What Do PT Barnum and the Glazers Have in Common?

16 08 2012

According to Wikipedia, it wasn't the legendary showman PT Barnum who coined the phrase "there's a sucker born every minute", but let's not this question of authorship get in the way of a good story.

We've recently come across article in the Wall Street Journal (yet another paper by everyone's favourite Australian media tycoon) in which lawyer Marc Jaffe who helped the Glazers structure and sell the Manchester United to the investment (and whose other clients included the WWE) provides a behind-the-scenes look at the IPO.

Jaffe said it was a challenge to sell the club to U.S. investors, who are less versed in soccer than European counterparts and who find the Premier League that Manchester United plays in somewhat opaque. But he said the goal was to convince potential investors that the company was “a global powerful brand a name that meant something off the field.” ... Jaffe said the company chose the U.S., after examining a possible IPO in Singapore last year, because the U.S. offered more liquidity.

Apart from his artful explanation of why the Singapore float was abandoned (is it fair to call the objections to the voting structure and general antipathy toward the Glazers' unrealistic valuation a "liquidity problem"?), Jaffe unabashedly trumpets the benefits of the confidentiality of the process.

Jaffe also said the recent JOBS Act proved helpful to Manchester United by allowing it to have confidential discussions for months with the SEC. He said he felt other “emerging growth companies” probably have different reasons for using the JOBS Act, but that it helped the 134-year-old Manchester United too. “It was terrific because the minute we filed the press went nuts,” Jaffe said. “For me the ability to file confidentially and have that period of couple of months before going public was a great, great advantage.”

In effect what the Glazers have done is exploited a piece of legislation that was very recently passed by the US Government (quite serendipitously for the Glazers) to reduce some of the more onerous requirements for small business to going public under the presumption that this would help these businesses get the capital they needed to get up and running during these difficult economic times, presumably as well because they would create jobs for Americans. The Glazers were rightly excoriated by two of the architects of recent financial regulations designed to add stringency and investor protections, not take them away.

In other words, the reduced reporting requirements and the usual smoke and mirrors tactics helped yet the Glazers and their advisors (led by Mr Jaffe) hoodwink even more people.

(Curiously, he offers no explanation why Morgan Stanley pulled out as an underwriter. Perhaps they were a little better "versed in soccer"? Or were they the "smart money"?)

So... if you were wondering how these IPO things happen, here's a glimpse under the covers.

And to those of you who are wondering about the provenance of that quote about suckers being born every minute, we humbly offer this suggestion:

Get a copy of Mr Jaffe's family tree. With comments like these there must surely be a genetic link.

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What’s Going on with Manchester United’s Stock Price? An Update

16 08 2012

Remember last week when we explained that the banks that had underwritten the IPO (i.e., those who had ensured it would get off the ground) had been artificially holding up the price?

Well that all ended today. You can see exactly when on the chart below. It was somewhere around 11.06am Eastern Time (a little after 4pm BST).

D'oh!

So what does that mean? It means the market thinks that, for that price, the club is overvalued. By some analysts estimates, fair value is only $4.97 a share! This would imply an £895 million enterprise valuation (which is a valuation that includes the debt) or £535 million equity valuation (which is just the available float times price) at current exchange rates.

Remember too that this doesn't hurt the club's finances. It hurts the Glazers as they are starved for cash and potentially hastens their departure.

In the immortal words of the Sage from Springfield, who knows slightly less than the Oracle of Omaha:

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RIP Lord Alf Morris, MUST Patron

14 08 2012

The Board and Committee of MUST would like to pass our condolences to the family of Lord Alfred Morris. A tireless campaigner for those less fortunate, he will be missed.

Story in the MEN
Lord Morris, Patron of SU and MUST

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What’s Going on with Manchester United’s Stock Price?

12 08 2012

We've been receiving a number of questions from supporters about the launch of the IPO, and in particular (a) what it meant that the opening price was lower than what the Glazers wanted and (b) what it meant to say that the banks were holding up the price. Here's an explanation.

Where would Manchester United's share price have ended up without artificial support of the underwriters? The answer is surely far lower than where it is after the first day of trading.

