Your View: Is F1 flotation out of fuel?

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It’s difficult to make sense of the ownership structure of Formula One to the average fan. There are multiple companies and owners but what may have been slightly easier to grasp was the planned flotation or IPO of the sport on the Singapore Stock Exchange. According to the Telegraph quoting F1 boss Bernie Ecclestone, that flotation may be on hold or permanently off the table for now.

“With the market generally as it is why would anyone buy into any company today, even if it has got bloody good earnings and records?” Ecclestone said.

“They would say let’s wait because it may go down 20pc so why should we buy now? The rest of the stock market worldwide has fallen so why should a new stock be any different? It’s even worse with what has happened in the last month.”

The reality, as our own Mark Hallam put it, is that CVC Capital and Mr. Ecclestone are wealthy because they understand the market, work in it every day and have made good decisions on investments. From my perspective, this also suggests that the recent performance of the Facebook IPO and falling markets would imply that these individuals are not in tune with market performance metrics and the speculative nature of the market or potential for IPO’s.

While markets and investments are certainly speculative, I would tend to believe that the brokers Formula 1engaged to pre-sale and shop the IPO found a lack of interest at the desired levels CVC Capital were looking for. This is a typical process when considering an IPO and if the initial inquiries were not favorable at this time, then it makes little sense to go to the expense of launching the IPO. Using Facebook and market conditions as the excuse may be part of the reasoning but are merely key indicators of a soft market. The truth may rest much deeper in that the valuation being floated isn’t sustainable by the level of interest shown so far.

In the end, the bigger question might be how does impact the Concorde Agreement that Ecclestone suggested was effectively a done deal? If team ownership was to be a component of the deal, the flotation would have been a good vehicle to make this happen. If there is no flotation, it certainly can still happen but will look different in execution.

It also brings forth a question of Mercedes AMG Petronas and their involvement as well. There has been no information regarding their position on the board of F1 and ownership potential such as the rumored to have been offered to McLaren, Ferrari and Red Bull.

The short answer to all of this? If there is concern over making a significant return on investment from a move by Formula One, it won’t make the move. Flotation or not, the series is a business using a sport as its appeal and unlike Facebook, it is actually making tangible products and services through its engineering development with teams running businesses of their as a by-product of the sport. It’s not Facebook or other social media, it’s Formula One.

What’s your take on the flotation delay or cancellation? Good news? Bad news? Why do you think it may have stalled and what are your concerns over the Concorde Agreement? Let us know in the comment section below.


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