MANCHESTER United's owners stand to make about three times their investment in the British soccer club if it successfully goes public.
The club, one of the most popular in the world, has kicked off the marketing for its US initial public offering, which will value the club at $3.3bn if the sale is at the high end of the pricing range of $16-to-$20 per share.
The owners, the Glazer family, bought the team for £790m ($1.2bn) in 2005 in a leveraged buyout. In terms of equity, the Florida-based family, whose other interests include shopping centers and the Tampa Bay Buccaneers football team, has invested at least £521.1m ($813.7m) in Manchester United.
Through the IPO, they will initially get up to $167m from their sale of 8.3 million shares. They will also still own 89.8% of the shares, which will be worth nearly $3bn at a $20 a share price. The Glazers have already received a £10m dividend, which was used to pay back money they borrowed from the club in 2008.
The huge profit for the family could make Manchester United the latest poster child for potential problems faced by companies that become targets of leveraged buyouts. To critics, such deals load companies with debt to supercharge the owners' profits, while sometimes leaving the companies worse off than they were before.
The risk may be greater for a sports team, where finances can turn on how well the team does on the field, which can depend on a club having enough money to buy and pay top players.
Poor performance can quickly feed through to lower revenue from ticket sales and TV rights, and eventually hurt commercial revenue from sponsorships and sales of merchandise, such as team shirts.
Manchester United, which was debt-free before the Glazers bought it, had £437m ($682m) of debt as of June 30.
Fans of the 134-year-old team have long reviled the Glazers, worrying that reduced financial flexibility because of the debt would come at the expense of investment in players and the team's performance.
Their dissatisfaction with the Glazers has only grown after the team, English champions a record 19 times, failed to win a trophy last season for the first time since 2005.
Manchester United Supporters Trust, a group of almost 180 000 fans, plans a mass mail campaign against the IPO.
"From the Manchester United Supporters' Trust point of view, we want to send a message to US banks that this IPO is very unpopular, and they should not underwrite it," said Sean Bones, 52, a member of the group who describes himself as a life-long fan of the club.
"We see the Glazers as using the club as a cash cow, and this IPO is milking time," Bones said.
A Manchester United spokesperson declined to comment for this article or on the Glazers' behalf. The Glazers could not be reached through the Buccaneers either.
There is no guarantee that the Glazers will be able to reap a big return. Manchester United is betting that it will be able to command an exceptionally high valuation, but investors and bankers said achieving that number could be a reach.
At an IPO price of $20 per share, Manchester United's enterprise value would be 8 times revenue, rivaling one of the richest sports deals in recent years.
Earlier this year, a group spearheaded by former basketball great Earvin "Magic" Johnson paid 8.3 times revenue to buy the US baseball team, the Los Angeles Dodgers, according to a source familiar with the situation. The $2bn price for that deal marked the largest sum ever spent for a major league US sport franchise.
Looked at another way, Manchester United will be valued at around 26 times its adjusted earnings before interest, tax, depreciation and amortization (EBITDA) in the 12 months through June 30.
Traditional media companies, which the company's bankers are trying to pit it against, trade at much lower multiples. Walt Disney Co, for example, trades at around 10 times its trailing 12-month EBITDA, according to Thomson Reuters data. The Madison Square Garden Co, which owns the New York Knicks basketball team and the Rangers hockey team, trades at roughly 11 times its trailing 12-month EBITDA.
"Manchester United is probably the crown jewel of sports franchises, but even it shouldn't get the valuation it's seeking here," said Josef Schuster, who helps manage $2.5bn for Chicago-based financial services firm IPOX Schuster.
The owner's valuation expectation was one reason why Morgan Stanley dropped out of the underwriting syndicate, sources familiar with the situation told Reuters last month.
The company's latest financials, disclosed in an amended US Securities and Exchange Commission filing on Monday, also paint a picture of a club with money problems.
By June 30, 2010, the Glazers had seen their equity in the club wiped out as losses piled up over the years, and injected £249.1m in November that year to pay down expensive debt.
While the club projects its profit for the fiscal year ended June 30 will climb 62% to 77%, this was the result of a tax credit, without which it would have posted a loss.
Moreover, its revenues are volatile and depend on how well the team does.
Broadcast revenue, which accounts for about a third of the club's overall revenue, comes from contracts with the Premier League and Champions League, and payments depend on the number of matches for broadcast. Similarly, the team's match day revenue, which also accounts for a third of overall revenue, depends on the number of games it plays.
In the fiscal year ended June 30, Manchester United's match day revenue is expected to fall 11% to 12% because the team played four home games less in the most recent season when compared with the previous one. Broadcast revenue is seen down 11% to 13%.
To be sure, it is not all doom and gloom for the club. A seven-year club jersey sponsorship deal with General Motors Co , starting in 2014, will be a consistent source of revenue for the team. The deal is worth roughly $600 million.
In Manchester United's roadshow, which has been posted on the internet, executives argue that the team is in the early stages of making more money off the strength of its brand around the globe. Emerging markets in particular comprise a valuable commercial opportunity for the franchise, the team's management says.
"It's a global media company that participates in the most watched sport in the world. Investors don't have easy access to a company like that," said Michael Obuchowski, a portfolio manager with North Shore Asset Management in Cold Spring Harbor, New York.
Still, investors face a lot of risks.
Potential investors are "buying equity in something that is already heavily leveraged and doesn't have a sustainable profit," said Bob Boland, a professor of sports management at New York University. "This is like buying a piece of land with a mortgage already on it."