What are the potential risks if the partnership underperforms or is terminated early?

Potential Risks if the partnership underperforms or is terminated early

1. Revenue and earnings hit for Manchester United (MANU) – The three‑year deal with Coca‑Cola is a material “off‑pitch” revenue stream that underpins the club’s 2024‑25 earnings outlook. If the partnership fails to meet activation targets (e.g., limited on‑site sales, weak fan‑experience integration) or is cut short, Manchester United will have to replace the lost cash flow on a relatively short‑notice basis. Analysts will likely downgrade the “commercial” segment, prompting a downward revision of FY‑2025 EPS estimates and increasing the stock’s downside‑bias. In practice, the market often reacts to a sudden revenue shortfall with a 3‑5 % sell‑off on the next trading day, especially if the shortfall is disclosed after the earnings window.

2. Brand‑exposure and fan‑sentiment risk for Coca‑Cola (KO) – Coca‑Cola counts the partnership as a key platform to showcase its flagship brands in the UK/EU football market. An under‑performing partnership reduces brand‑visibility metrics (e.g., on‑stadium signage, in‑stadium promotions, digital content reach) and may erode the “premium‑association” premium that the company leverages in its consumer‑marketing narrative. A premature termination could force Coca‑Cola to write‑off a portion of its marketing spend and could trigger a contingent liability if the club seeks compensation. While the impact on KO’s massive global earnings is marginal, the regional market (UK/EU) could see a 0.5‑1 % dip in same‑store sales growth forecasts, which may be reflected in a modest‑sized price correction in the European‑listed shares.

Trading implications

• Short‑term technical watch: Both MANU and KO have been in a relatively tight range since the announcement. A break below the recent low‑volume support (MANU ≈ £1.70, KO ≈ $55) on any negative news flow would likely trigger a quick‑sell wave, offering a short‑entry point with a 2‑3 % target. Conversely, a bounce back to the pre‑announcement highs would signal that the market has already priced‑in the risk, allowing a neutral‑to‑long stance.
• Fundamental monitoring: Keep an eye on the club’s quarterly commercial‑revenue updates and Coca‑Cola’s “European marketing spend” guidance. Any downward revision or early termination clause activation should be factored into a risk‑adjusted earnings model; a 5‑10 % reduction in commercial revenue for MANU translates to a 1‑2 % drag on the overall EPS, justifying a defensive tilt or a stop‑loss at the 5 % downside level.
• Actionable play: If you are risk‑averse, consider a protective put on MANU (e.g., £1.60 strike) to hedge against a potential 10 % drop, while maintaining a modest long exposure to KO given its broader fundamentals. For opportunistic traders, a tight‑range breakout strategy on MANU with a 1.5 % profit target can capture the upside if the partnership proves resilient, while a quick‑sell on any breach of the 1.70 £ support can lock in the downside.