Following an opening that can only be described as a huge black eye, Manchester United teeters on being the next "Facebook" as its readies for its share price to start falling.

Only the deliberate backing of the banks who brought the Glazers’ public kept the stock from plunging below the $14 per share opening price.

What happened?

The Glazers' rip-off of an IPO has been widely reported in the media over the past two weeks, in large part thanks to your phenomenal efforts alerting the banks and the press to its facts. Our advisers have been telling us privately that they've never seen an IPO sustain the battering that the Glazers took and still launch, but this tells you something about their desperate need for cash.

The stock started trading at a price of $14 per share. Almost immediately investors started selling. In principle there should have been an oversupply of United shares, which would have driven the price down. Yet on Friday there was always a willing buyer at $14 per share. These buyers are surely the underwriting banks, the ones who helped the Glazers get the IPO launched. By scarfing everything up at $14 a share they prevented the even worse debacle of an opening day price job.

You can see this in the chart below. It's like a stone skipping across a lake. At some point we believe it's going to sink.

We now await the end of the artificial price support from the underwriting banks. When their false support fails, the market will give its guidance on a realistic valuation. We expect this to be far below the Glazers’ initial pipe dream of $16, and perhaps at a low enough level ($8-$10 per share) where it becomes a takeover target.

What is a realistic valuation?

The real valuation of Manchester United should prove considerably lower than the baseless valuations that have appeared over the years in the papers from nameless sources. The initial offering price of $14 is already well below the Glazers’ hoped-for price of $16-$20.

What is truly remarkable is that every serious investor or journalist who has commented on the price has said it massively overvalues the company.

Those who have cravenly defended the Glazers remain loath to speak to any facts and deal solely with the hypotheticals that emanate from the Glazers own spindoctors.

The most thorough analysis we're aware of is this Morningstar piece estimating fair value to be $10 per share, but even this is caveated and could be lower depending on Club performance.

If a $10 per share price is more realistic, this would value Manchester United at around £1 bn or lower, putting it squarely in the frame as a possible takeover target.

EDIT: Just after posting this we because aware of the PrivCo analysis in which they value United at $4.97 per share based on the company's fundamentals and the performance of sports teams generally! We've linked to this at the very bottom of the post.

Some commentators are now drawing comparisons with the disastrous Facebook IPO and the same ultimately futile defence put up by underwriters. Facebook now trades at a much lower level, reflecting a price that a broad array of investors feel is more legitimate. While the Financial press have recognised these similarities, this story has not been covered in any mainstream media.

Again, the Club pays for the Glazers’ greed

In their damn-the-torpedoes strategy, the Glazers ploughed on with the IPO earning roughly $110 million for themselves immediately. Meanwhile, as described in this analysis by Andy "andersred" Green, Manchester United (the business) will be required to pay the fees of the IPO. In fact, it will be two years before United begin to "benefit" from the flotation, yet the Glazers get their money straight away. This will be coming as a surprise to no-one.

Below are links to stories that provide additional information.


Wall St Journal: Manchester United IPO Fails to Excite the Crowds
"For most of the afternoon, the share price toggled between $14.01 and $14, an indication that the underwriting syndicate, led by Jefferies Group Inc., JEF -1.05% was supporting the stock. Underwriters can step in to buy shares in an effort to keep a deal from "breaking," or sinking below its IPO price, but there is no set amount of time that they will continue to buoy the shares beyond the first day of trading. Both Manchester United and Jefferies declined to comment about whether the stock was being supported."
http://on.wsj.com/P4XeVJ

FT: 
Underwriters had to step in to support Manchester United as shares in the British football club repeatedly tested their $14 listing price after their debut on the New York Stock Exchange on Friday. That came after shares were priced below the expected $16-$20 range on Thursday. Man United shares ended up 0.1 per cent to $14.20. 
http://on.ft.com/P4Futn

AFP: Manchester United shares flat after cut-price IPO
"Analysts said underwriters were propping up the shares on the New York Stock Exchange to keep them from dropping below the issue price."
http://yhoo.it/P4X4h7

MarketWatch - The Wall Street Journal: Manchester United Being Supported At Offering Price By Underwriters
http://on.mktw.net/P4EHbT

dealbreaker.com: Manchester United IPO Goes Nowhere In Exciting Fashion
"guess the stabilization strategy of an overhyped IPO"
http://bit.ly/P4F7iy

