The Formula One group, which is largely owned by CVC Capital Partners, is planning to list around 20 percent of the shares of the company on the Singapore Stock Exchange in July, with the goal of raising between $1.5 billion and $2 billion. This would value the company at around $10 billion. This is a very aggressive timeline for an IPO and it remains to be seen whether investors will go for the shares.
There are a number of significant questions that will cloud the value of the company. There is talk of a new Concorde Agreement being in the pipeline, but it is not yet signed and there is also the potential of legal action from at least one very large company that is not part of the deal at the moment. In addition there are questions about the company leadership. Bernie Ecclestone is 81 years of age and still doing a great job, but there is no sign of any succession plan, at least not one that has been made public. It could be that CVC plans to put someone like Sir Martin Sorrell, a current board member of the group’s holding company, into the leading role, but that will not happen until Ecclestone disappears from the scene.
There are also questions about various legal actions that could affect Ecclestone’s situation. Those are the risks for investors. On the upside, there is the potential of an expanded World Championship, with higher revenues, although these will inevitably be the source of discontent in the ranks of the teams, which believe that they should be getting a much higher share of the revenues. There is a also a significant debt load.
Formula One has appointed Goldman Sachs and UBS as its joint global co-ordinators for the IPO. Goldman has been advising CVC for some time and UBS is an F1 sponsor. There are four additional joint bookrunners: Morgan Stanley, Banco Santander, Singapore’s DBS Group and and Malaysia’s CIMB. They will now work to find syndicates and underwriters who will place the shares with investors. The next step will be road shows and discussions about the best offering price and the timetable for the flotation. The idea of using multiple bookrunners is to try to improve the offer price.
The disadvantages of an IPO for Formula One include requirements to disclose financial and business information which has never been a Formula One strongpoint, even before a flotation can be achieved. There is a risk that the required funding will not be raised, as happened before when a previous attempt was made to float.
A listing in Asia is clearly an attempt to cash in on the region’s interest in international sporting brands.