24/04/2020
NEWS STORY
In what might be seen as a bold, clever move by Liberty Media in giving F1 a $1.4bn lifeline, has it missed out on a golden opportunity to secure the sport's future?
As previously reported - and confirmed by F1 managing director, Ross Brawn who admitted that F1 could "collapse" - the sport was looking into the financial abyss the longer the ongoing coronavirus pandemic drags on.
With far less money coming in than usual, F1 still has expenses to pay, and while there are cash reserves and up to half-a-billion in credit lines, the sport was facing a worrying future financially.
In a bold move today, Liberty Media transferred a 33% stake in events promoter Live Nation to the satellite radio broadcaster SiriusXM, essentially transferring from one branch of the Liberty empire to another.
The move, according to Liberty CEO, Greg Maffei, "increases cash liquidity by approximately $1.4 billion", which can be used "for F1 in event of continued delay of season, including preserving health of ecosystem."
The move gives F1 the cash required to meet its current loans as well as paying compensation to race promoters where events might have to be held behind closed doors and team prize money.
According to Liberty, it also "eliminates $1.3 billion of parent level debt" attributed to the F1 group and will leave sufficient cash "for opportunistic investments and acquisitions".
While much of the media has picked up on the fact that Maffei revealed that F1 has "advanced prize money to certain teams already", and "there are cases where we may do more of that", "other things that we might do to bridge teams that might need help", the sport appears to have missed out on a golden opportunity.
Surely now, would have been the ideal opportunity to offer the teams their new contracts and asked them to sign on the dotted line, thereby committing them to the sport and ensuring its future, after all, as it stands none of them are committed beyond the end of this season.
Indeed, Maffei went as far as warning the teams that Liberty does not have "an open chequebook".
"We want to make sure that teams are solvent because they are part of what we need to race successfully in 2020, 2021, and beyond," he admitted.
"We're not encouraging using our cash in an unwise fashion," he continued, "but we're trying to balance the operating business and its current results against the operating results of our partners in the form of the teams, who do incur large costs."
Adding that the teams "still need to incur all their costs of running", he admitted: "It's a challenge. How do we do something that is beneficial for fans, but also doesn't have the teams bankrupting themselves?"
While Chase Carey is targeting up to 18 races and Ross Brawn up to 19, Maffei admits "we have scenarios for zero races, anywhere from 15-18 races, races that begin with no fans present and only the teams."
While some countries are easing off on their lockdowns and even witnessing a return to work by some non-essential industries, there is still no sign of any easing off in terms of the restrictions on sporting events.
Indeed, more countries appear to be extending the ban on public gatherings.
While events behind closed doors would circumvent some aspects of such bans, there are many other facts to be considered such as travelling to events and whether travellers from some countries would face quarantine.
The intended season-opener in Melbourne, let us not forget, was thrown into chaos by the fact that just one employee tested positive for the virus.
While it is unclear whether the $1.4bn will be enough for F1 to ride out the storm remains to be seen, but according to Forbes, shares in F1 subsequently increased by 14.2% on the Nasdaq.