New York Post:
"Underwriters were forced to prop up the price amid slack demand, according to reports, an uneasy reminder of Facebook’s underwhelming May 17 debut."
http://nyp.st/P4DbXk

PREMARKET INFO: 
It’s the underwriters versus the HFT rebate traders.  We’ve got a real soccer match here, and the result….a locked stock price.  Analysis of the HFT tractor beam in MANU:
http://bit.ly/MmKxp1

Zerohedge:
"... the underwriters of the MANU IPO are 'pulling-a-facebook' ..."
http://bit.ly/OYzqCS

PrivCo report:
If the stabilization bids used to support the overvalued IPOs of Zynga and Facebook are any indication of what will happen with Manchester United, Monday might prove to be a very rough day. PrivCo CEO and Founder Sam Hamadeh stated, "The magnitude of the overvaluation of ManU's IPO - and therefore the potential for a disastrous collapse in the company's stock - is reminiscent of IPOs from Zynga and Groupon."
http://bit.ly/Okoel8

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MEDIA RELEASE: GLAZERS’ MAN UNITED IPO - THE 659 MILLION FAN SCAM?

07 08 2012


Manchester United Supporters’ Trust calls on owners to come clean over IPO numbers - 659 million fans - are you having a laugh?
 
For immediate release, Wednesday 8th August
 
The Manchester United Supporters’ Trust, the independent voice of Manchester United fans in more than 100 countries, has today called on the owners of Manchester United Ltd. to come clean on the numbers they are using to promote their proposed Initial Public Offering (IPO). Speaking on the eve of the proposed share sale in New York, MUST is championing the interests of potential investors by making two demands of the Glazer family:
 
1. To substantiate on what basis they are claiming 659 million followers (also confusingly referred to as fans in the IPO video presentation) around the world. Investors should be able to see the source material of the "independent research" the club’s management are citing, published in full. Our understanding is that far from being independent the survey was actually commissioned and paid for by Manchester United. What EXACTLY is their definition of a follower? And a fan? These numbers have been widely criticized including by independent authorities on the matter such as Sporting Intelligence (see article below)

 


2. To disclose current take-up of season tickets and club memberships for the 2012/13 season. The club has claimed in its prospectus and investor roadshow that 80% of match tickets are sold at the start of the season, and the club can claim '99% occupancy' of seats for all games. Other sources suggest a continued fall in demand and that is certainly the experience of supporters trying to sell on unwanted tickets which often now go to waste or end up being given away.
 
The owners must answer these key questions about the figures being used to promote their IPO and clearly these are figures that could materially impact on perceived valuation of the company. Failure to do so could well leave them open to a post-IPO class action law suit by disgruntled investors if these figures turn out to be misleading.

A spokesman for the Manchester United Shareholders' Trust, commented:
"We have made it clear that on the Glazers' terms, the share sale is a bad deal for fans, investors and the club. For the club, this is a bad deal because more than half of the funds raised will now be paid direct to the Glazer family, with a smaller portion being used to pay down some of their debt which they have saddled the club with since 2005. For fans, it is a bad deal because it is a missed opportunity for more equitable ownership of our club, with proper distribution of voting rights; and by floating shares at this inflated price, it provides a poisoned pill which might deter any more enlightened owners from buying the club in future.
 
Yet above all this share sale is a bad deal for investors – to whom we'd say 'buyer beware'. Not only are the shares overpriced, coming with minimal voting rights and poor corporate governance – but we are highly doubtful of the misleading marketing claims of the club's management, upon which their highly ambitious float price is predicated.

The club is claiming that 659 million people - one in ten of the world’s population – is a United follower. To put that in context, Facebook has 901m users. While we’d love to think so, in reality I doubt if one in ten people in Stockport, let alone Jakarta, supports United actively to the extent they would pay money to the club. The club should justify that figure and clarify how it is counting 'fans' and 'followers'.
 
