Soccer Clubs: Fantasy or Finance?

Introduction

Normally, soccer clubs worldwide are often romanticized as collections of the greatest players, fueled by their passion for performing before adoring fans. However, in reality, each club is a business entity, driven by financial imperatives. But in the high-stakes arena of professional soccer, the true measure of success is often debated: is it the glory won on the pitch or the fortunes amassed off it? While on-field success is usually seen as the ultimate measure of a club’s achievements, the financial deals that underpin a club’s operations play a crucial role in sustaining and enhancing its competitive edge. To dive deeper into this phenomenon, we can use the MANU stock for the soccer club Manchester United in England to look at how these two factors affect the MANU stock price. In this case, the MANU stock is particularly suitable to analyze, because it has been listed in the New York Stock Exchange (NYSE) since 2012.

This piece of knowledge is vital to learn and allows us to be able to consider soccer clubs as business enterprises. Additionally, understanding the balance between team performance and financial management in soccer clubs is essential for anyone invested in the sport, whether as a fan, analyst, or business professional. As global professional soccer becomes increasingly commercialized, recognizing the importance of financial stability and its impact on team performance becomes crucial. Learning this information equips individuals with a deeper appreciation of the complexities that drive a club’s long-term success, enabling more informed discussions and decisions related to the sport.

But how do we even attain an in-depth analysis of this stock price? For this, there are a myriad of steps to acknowledge. The primary step includes viewing the various events that impacted the MANU stock price since 2012 using historical data. Next, we categorize each of these events into either performance-related or financial deals, then how much the stock price changed, either positively or negatively, and how long the effect took after the event. This is done by analyzing the historical stock price and calculating its change before and after the event’s effect. For example, on December 18th, 2013, the manager at that time, Sir Alex Ferguson, announced his retirement, which lowered the club stock from $17.96 to $17.66, which was a 1.68% difference. Furthermore, the final step is to calculate the average stock price change for both performance and financial categorized events, and compare them to discern which had a greater effect on the club’s success.

This graph shows all the major events of the club Manchester United, and how much the stock price changed through the years. The small numbers on the top of the bars represent the number of days the stock price changed following the event.

Team Performance and Stock Price

One of the most obvious factors when assessing the stock price for a soccer club is the performance of the individual players and overall team during games and tournaments. This also would take into account the coaching staff, especially the manager, as team strategies and lineups are a key element of the team’s performance. Over the last 12 years of the MANU stock’s inclusion in the New York Stock Exchange (NYSE), the club Manchester United has had numerous ups and downs in terms of titles won, player signings, and even management rotation. Here are some of the major events that have affected the MANU stock, including the Europa League Victory in 2017, the UEFA Champions League Qualification in 2023, and even player signings, such as Cristiano Ronaldo’s return in 2022. Using our strategy, we can answer the question: how much does team performance affect stock price? If we take into account the major events since 2012 using the graph above, and sort them into events regarding team performance, such as major title wins using AI, we can calculate the average change of price for all the events. List of prices of each of the events: 1.38, 0.97, -3.35, 6.73, 3.98, 1.90, 2.38, 4.05, -2.63, 2.63, -2.54, -4.14, -6.06, -3.24; and when we take the mean of the values we get 0.083.

This graph represents the major events that are related to team performance, for example, the EFL Quarter-Final win in December 2016

Business Deals and Stock Price

Since we established the fact that soccer clubs are also business entities, there are a lot of factors and events to uncover regarding their stock price. For example, there are sponsorships and brand deals, sales of tickets and merchandise, and also quarterly earnings and reports. However, according to Sportico, one of the most prominent events was the potential scale of the club, Manchester United by the Glazer family, which raised the MANU stock price by 8.33% ($1.50). Similarly, as for the effect of team performance, we can also use our strategy to decipher

how much financial deals and branding affect the MANU stock price. We can take the events shown and sort them into events regarding financial deals using AI; with that, we can calculate the average stock price change as we did previously by taking the mean of the total stock prices of the designated events to ultimately find our value. Using this process, the list of the stock prices is, 0.8, 2.22, -3.43, 1.05, 5.13, 1.65, -2.50, -2.96, 8.33, -3.78, 4.65; and the mean value is 1.005.

