14/10/2011
NEWS STORY
On Wednesday it came to light that the ownership of Force India had changed. The team was previously owned 50% by Watson, the holding company of team principal Vijay Mallya, with the other 50% held by Strongwind, the investment vehicle of Dutch businessman Michiel Mol.
Now only 15% of the team is in Mol's hands with 42.5% held by Mallya and another 42.5% owned by new investor, Indian conglomerate Sahara which will put $100m into the team.
Nothing surprising there but then we come to comments from Mallya who said that "I have not sold a single share [in Force India]. None of the existing shareholders are selling anything." How can the team have changed ownership without any of the previous owners selling their shares? Pitpass' business editor Christian Sylt is on hand to explain.
For the sake of an easy example, let's pretend that Force India's parent company, which is Orange India Holdings, had 100 shares with 50 owned by Mallya and the other 50 owned by Mol. Then, along comes Sahara which wants to buy into the team and although the owners want to get it onboard as an investor, neither wants to sell their shares.
The solution is for Orange India Holdings to issue more shares (let's say 100 to keep the example simple) and these are then handed to Sahara in exchange for it investing $100m in the company. This gives Sahara 50% of the company in an instant, and leaves Mallya and Mol with 25% (50 shares out of a total of 200) each. The rationale for doing this is that although Mallya and Mol's shareholding goes down in the process it will be worth more than the higher percentage they had without Sahara as an investor.
Crucially, they lower their shareholding without ever selling even one share. Instead, Sahara came on-board by the company issuing new shares which were given to it and this explains why Mallya said "the total [share] capital of the company has increased enormously. None of us sold or bought equity and there will be only restructuring." It is a business manoeuvre which went straight over the head of one blogger however - something which he may already be regretting.
There is no doubt that the market is flooded with F1 blogs and the majority offer little real insight into what is really going on in the sport. A few of them do break early news, which later proves to be accurate, but these are in the minority.
There tend to be multiple problems with the bulk of the blogs: they are verbosely written by people with little or no training in print journalism and often slip into rambles about the personal experience of the blogger plugging products like airline lounges or bemoaning poor customer service.
However, the biggest problem they pose is that they can digress into writing about subjects, such as the business side of F1, in which the blogger has little or no media training. You can count on a few fingers at the very most, the sports bloggers who have covered the business of F1 for the fast-moving world of national newspapers. This lack of experience leads to errors which confuse the readers, which brings us back nicely to Force India.
Over the course of the past two months, one particular blogger has predicted that no less than three F1-related companies would be sold or had already been sold. Of Toro Rosso, he said that "the word is that Aabar has acquired a minority shareholding in the team (around 40 percent) and has an option to increase that to gain control (probably around 60 percent)." This of course came despite a denial from Dietrich Mateschitz, managing director of the team's owner Red Bull, who said: "Toro Rosso isn't up for sale".
The blogger also said "[Genii Capital's co-owner Gerard] Lopez has been quietly working to put together a consortium to buy Group Lotus from [its Malaysian owner] Proton." Proton had a different view of things and released a statement saying that "the alleged moves between Group Lotus and Genii Capital are untrue and.. the reports are highly speculative in nature." Next comes Force India.
On 7 October the blogger reported "the word from India is that Vijay Mallya is on the verge of selling his shares in the Force India team." The blogger later openly admitted that "it is odd that the story got printed in a sensible newspaper in India." This was the first mistake.
By trusting a second hand source, reliability is easy to compromise. The blogger's post contained no evidence that he had put the allegation to Mallya personally about him selling his shares and, surprise surprise, the Indian tycoon soon issued a firm denial applying to both the newspaper and blog reports. It sent the blogger off in a huff and he subsequently wrote that "if there is a sale on the cards which is confirmed at some point in the near future then we will know that Mallya has been lying through his teeth, although for now we are willing to give him the benefit of the doubt."
Mallya said in his statement that "I was shocked to read a media report that I am selling the Force India Formula One team...I have no plans whatsoever to exit." As explained above, this is completely and unequivocally accurate in light of the share issue to Sahara.
However, the blogger saw the share sale as vindication and proclaimed "who can be trusted to tell the truth when people involved are capable of telling such outrageous lies." Given that no shares were sold, this looks like a very risky accusation for the blogger to make and one which seems to be defamatory of Mallya. Nevertheless, the blogger was immediately back to his old ways predicting that "Mallya wants to edge out quietly." Although he clearly hasn't learned from this episode, his readers have.
One reader soon posted below the blogger's article "what "outrageous lie"? You've gone nuts." Others soon followed that up by saying "how does this mean the Team is "sold"? He just got a business partner." Another chimed in with "where has he sold the team? Where did he lie?" It opened the floodgates to a torrent of completely valid criticism. The blogger's response was cutting and showed even more aggression to Mallya: "an intelligent man would have said nothing. He lied through his teeth." He added "[Mallya] cannot be trusted to tell the truth...why would I trust him ever again?" Er, perhaps because he wasn't lying and in fact the blogger misunderstood the business transaction?
The blogger's crusade against what he believed to be Mallya vocalising a lie seems rather ironic given that in September he repeated reports that "Scuderia Toro Rosso will be taken over from the Italian Grand Prix onwards by the International Petroleum Investment Company (IPIC) of the United Arab Emirates. There have been suggestions that the Faenza-based team will become known as Team UAE." Unless our eyes have deceived us since Monza, this would seem to be far from true.
The worst aspect of this sorry tale was yet to come and it is the very reason why it merits reporting. One reader complained that "my comment isn't published. It had no abuse or derogatory content and just presented an honest point of view." The blogger replied, in a confrontational style, that "I have no idea what your last comment was but if it was not published it was probably because it was disrespectful in tone. Your ability to comment is a privilege not a right." It sounds like something out of a communist state and, befitting the theme, censorship soon followed.
Yesterday the blogger announced that "I have decided to shut down the blog comments for a few days to get a little peace and quiet and to allow me to consider whether it is really worth the effort that I put in. There are so many people out there who do not seem to appreciate what I am doing and are unpleasant, disrespectful and abusive, that I am not sure I know why I am doing it any longer... Most of these people think that they know all the answers, so I cannot really help them learn more. Their minds are closed... A lot of the responses in recent days have been coming from people who are simply grandstanding." In fact, they were simply correcting his error.
The blogger's response makes one wonder why he has been merrily cooking away in the kitchen for so long if he can't take the heat. It is customer service which Basil Fawlty would be proud of. Stifling the fans' voices in such a public and broad-brush way leaves little to the imagination.
Staggeringly, the same blogger made the following request to his readers just last year: "F1 journalism is becoming more and more expensive as it switches its focus from Europe to Asia... Increasingly, those doing the writing are not at the races. This means two things: the reporters who travel get less work, because the stay-at-homes can undercut their prices; and the overall quality of the reporting goes down because there are fewer reporters with personal contacts in the sport. Thus coverage becomes less authoritative and in consequence less respected. Teams have to do more media firefighting, stamping out incorrect stories which take on a life of their own when one copier after another spreads the word across the World Wide Web... Given the current trend of restaurants asking customers to decide what they want to pay rather than setting prices, I thought it would be better to ask readers for donations rather than switching to a subscription model. If you like what I do, please feel free to donate money." Say no more.