24/07/2017
NEWS STORY
Yesterday, 23 July, marked the deadline by which time the ten teams had to take up the offer of 19 million shares in F1. There were no takers.
As part of its purchase of F1 in January, Liberty Media offered the ten teams the opportunity to invest in the series, thereby giving them a financial interest in its future.
Initially, they were offered $1.1 billion worth of shares at the price ($21.26) the shares closed at on the day before the F1 buyout was announced.
Had they taken advantage of the original offer, with the shares subsequently increasing 59.4% in value, the teams would have been laughing.
However, leading the sceptics was Red Bull co-owner Dietrich Mateschitz, who admitted: "I honestly don't know if I should buy shares."
The shares had been offered by Liberty as part of its payment for the sport, and if the offer had been exploited it would have given more cash to
the sellers who were led by the private equity firm CVC. Consequently, with no takers, Liberty raised $450 million of debt and used it to acquire $400 million of the stock which was put into treasury.
The reason for this was "to fund an increase to the cash consideration payable to the selling shareholders of Formula 1 by approximately $400 million and retain in treasury the approximately 19 million shares that would otherwise have been issuable to the selling shareholders".
Undaunted, Liberty once again offered the shares, this time $400m at the same pre-takeover price, but again there were no takers.
"Regarding the potential share sale to Formula One teams we have no update now," admitted Liberty's chief executive Greg Maffei to analysts in May.
Filings by Liberty stated: "Shares of FWONK are reserved by Liberty Media in treasury for possible issuance to the Teams and any such sales of these shares to the Teams will be at a purchase price of $21.26 per share. To the extent such shares are not issued to the Teams within six months following the Second Closing, the shares will be retired... The Second Closing was completed on January 23, 2017."
Consequently, the new deadline was 23 July and again there were no buyers. Indeed, as of this time the only team which owns shares in F1 is Ferrari which received its allocation when it sold its 0.25% stake in the sport, nothing to do with the $400 million offered by Liberty.
In recent weeks the share price has fallen, closing last Friday at $34.23, a drop of 6.5% since the start of the month thereby wiping $445m off the stock's value.
The Daily Telegraph recently revealed, that F1's former owners have sold 38% of the stock they were given as payment for their shareholding in the series, while six of seven investment funds which own 29.4% of FWONK's stock have "registered the resale of their shares."
They bought the stock for $1.6 billion in December and Liberty used the cash to pay F1's former owners. The funds got the stake at the discounted price of $25 per share and although the teams were offered a better deal one month later they still weren't interested.
But why?
Other than the loss of the Malaysian Grand Prix, there is the doubt over the races in Britain and Singapore. Then there's the threat of an investigation by the Serious Fraud Office into whether there is evidence of corruption in the Concorde Agreement, a claim denied by F1, CVC, Liberty and the FIA.
In addition there is the fact that that the current Concorde Agreement expires at the end of 2020, and with it the contract that keeps all ten teams on board… and without the teams there is no F1.
Much has been made of the fact that the sport is working on two fronts - commercial and sporting - to improve the show and thereby increase revenues.
However, despite the endless positive comments in terms of how impressed they are with the sport's new owners, none of the teams is seemingly willing to reinforce its confidence with hard cash.
"We have been actively engaged with all teams to shape a shared vision for the sport that will create real value for all stakeholders," said Chase Carey in a statement following the passing of the latest deadline. "While the window for this particular investment opportunity has passed, we are pleased with the collaborative discussions we are having with the teams.
"These discussions will take time," he admitted, "but we appreciate their receptivity towards further aligning our incentives for the long-term benefit of the sport."
"The approximately 19 million shares previously reserved for issuance to teams have been retired," confirmed Liberty. "As of May 31, 2017, there are approximately 230.6 million shares of Liberty Formula One common stock outstanding, which includes approximately 15.7 million shares of FWONK issuable upon exchange of the Exchangeable Notes issued to the Formula 1 selling shareholders in connection with the Formula 1 Acquisition, based on the maximum number of shares issuable. Liberty retains the right to offer future investment opportunities to Formula 1 teams."