Singapore float was abandoned (is it fair to call the objections to the voting structure and general antipathy toward the Glazers' unrealistic valuation a "liquidity problem"?), Jaffe unabashedly trumpets the benefits of the confidentiality of the process.

Jaffe also said the recent JOBS Act proved helpful to Manchester United by allowing it to have confidential discussions for months with the SEC. He said he felt other “emerging growth companies” probably have different reasons for using the JOBS Act, but that it helped the 134-year-old Manchester United too. “It was terrific because the minute we filed the press went nuts,” Jaffe said. “For me the ability to file confidentially and have that period of couple of months before going public was a great, great advantage.”

In effect what the Glazers have done is exploited a piece of legislation that was very recently passed by the US Government (quite serendipitously for the Glazers) to reduce some of the more onerous requirements for small business to going public under the presumption that this would help these businesses get the capital they needed to get up and running during these difficult economic times, presumably as well because they would create jobs for Americans. The Glazers were rightly excoriated by two of the architects of recent financial regulations designed to add stringency and investor protections, not take them away.

In other words, the reduced reporting requirements and the usual smoke and mirrors tactics helped yet the Glazers and their advisors (led by Mr Jaffe) hoodwink even more people.

(Curiously, he offers no explanation why Morgan Stanley pulled out as an underwriter. Perhaps they were a little better "versed in soccer"? Or were they the "smart money"?)

So... if you were wondering how these IPO things happen, here's a glimpse under the covers.

And to those of you who are wondering about the provenance of that quote about suckers being born every minute, we humbly offer this suggestion:

Get a copy of Mr Jaffe's family tree. With comments like these there must surely be a genetic link.