Depicted here is the bar graph for the major events dependent on branding and financial deals, such as when Manchester United was sponsored by Adidas in January of 2015, its biggest sponsorship ever, bringing in around £750 million ($1.3 billion).

Comparison and Understanding

The comparison between the mean values of stock price changes following team performance events and financial deals for the club Manchester United reveals a significant insight into what truly drives the success of a soccer club. As shown, the mean value of the MANU stock price change after team performance-related events stands at $0.083, whereas the mean value following financial deals, branding, and earnings reports is notably higher at $1.005. This difference underscores the greater impact that financial events have on the club’s stock market performance compared to the outcomes of matches or titles won.

Team performance, such as victories or losses and even individual player performances, certainly influence the stock market, but these effects are relatively short-lived and smaller in magnitude. On the other hand, financial deals, particularly those involving major sponsors like Adidas and Chevrolet, have a much more substantial and lasting impact on the club’s valuation. For instance, Manchester United’s deal with Adidas, which was one of the most lucrative sponsorship agreements in sports history, led to a significant increase in the stock price by about 5.13%, reflecting strong investor confidence in the club’s financial future. Similarly, according to Juwan Watson from the Sports Business Journal (2022), the $559 million sponsorship with General Motors for the Chevrolet brand to be the main shirt sponsor in 2014 also allowed for around a 2-5% increase in stock price shortly after its announcement. Conversely, if we examine the most impactful event concerning team performance, which was the Red Devils’ Europa League Victory in 2017, they only earned about £6.5 million ($7.3 million); which raised the stock price by about 4.05%. This explains why many clubs prioritize securing high-profile sponsors, as they are more critical to sustaining and growing the club’s financial health than on-field successes alone.

However, these two variables, team and player performance are intertwined with financial deals and branding. For example, according to Sánchez and Barajas (2019), strong performances, particularly in high-profile competitions, can lead to significant financial benefits, such as bringing in more fans into stadiums, increased revenue from prize money, broadcasting rights, and sponsorship deals. Moreover, winning major tournaments or consistently performing well in domestic and international leagues enhances a club’s global brand value, making it more attractive to sponsors and commercial partners. On the contrary, poor performance can lead to financial strain, as clubs may miss out on lucrative deals, experience lower matchday revenues, and face reduced interest from sponsors. Additionally, the success or failure of key players and management decisions can directly impact stock prices for publicly traded clubs, as investor confidence is influenced by the club’s competitive outlook. One example of this was Cristiano Ronaldo’s return to Manchester United in 2021. Even though the club signed him for £15 million ($16.6 million) with £8 million ($8.9 million) add-ons, this was a beneficial financial decision, since not only did Ronaldo increase team performance overall, but also dramatically increased the club’s sales in terms of match tickets and merchandise. In fact, according to the Daily Star (2022), data released ten days after his arrival at the club showed Ronaldo’s shirt sales had hit an astonishing £187 million ($246 million), giving him the record for the fastest-selling shirt in Premier League history. This proves a club’s on-field achievements and financial health are deeply interconnected, with each influencing the other in a cycle that can lead to either sustained growth and success or a decline.

Conclusion

Growing up, I viewed soccer through the lens of pure fandom: celebrating goals, championships, star players, and playing Fantasy Premier League with friends. But as I delved deeper into the economics of the sport, I came to understand that soccer clubs are much more than just teams competing on the pitch; they are intricate business entities driven by both athletic performance and financial strategy. This analysis of Manchester United’s stock prices over the years, influenced by key moments of both on-field successes and financial deals, demonstrates a crucial insight: while on-field success is undeniably important, it is the financial maneuvers, such as sponsorship deals, branding, and market strategy that have a more profound and lasting impact on a club’s financial standing.

Ultimately, this analysis has transformed how I view soccer and its business dynamics. Clubs are no longer just entities competing for trophies; they are also global brands that must navigate financial markets, partnerships, and fan engagement thrive. As I have learned, the true success of a soccer club lies not just in its ability to win games but in its ability to secure and sustain financial stability. This broader understanding of the sport’s motives has deepened my appreciation of the complex relationship between performance and finance, and it is this insight that offers a more complete view of what truly drives a soccer club’s success in today’s world.

Works Cited

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