Buy the horse, not the stable!


Buy Bernie Ecclestone's Grand Prix Circus, when you can probably get control of the Formula 1 (F1) big top simply by being a co-owner of the star act? Fiat Chrysler Automobiles (FCA) own 90% of car maker Ferrari with Piero Ferrari, Enzo's son owning the other 10%. FCA have announced their intention to sell off 10% of the Italian sports car maker and are valuing Ferrari at $6 billion. This might seem a little excessive as the entire group is valued at only just over $12 billion...but such is the razzle dazzle of the prancing horse from Maranello! There is no Formula 1 without Ferrari and with new owners of F1 on the horizon now is the time to strike. Change in F1 ownership will inevitably result in some instability and they need a happy and contented Ferrari. So why not just grab that 10% of Ferrari for $600million. In addition to impressing the hell out of your Russian mistress or dinner companions at your beach house in St. Tropez, you go straight to the top of the queue for any new Ferrari with the bonus of VIP invites to every Grand Prix.

...and another thing

As a major Ferrari shareholder, the real opportunity is to throw a big spanner in the negotiation with F1’s new owners and each team’s slice of the action. Known as ‘The Concorde Agreement’, in the past it has always proved a tortuous tussle between Bernie Ecclestone and the teams on dividing up the proceeds…with Ferrari usually ending up with the biggest piece of the pie. This has led to grumblings of dissent from the other teams.

The current owners of Formula 1, bankers CVC, are trying to secure a sale of F1 with a $9billion valuation by July 2015. No one knows for certain what they paid for the original 63.4% holding which they have diluted down to 35.5% but estimates are they are getting between a 300% to 400% return. Neither CVC nor the new owner will not want Ferrari rocking the Formula 1 boat.

At worst the owner of the Ferrari 10% stake might force the new F1 owners to find someone to buy him or her out at a price in excess of the current value just to get rid of them. Known as ‘greenmail’, I suspect the new F1 owners might pay a hefty premium for removal. Say a $1billion!

At best the owner can only increase the value of Ferrari’s share price by extracting an ever better share of the Concorde Agreement income as well as knowing he can exert real control over F1.

...and another thing

As a global sport with only 19 races per year, Formula1 dwarfs most other audiences of series sports events. Yes, more people may watch football or cricket as a whole but the games are spread over a huge panoply of counties and teams. F1 is essentially the must view by nearly all motor sport enthusiasts concentrated into a limited number of races per year. This results in an annual viewership of approximately 500 million. Big but….The World Cup has an even greater concentrated viewing of around 4 billion.

FIFA (the governing body of world football and the World Cup) is under the spotlight at the moment with a number of investigations. FIFA is a sports organisation with a strong frontman, labyrinthine rules and whose critical choice of locations (or cancellation of others) might appear controversial with rumours of substantial and possibly questionable payments. All of this is of course wrapped up in a mighty patchwork quilt of billions of $,£,¥,€ etc etc.

Does any of that appear similar to the annual extravaganza that is F1?

I fear that those whose feet have been squashed by the F1 juggernaut in the past may feel the time is right to try and shine some light into what they consider to be the sport’s darker corners. In the fevered environment now surrounding big sport, just watch as they try and drum up support for ‘an investigation,’ however unjustified it may actually be, into Formula 1…Let’s just see. All the more reason to buy Ferrari and stand back?

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  1. Jack Frost says:

    I do hope Bernie gets his price – after all his daughter’s hoping to move up into a bigger BH home sometime this Fall as she needs ‘a bit more room for Dad’….

  2. Clare says:

    Hello Dear Mark, I do love to read your weekly posts..they are amusing and informative.
    See you in UK in August.
    With love, Clare

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