It’s no shock to me the Manchester United (NYSE: MANU) share price has exploded on Monday.
News broke last night that England’s most successful football club is attempting to form a breakaway European Super League with several other top European teams. It’s a proposal that has the potential to deliver truly-staggering revenues to the continent’s biggest teams.
So is now the time to buy Manchester United shares? They’re up 10% in pre-market trading.
What is the European Super League?
Talks about forming a European Super League has been circulating behind closed doors for years now. A formal announcement on the competition was finally made last night amid recent rumours that JP Morgan will finance the scheme, news of which was also confirmed this morning.
Under the plans, 20 of Europe’s best and biggest football clubs will come together from this August to compete in mini-leagues and then knockout ties. In effect it will replace the current UEFA Champions League in terms of continental competition for the big teams. Games will be played midweek as they are now.
Revenues poised to explode?
So why has the Manchester United share price jumped? Well, as one of the European Super League’s 15 Founding Member clubs, the Red Devils stand to receive payments worth hundreds of millions of pounds.
The European Super League claims that the new tournament “will provide significantly greater economic growth and support for European football via a long-term commitment to uncapped solidarity payments which will grow in line with league revenues.”
These solidarity payments “are expected to be in excess of €10bn during the course of the initial commitment period of the Clubs,” it said. This is far in excess of the sort of revenues that top clubs currently enjoy under the UEFA Champions League.
What’s more, the Founding Clubs like Manchester United “will receive an amount of €3.5bn solely to support their infrastructure investment plans and to offset the impact of the COVID pandemic.”
Should I buy Manchester United shares?
Has the news encouraged me to buy Manchester United shares though? Clearly the plans have the potential to supercharge revenues among Europe’s elite. Television income from lucrative Asian, American and African markets could balloon. And the major clubs mean business, as Manchester United’s resignation from the influential European Club Association this morning shows.
However, the breakaway clubs will face fierce resistance to get their plans off the ground. Footballing bodies UEFA and FIFA, along with domestic league associations like the Premier League, have all threatened to take legal action against participating teams. This could see them thrown out of domestic competitions or hit with other penalties.
There’s been an outcry too from fan groups who claim the move will worsen inequality in modern football. A mass boycott of football games and expensive TV sports packages is clearly not out of the question. Meanwhile, prime minister Boris Johnson vowed to “make sure that this doesn’t go ahead in the way that it’s currently being proposed.”
There’s clearly a long way to go before any European Super League gets off the ground. So, for the time being, I’m happy to sit on the sidelines. I’ll see how things progress before buying Manchester United shares.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.