Secondly, we feel the club should give proper guidance on ticket sales. United season ticket holders and members who have been contacted by  the club recently will know it has had to try harder than ever before to sell tickets – not least because of the economic situation, and the inflation busting price rises particularly under the earlier years of the Glazers’ ownership.  Match-going United fans continue to be the commercial lifeblood of the club, but we will not have our loyalty milked so contemptuously forever – and we are sure broadcast partners and investors will not want to see empty seats in Old Trafford this season. Again, we’d like to see the club come clean on its claims."

 

A recent article published by respected analysts Sporting Intelligence on 7th June dismantles the Glazers' claims of 659 million followers/fans & correctly predicts (two months prior to it happening) the commissioning of the survey would be linked to another IPO attempt.

 

Full article here:
http://bit.ly/MJ25rm
 
United fans wishing to register their opposition to the terms of the proposed share sale and IPO can join MUST at  www.joinmust.org

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MUST launches viral infographic attacking Glazers’ mufc float

07 08 2012

Please share the infographic below on Facebook, Twitter and email. Below is the press release sent out today:  

FOR IMMEDIATE RELEASE - Tuesday August 7th 2012

MUST - Glazers' infographic  

As part of its continuing pressure on the planned Glazer family New York IPO MUST - The Manchester United Supporters Trust has released an INFOGRAPHIC highlighting some of the hard financial facts surrounding the IPO and Glazer ownership of Manchester United in general.


Key facts and figures are bought to life visually and graphically.

A spokeman for MUST commented,
"This is a highly effective way of getting across some of the negative aspects of the Glazer's ownership and the IPO in general - and though the presentation is light hearted this is no laughing matter for Manchester United's global fan base".

"This is just another way of telling the story that the Glazers' New York flotation plans for Manchester United are bad news for investors, the club and fans and demonstrate just how much ownership by the Glazer's has cost the club".

"We had to tone it down a little - some of the ideas we thought about were incredibly popular with the development team but probably not totally in good taste"

"The facts alone are disgusting enough for any red to the core United fan and we must do all in our power to defend our club against the consequences of this flotation plan".

"We're appealing to the millions of United fans around the world to join the MUST campaign through our website www.joinmust.org to send a powerful message to the Glazers, their bankers and their sponsors. Over half a million messages (currently 519,737 and counting) have already been sent to the Glazers' bankers and now fans all around the world are turning their attention to the sponsors too"


Notes:
The infographic is free to publish and is available below or download online here:
http://action.joinmust.org/page/-/images/manchester-ipo-yellow.png

Sponsors SpeakOut: http://bit.ly/Mp7QtB
IPO Banks SpeakOut: http://bit.ly/QpHSLV
Open Letter to Glazers: http://bit.ly/N99IL9

MUST - Glazers' IPO infographic   

 

 

 

 

 

 

 

 

 

 

 

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Message to Sponsors: Do You Really Want to Be Associated with the Glazers?

06 08 2012

On the back of our campaign targeting the IPO banks (you sent over HALF A MILLION messages!) we're moving on to the sponsors. Sponsorship is a tricky subject, so let's be clear: MUST are not against commercial tie-ups. They provide a source of income for the club. The problem is that the majority of these funds are not being reinvested in the club. Instead they are wasted in interest on the self-inflicted debt or, worse, they go straight into the Glazers' pockets.

Our goal with this campaign is to explain to potential sponsors that their association with the Glazers puts them on the wrong side of the equation.

If you’d like to participate in the campaign, go to http://action.joinmust.org/clubmoney

Please help us by alerting your friends and contacts via Twitter, Facebook and whatever other means you have.

A copy of the email the sponsors will be receiving is below. Let us know what you think in the comments.

I am one of the millions of Manchester United fans you’ve been told about. Manchester United has told you I’m devoted to the club and, by association, I will therefore be devoted to you.

They’ve got half of that right.

I do care passionately about my club.

What they aren’t telling you is that I am angered by the on-going actions of the Glazers, the team’s owners. By association, I’m not going to be so fond of you.

The Glazers are using the money you’ve paid them to line their own pockets. Very little of your sponsorship money will benefit the team, the club or the fans.

You are effectively helping the Glazers in their quest to bleed our club dry.

For this reason I will never, ever, be loyal to your brand. In fact, as long as the Glazers remain in control and you do business with them, I’ll see you as part of the problem and will be avoiding your brand.

