So the flotation is delayed, and – whisper it – perhaps off. I say that because the last attempted float back in the 1990s was also initially billed as a delay but the money-minded then went off on a hunt for bond issues instead. That could happen again. The non- float may not be good news for the suits at CVC Capital Partners, but it is good news for the sport, as it means that the ownership remains concentrated, which is probably a good thing as anyone wishing to buy the business can do so more easily than would be the case with a floated company. The downside of this is that there will be less transparency than would be the case with a floated company. Transparency is a good thing when one is trying to deal with big global companies.
The major questions remain as before: has the sale of shares in recent months constituted “a change of control” and could such deals be vetoed by the FIA? Without knowing the definition of that specific to the contract between the FIA and Formula One it is hard to know.
The day-to-day politics of the sport will trundle on, with the teams and the FIA discussing cost control mechanisms and budget caps. The deadline for decisions relating to 2013 is on June 30, after which change can only be achieved with 100 percent agreement between the teams. Today changes can be voted with 80 percent in favour. Put another way, it means that if Ferrari and Red Bull get together and tell their satellites/customers to oppose something, they cannot stop it happening before June 30, but after that date they can block change…
The other question is whether or not the various parties are ready to sign a new Concorde Agreement, or will that be challenged by any of the interested parties?
On we go…
So as predicted by yourself then Joe !!
I think that the smoke and mirrors will continue for sometime to come.
Mr E is in his element now, he can not need the money, it is now just the biggest game for him to play.
I’ve no idea how Formula One Group is configured but it is easily possible to sell large quantities of shares without ceding control: you simply differentiate the shares into common stock (voting) and preference stock (non-voting) and keep the former. It’s how one, R.Murdoch, controls News Corporation. Ecclestone….Murdoch….hmm, I start to see some similarities!
Similarities? The New York Times does exactly the same.
Bernie’s an old hat at those games. He used them to control his F1 shell companies even after having sold them. It all fell to bits when the banks repossessed the companies after a series of bankruptcies, then successfully sued Ecclestone for control of the corporate boards.
Well, more like successfully convinced, rather than successfully sued. The lawsuits never concluded because Bernie folded like a house of cards the moment the bank’s man showed him they had proof of his tax avoidance schemes. That man? Gerard Gribkowsky.
Christ!! I always wondered why Bernie folded so quickly on that one… and now, perhaps, we know…
I suspect they knew this was coming but not quite yet. Hence the rush to get it completed.
I suspect they finally got done doing their due diligence.
The room for growing the company (ever more races) must be limited and so the P/E just looks like a bad investment. The outcome of the German court case must be as bad as anything the FIA can throw at them.
I would love CVC to get their fingers burned. If the sale last week was genuine, they have at least got their original investment stake back.
One wonders if last week’s sale was conditioned on a timely public offering?
The sale seems to have been designed to bring some credibility to the product. With the IPO off the table, the rationale may no longer exist. Will the sale be finalized? Will the buyers seek recompense from CVC?
Has there ever been an F1 season or race delayed by such internal politics?
2011 Bahrain was external politics and Indy was a farce – but not delayed. Surely the teams would put the fans and sport/show/spectacle itself above internal power plays given the focus on branding these days…
Or am I being simple again?
Before June 30 to change they need 80% of the teams, which means that Ferrari and Red Bull with their satellite teams (Toro Rosso and Sauber I presume) can’t stop it?
But 4 teams out of 12 is 33%. And even if Sauber switched sides, 3 out of 12 is 25%.
So with 80% needed for change, even now Ferrari and Red Bull with the help from just Toro Rosso can stop any change.
Or is it some other percentage? Isn’t it the 2/3 of the teams are needed, which means it would work even if Ferrari, Red Bull, Toro Rosso and Sauber are against?
Did you consider that Toro Rosso is part-owned by a Mercedes Benz shareholder?
No, I didn’t.
Seeing how Toro Rosso and Sauber followed Ferrari and Red Bull out of FOTA, what satellite teams are you talking about then?
And with 80% they still need just one.
“…anyone wishing to buy the business can do so more easily than would be the case with a floated company. ”
Where did you get this idea? A prospective buyer of a public company has the benefit of the market establishing share prices, as well as audited financial statements.Boards have a fiduciary responsibility to consider offers. Plenty of PE firms refuse to discuss purchase of private companies because of the disagreements over valuation.
This whole IPO exercise is due to the disagreement between CVC and Lehman trustee over the value (price) of the 15% stake, notwithstanding the shareholders’ agreement.
If CVC can’t get the $$$ for the Lehman stake via the IPO, they’re going to have to try Plan B,whatever that is, or run the risk someone else decides to meet Lehman’s price.And the clock is ticking…
Joe, is your understanding that the pre-float share purchases announced the other week will not now go ahead?
I ask because I’m pretty sure I read someone from FOM suggesting the other week that having completed those sales took away some of the pressure to go ahead with the float…
It’s at times like this that I’m glad F1 is a spin-free zone.
