Breaking: Kubica could leave Renault

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Renault driver Robert Kubica’s manager, Daniele Morelli, has some questions for Renault’s new owner Genii Capital. This according to the BBC’s Andrew Benson.

Kubica

Kubica deal with Renault was announced shortly after the season ended filling the vacant slot left by outgoing Fernando Alonso. The team has been under considerable scrutiny by its board of directors over the past few weeks. The future of Renault’s involvement in F1 seemed tenuous at best and this week it was announced that the team is indeed being sold, in part, to a private equity firm known as Genii capital.

The consistent rumor is that the deal has Genii Capital in a majority position at 75% while French car maker will remain involved and the name of the team will also continue as Renault.

Team managing director Jean-Francois Caubet said:

“The net cost that Renault had in 2009 and the net cost Renault has in 2010 will be divided in two,” he said.

Team president Bernard Rey said that Genii Capital had acquired a “significant stake”.

“I am delighted to welcome Genii Capital as our new strategic partner as I am sure that their enthusiasm and business expertise will create a new dynamic for the team, the staff, and our partners,” Rey said.

“Today’s announcement also confirms Renault’s commitment and trust in the sport’s governing bodies to improve the green credentials of Formula One.”

“I am delighted to welcome Genii Capital as our new strategic partner as I am sure that their enthusiasm and business expertise will create a new dynamic for the team, the staff, and our partners,” Rey said.

“Today’s announcement also confirms Renault’s commitment and trust in the sport’s governing bodies to improve the green credentials of Formula One.”

But what’s in a stake? A 75% ownership structure is more than a stake and one must consider it is far from a non-voting stock position or ghost stock option. The conventional wisdom would have Genii Capital managing 75% of the risk, revenue and cost in a standard configuration. Venture capital firms have many different ways of investment and perhaps the press is reading in to the percentage of ownership a tad but perhaps not.

A common vehicle of investment is a “convertible warrant” structure where the operating capital is loaned to the company in return for a position on the executive board and, depending on the amount of investment, a voting position. The investment can, over time, become convertible to warrants or permanent stock ownership in the company.

Occasionally an amount gets thrown out as the cash loaned to a company and simple math then equates it as a percentage of the total estimated value of the company or the total annual estimated expenditure on the program and this becomes the rumor. In short a $100MM team budget that gets a $75MM infusion of cash is sometimes thought to be now 75% controlled by the investing arm. That usually is not the case.

The lingering questions from the Kubica camp are understandable as their contract was completed prior to the changes at the Renault F1 team. The conditions have changed and clarifications are sought. Morelli said:

“The cards have changed in respect of when we signed and it’s important Renault give us full information.

“We are not against the new position in principle, but it is important to know who will run the team and what kind of strategies they will use. It could be positive or negative.

“We need some time – at least a few days – to evaluate the new situation so I am not in a position to say we will leave or stay.”

No doubt there are some serious concerns and the hint or insinuation is that perhaps contractually Kubica is under no obligation to stay if there has been a change in ownership or management. That is common language in a contract and it remains to be seen if Kubica will find the new owners as committed to him as Renault was but his options are growing weaker by the day as the available racing seats are being filled.

Check out the BBC story by Mr. Benson. He does a terrific job for the network and its an interesting read.

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