What can you do?

Talk to the Glazers.

Explain to them how to treat their customers and shareholders.

You know how important it is for a modern business to have a constant dialogue with its customers.

Ask them why they haven’t met or spoken with us about our legitimate concerns despite promises to do so in the seven years since they took over.

You know how important it is to offer value to shareholders.

Ask them then why they are about to launch an IPO where over half the proceeds will go into their own pockets, where ordinary shareholders are treated with disrespect and offered neither dividends nor real voting rights.

You know that good business strategy requires attending to the health of the business.

Ask them why, then, your sponsorship fees are being used to prop up their failing business empire and make them personally wealthy.

The Glazers are right about one thing. We are fiercely loyal to the club. We will never cast this loyalty aside when it comes to supporting and defending United. We will therefore do what we can to defend the club from the Glazers and their partners.

You should understand that by working with them the value of your sponsorship and expected ROI is limited.

But you have the power to change that.

Thank you.

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MUST OPEN LETTER TO THE GLAZER FAMILY

06 08 2012

title

An open letter to the Glazer family, owners of Manchester United Football Club, from The Manchester United Supporters' Trust, representing United fans in over 100 countries.

6th August 2012

Dear Glazer Family,

Despite your promises when you took control of Manchester United Football Club in 2005 you have consistently refused to speak to fans.

This open letter is our only guarantee you will hear our voice.

Your leveraged and hostile takeover has cost in the region of £520million in debt related interest, repayments and fees, and the current balance sheet still shows debt of over £430million so in total your ownership has cost the club a staggering £360,000 or so a day.

Included in those sums are the many millions you have taken personally.

You have openly admitted your model of ownership is unsustainable and that this level of debt is harmful to the future success of the club.

We are currently lobbying your IPO advisors and have called for a global boycott of sponsors’ products.

The only core revenue stream directly in your control - commercial sponsorship may have grown during your tenure but the opportunities to sweat your asset are finite.

Long term you are eroding brand value and fan goodwill and operating profit has been falling over the past three years.

More worryingly the ability to invest meaningfully and competitively in the team is being restricted.

We support the players individually, the manager wholeheartedly and the team unconditionally but we can never accept your ownership as being anything but bad for the club.

The club needs to return to its pre-takeover debt free status as quickly as possible, where profits are used to invest primarily in the team – especially in youth development, the stadium, the local community and building on the club's historic legacy.

We call on you now to cancel the planned IPO and structure a full float, with a single class of full voting share - or to willingly offer the club for sale at a realistic price.

We would support a flotation wholeheartedly and encourage the global fan base of Manchester United Football Club to take such an historic opportunity to secure a meaningful fan ownership stake where the priorities of the club are the same as the fans – not absentee owners.

We invite Manchester United supporters around the world to come together – register interest with MUST through our website www.joinmust.org to help create the future Manchester united we all want to see.

Duncan Drasdo, MUST CEO @Drasdo
Gerald Shamash, MUST Chairman

MUST. The Manchester United Supporters Trust www.joinmust.org
Manchester, UK.

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Putting Pressure on the Banks

03 08 2012

Today we launched a new campaign to put pressure on the IPO banks and potential investors in the Glazer IPO.

As 38 degrees did against the Olympic Tax Dodge, we have organised an email/social media campaign designed to shine a bright light on supporters’ opposition to the rip-off their IPO represents.

If you’d like to participate in the campaign, go to http://action.joinmust.org/fairshare

Please help us by alerting your friends and contacts via Twitter, Facebook and whatever other means you have.

A copy of the email the bankers will be receiving is below. Let us know what you think in the comments.

I am a passionate Manchester United Football Club supporter. I have been for most of my life.

The club is in my blood. I doubt very much it is in yours but you are now playing a part in my team’s history – by advising the Glazer family on the forthcoming NYSE IPO.

You know this IPO is going to be bad for business.

You know the valuation is high. This isn’t a tech company. It’s not an “emerging growth” company. It’s a sports team, one already at the high end of the scale.

There’s no meaningful control. There’s no dividend.

There’s no value in these shares.

