Manchester United Shares Winning Structured Product Investors

Investors are buying structured products that profit on gains in shares of Manchester United following the English soccer club’s initial public offering.

Royal Bank of Scotland Group Plc issued eight so-called mini futures since the club’s U.S. stock issue on Aug. 9, according to data compiled by Bloomberg. The securities were priced in Swedish krona, euros and Swiss francs and offer investors leveraged exposure to the stock, which has fallen 3.1 percent from its $14 IPO price.

Investors were drawn to the club’s “proven track record on the pitch and the potential to profit from increasing media revenue” and merchandise sales, said Christian Bahrne, London-based head of public distribution of equity derivatives and structured retail for the Nordic countries at RBS. The club’s revenue has more than doubled since the Glazer family bought the team in a leveraged buyout in 2005.

United’s sponsorships and product licensing helped generate 89.5 million pounds ($141.7 million) of revenue in the nine months through March 31, more than one-third of total revenue, filings show. That’s 17 percent more than the year-earlier period.

The mini futures, the first structured products tied to the 134-year-old club, were bought by individual investors in Scandinavia, said Bahrne. Demand is strong in the region for foreign equities, including companies such as Google Inc. and Apple Inc., said Bahrne.

The mini futures comprise two parts, a cash investment from an investor and a loan from the issuing bank. To leverage the product, an investor will pay 500 krona ($75) and borrow 500 krona, receiving 20 percent for every 10 percent gain in the stock and losing 20 percent for every 10 percent fall.

All eight securities were bullish on the stock and RBS plans to sell bearish securities as soon as next month, Bahrne said. It can be difficult to structure bearish products immediately after an IPO due to the limited supply of stock in the market, which the bank would need to borrow to cover its short position, he said.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE