David Moyes was fired as manager of Manchester United, four games before the end of the club’s worst Premier League season in years. Photographer: Michael Regan/Getty Images

Manchester United Stock Puts Price on Leadership

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Manchester United isn't just a soccer club: It is the second most valuable sports team in the world and a rare sports franchise to have had the courage to list on a U.S. stock exchange. The club's share price is near its peak after the firing of manager David Moyes, showing just how important the leader's personality can be to the value of a business.

There is reason to be grateful to the club's U.S. owners -- the Glazer family, who also control the National Football League's Tampa Bay Buccaneers -- for bringing United back to the stock market in 2012. The ups and downs of the share price reflect the mood of the team's fans in the most pure and naive ways: It rises when United wins big, tanks when it loses and is surging again on the hope that a new leader may perform better than the old one. With a price-to-earnings ratio of more than 60, the stock is a toy for fans, but then many tech companies, at their current valuations, are similar cults. If there is a difference, it is that the performance of a soccer team is easier to gauge and more fun to watch. The soccer manager stands as the perfect metaphor of the rock-star chief executive, with all the perks and pitfalls that come with the role.

At the time of United's listing on the New York Stock Exchange in August 2012, the club was in decent form, even if its pampered fans grumbled about a bad season -- no European trophies and second place (on goal difference) in England's notoriously tough Premier League. The team was still coached by the legendary Sir Alex Ferguson, under whose leadership it had won every imaginable competition. Still, Manchester's initial public offering could hardly be called successful: It had to price its shares at $14, below the previously announced minimum of $16, to attract interest.

Near the end of the 2013-2014 season, United is in seventh place with no chance of competing in Europe's prestigious, and lucrative, Champions League. The team made its worst start to a season since 1989-1990 and never got its act together, suffering some of the club's most humiliating defeats in history. These included United's first loss to a Greek side, Olympiakos Piraeus, in European competition, a 0-2 debacle that came as the club's stock hit a 12-month low, close to the IPO price.

With Monday's firing of Moyes (he wasn't officially informed until after he had read about it on the Web), Manchester United's stock price reached the $19 high it achieved when Ferguson won his last league title with the club. Its immediate 6 percent jump matched the one that Yahoo! Inc. gained when its chief executive, Carol Bartz, was fired over the phone in 2011, and was also only slightly short of the increase that Groupon Inc.'s share price recorded when the company fired Chief Executive Andrew Mason last year.

Getting rid of Moyes has ensured that shares in Manchester United now trade 25 percent higher than the IPO price, despite the club's lackluster performance on the pitch and the inevitable financial setbacks of dropping out of European competition for the next year.

In English football, money talks louder and louder each season and it has been suggested that the performance of a team is more closely correlated with the players' wage bills than the managers' talent. That isn't exactly true: a manager can still consistently outperform budget-related expectations, as Adrian Bell and his co-workers at U.K.'s University of Reading established in a 2011 paper. They named Ferguson as a top out-performer, winning an average of 0.72 points more per match than would have been expected given the money he had available to spend. A win in English football is worth three points, so that is a formidable personality effect.

To fans without a mathematical apparatus to assess managerial performance, it just showed. "Moyes' response to bad results was dreadful," Simon Kuper wrote in Financial Times. "His long, baffled, unhappy face - caught by TV cameras whenever United conceded a goal - became the symbol of his team's malaise. Ferguson, the master of PR, tended to respond to defeats with anger." Unlike Moyes, he would have never called another team a favorite to win. "One thing that really riled United fans is the fact that Moyes often viewed them as the underdog in his comments," Adam Shergold recalled in the Daily Mail.

Moyes' defeatism, his slowness to make crucial transfer decisions and his inability to control a locker room of aging stars who had worshipped Ferguson contributed to the team's awful performance. The next manager will have to confront the same problems, but in the view of the club's fans almost anyone can do better. The stock market echoes that sentiment: Investors with the guts to get involved with sports stocks are, of course, fans too.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Marc Champion at mchampion7@bloomberg.net