The only potential ROI is if the club’s fortunes improve. How is this going to happen with the Glazer family already planning to extract $150 million from the proceeds. Do you think they’ll stop there? They’ve already cost United nearly $800 million in fees and interest.

There’s no upside to this.

There’s no value to institutions or to retail investors when owners treat their company and customers like an ATM.

Meanwhile, Sarbanes and Oxley are having a good laugh as the classification of the business and how it makes a mockery of the JOBS Act. It's an election year, too.

Given current perceptions of the banking industry, are you really sure you want to be holding this bag?

It’s not just fans like me who are watching. It’s your entire industry, the journalists who cover it and the Senators and Congressmen who regulate it.

Step away from this.

If you want to invest in something, we want to provide a different vision.

We want meaningful fan ownership, a club run in its best interests. Where commercial revenues are reinvested and don't walk out in the pockets of absentee owners who want to use the Company as a private piggybank.

We believe this vision is attainable. If this vision appeals to you as well, contact MUST.

Thank you.

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MEDIA RELEASE: MANCHESTER UNITED FANS BEGIN GLAZER SPONSORS’ BOYCOTT

03 08 2012

FOR IMMEDIATE RELEASE Friday August 3rd 2012

MANCHESTER UNITED FANS BEGIN GLAZER SPONSORS’ BOYCOTT

The Manchester United Supporters Trust (MUST) has today (August 3rd) called for a worldwide boycott of Manchester United sponsors’ products, with support across the UK, Europe, Asia and the US.

With members in over 100 countries and additional support from locally based fans groups in places such as India, Indonesia and USA MUST has instigated the initiative in response to the planned New York IPO.

All the club’s sponsors are being targeted and a mailing programme based on the technology used in President Obama’s previous election campaign is being utilised.

The Manchester United Supporters Trust has strongly opposed the Glazer family ownership which sees the club £430million in debt and has cost it a further £520million in fees and debt repayments.

The planned IPO was initially intended to raise funds and to use all those proceeds to pay down some of the debt but in a u-turn the Glazer family now plan to take half the proceeds for themselves.

The boycott strategy is intended to send a loud and clear message to the Glazer family and club sponsors that without the support and purchasing power of the fans - the global strength of the Manchester United brand doesn’t actually exist.

It is hoped sponsors will put pressure on the Glazer family to reconsider their plans.

It is also hoped the companies advising the Glazers on the IPO, and potential investors themselves will recognise that without the full support of fans going forward there are too many uncertainties in meeting the IPO prospectus’ claims on revenue streams.

A spokesman for MUST commented.

“Essentially the IPO is bad for investors, the club and the fans.”

“The Glazer family sell the rights to our loyalty and devotion for the club to sponsors for many millions but then use that money to pay off their self imposed debt”.

“It has to stop and we want the IPO shelved and a proper fan ownership model put in place - one share, one vote”.

“Our actions are no different to the marketing tactics used by all the clubs sponsors anyway - we’re just executing it in another way. Their efforts are mostly about brand switching and ours are too - we’re just saying more overtly - don’t use those sponsors products - and the sample of fans we’ve spoken to around the world believe this is the right approach”.

“Even without this approach, allowing the Glazer’s to continue running the club unchecked is bad news for sponsors. Less funds for the club (because of servicing current debt levels) means less investment in the team and that could impact on sponsors being associated with a winning, successful team. That would be like sponsors watching their own ROI diminish”.

Manchester United Football Club sponsors include:

AON, DHL, BWIN, Casillero Del Diablo Wines, Hublot, Smirnoff, Mister Potato, Nike, Chevrolet, Singha Beer, Thomas Cook, Turkish Airlines, Epson, STC, PCCW Telecommunications, GlobalCom, Viva Kuwait, MTN, Airtel, Zong, Globul, TM Telecommunications, Viva Telecommunications, Turk Telekom, A.P. Honda, Airtel Africa, Beeline Telecommunications.

There has been a surge in consumer power recently with shareholder revolts at Aviva, Barclays, Reckitt Benckiser and even marketing services group WPP.

The clothing and retail brand Gap performed a u-turn on a proposed new corporate identity following a customer backlash and the US fast food chain Chick-fil-A is currently experiencing a consumer revolt.

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