And so Bernie’s game continues, the only question is what wrinkle he comes up with next! I will say that someone, somewhere in CVC is smarting that this float all went south and if like most of your readers they see Bernie’s guiding hand behind some of the negative press recently they will be looking for pay back later on (assuming they survive this failure). Bernie is so lucky he can hide behind Facebook debacle and now he has recruited Graff Diamonds to the cause of why F1 cant float. But he will have ticked off someone, somewhere in CVC over this! Will they trip him up down the road?
Without the float it really reduces the leverage of the FIA and Mercedes over the Concorde agreement. He can tell them to get lost and mean it, knowing he has called their bluff, little they can do to him right now. Then he has further ammo to tell CVC he was correct on not wanting a float. That all a float did was give others a way to leverage him in business deals. Yes it all has swung back in Bernies direction, yet again! Expect Mercedes will sign soon.
That assumes Bernie survives the quickly approaching Gribkowsky verdict. Suggestions have been made that if Gribkowsky is found guilty of taking bribes, the prosecutor will be required to charge the payer with bribery.
It’s difficult to imagine anyone so charged being permitted to continue in such a high profile position.
I expect nothing will be finalized regarding the new Concorde until that uncertainty is resolved. CVC without Bernie would certainly embolden a large swath of the paddock.
So, what we all expected then. Can Karen confirm that the shares (if they were shares) sold (if they were sold rather than optioned) to the premature three, were of the non-voting variety?
Or do they only come into existence after/if the float?
I think the problem is we don’t know a lot about what exactly they bought, just a amalgamated higher level percentage.
I guess they will be fairly quick registering their ownership, so, if, if, I can work out what subsidiary they are using, it should be a quick search to find out at what level they buy in. At least that’s a fairly narrow objective. I don’t have the tools on my desk, trip to the library.
Not promising I can rush off to do that straight away, had a hard health knock I’ll take as self inflicted, which is priority to unravel, but looks like a modest and interesting goal to me.
Of course, I am already thinking of Round 2 in this year’s nonsense. But timing: not too early or too late with the analysis. If you find anything, launch it when people are listening.
I see this flotation thing as something that has to be simplified. I’m not against a simpler structure. I think if they flattened it, sorted out the messes, I’d actually buy in.
But I think a precondition will also be openness about, or the removal of, private voting accords.
The articles below say that the investors got no voting rights so they won’t have any control. It is hard to believe. One article and I might say it is an error but two is evidence to the contrary. One of the articles even suggests they have no put option which is perhaps even more remarkable. Why buy if you can’t sell back to the seller?
http://www.ft.com/cms/s/0/a7159f2c-a3dc-11e1-8878-00144feabdc0.html#axzz1wgvHTe9k
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9282872/Investors-buy-into-F1-for-1.6bn-as-Bernie-Ecclestone-confirms-float.html
I think everyone is reading too much into this. The global markets are taking a bit of a pounding. And, the bad news isn’t just Europe. China appears to be slowing down, and bad news out of Asia might be the most relevant. Add in the string of unsuccessful IPO’s and it just leads to a predictable conclusion.
Point is, the fundamentals of this float and the business are still there, for good or ill. This IPO most likely will happen at some point in the future. I don’t know if it will successful, but I think it may be irresponsible to hope for worst for perhaps not the right reasons.
If you are against this IPO, I would ask you what was your position on the Williams IPO because that IPO was dodgy.
Michael, I’m not sure this is easy to search back, but I gave my rationale for buying Williams a few times. Basically a very long term bet on their tech.
Maybe the whole market is simply dodgy. I’d go with that.
However, I think sane investors are a bit stupid to get tempted when someone is screaming “get it whilst it’s hot”. No, it works the other way around on the buy side. So says a traditional sell side guy.
I was against this IPO because the closer we got to the date, somehow the less we seemed to know. Further there are complex intrinsic practical legal and financial factors unknown. At least with Williams, we knew they were down, but developing stuff for which they have industrial customers. Oh, and a name, which is no longer Wanker Williams, but respected. Also, they are about back to their issue price. You don’t trade such thin stocks. Try finding some to borrow so you can short.
What I will argue strongly, for both issues, is that they floated too few shares. I am sick and tired of people getting valuations on such thin market valuations. If you want to go public, go public. The public markets should not be a plaything of permanently vested interests. This is commerce to benefit all. And we wonder why the economy is grinding to a halt . .
Which makes me suddenly think, if I bought a shell, and floated (cost would really not be that much, you could count it in MB AMG coupes) and got a genuine plan, good people, and a big public tranche together, there might just be demand for that on principle.
Facebook has transformed the landscape with regards to flotations. In recent years IPO’s have basically halved in price within a few weeks of launch day. Facebook looks no dfifferent.
Linkedin declined 50% in 22 days
Groupon declined 52% in three weeks
Yahoo declined 53% in three months
Amazon declined 48% in 6 days
And the list goes on….
So the valuation of F1 despite the hyperbole, could also be expected to fall 50% from the IPO. Why would F1 be any different? I cannot see F1 being floated within the foreseeable future, or if so at a reduced value – thanks to Facebook.
F1 is (as you have mentioned before) impossible to value in the long term because nobody knows much about the current deals.
Joe, the delay is due to the facebook disaster.Actually, all the IPO’s that were suppose to take place these weeks are on hold…