(BFM Bourse) – The stock market price of Formula 1 recently reached its all-time highs, emerging from its depths of the year 2020, with a multiplication by more than three of the action. This rewards the efforts of the owner of the commercial rights of the discipline, Liberty Media.
The most beautiful single-seaters in motorsport resume competition this Sunday. The start of the new season of the Formula 1 world championship is given with the Bahrain Grand Prix. Liberty Media, which bought Formula 1 in 2017 (or more precisely its commercial rights until 2110) has already won a trophy.
In January, the magazine Forbes established the American group as the most expensive sports empire in the world, with a total value of 21 billion dollars, of which 17.1 billion linked to F1 (in enterprise value).
An estimate consistent with what the F1 stock market weighs. Because the automobile discipline has been “listed” on the Nasdaq since 2017, even if it is necessary to give some explanations. Liberty Media has issued several types of shares, each grouping one of its main activities: baseball with the Atlanta Braves, music streaming and concert promotion (Live Nation), gathered in the “Sirius XM” shares, and, therefore, the F1.
In January 2017, the Liberty Media share was renamed Liberty Media Formula One following the takeover of F1, with the Formula One Group as its assets, which essentially brings together activities related to motor racing. (it also brings together minority investments from Liberty Media). The stock market capitalization (the total value of the shares) of Formula One Group is 16 billion dollars – more than several CAC 40 groups – for a net debt of 1.3 billion dollars, which therefore amounts to a enterprise value of approximately $17.3 billion. Hence the figure of Forbes.
Cap on social networks
Beyond the weight of F1 on the market, the evolution on the stock market is impressive. Formula One Group shares exist in three classes, with different voting rights. Taking the main class, which includes 85% of the shares in circulation, the stock is currently trading at 68 dollars, and recently hit an all-time high in early February of 73.22 dollars. Since hitting a low in March 2020, the stock has more than tripled.
This spectacular rise is due to the strategy of Liberty Media, which was able to dust off both the image and the management of F1.
“The upward movement of the stock is completely understandable given the excellent work that has been done by Liberty Media since they took over F1”, judge Paolo Aversa, professor at the Bayes Business School in London . “At the time of Bernie Ecclestone (the previous boss of the discipline), F1 was a futuristic sport with medieval management. Above all Ecclestone hated social media”, continues the academic.
Liberty Media has completely changed the trend by clearly focusing on social networks.
“Liberty Media has succeeded in solving one of F1’s big problems. How to attract a younger audience with free content without undermining the traditional ‘pay per view’ model [des offres payantes via abonnements, NDLR] and therefore lose value? The solutions have come from social media where young people see content like highlights that are free, not the race itself, or other content posted by teams or drivers. This has made sport more accessible without cannibalizing the traditional audience, even allowing new consumers to then subscribe to pay-TV offers”, emphasizes Paolo Aversa.
Netflix as a boost in the United States
The Netflix series “Drive to Survive” is also no stranger to the resurgence of popularity of the discipline. Launched in 2019, this soap opera goes behind the scenes of the discipline by focusing on human relationships and rivalries (sometimes excessively). The global pandemic, which has caused many consumers to stay at home and watch streaming offers, has acted as an accelerator, a new generation, going from Y to Z, discovering a sport of which they did not know until present the attraction, the technicality of the discipline that could put her off.
“The Netflix series helped grab attention, especially across the ocean in the United States, where F1 was struggling to gain popularity. Netflix really helped consumers understand the passion who hides behind the competition, and not just at the top of the grid, but in the ‘midfield’ [les écuries du milieu du classement, NDLR]“, Judge Paolo Aversa.
Hearings follow. In 2021, the latest global figures known, the global television audience per Grand Prix was 70 million people, and 60.3 million with constant broadcast agreements, up 13% year-on-year, the highest since 2013. Across all digital media (social networks and legal streaming) growth reached 40% with a total of 49 million subscribers and 7 billion views.
More recently, in France, a historic country of broadcasting, Canal+ indicated in November that 1.21 million viewers followed the Sunday race, on average, i.e. a growth of 6% compared to 2021 which already marked a record. And an increase of 96% compared to 2015.
The breakthrough in the United States is palpable: broadcaster ESPN announced, also in November, that the number of viewers per race had reached a record 1.21 million, up 28% year on year. With a peak for the Miami Grand Prix, at 2.58 million.
Relays to continue the rise
The F1 revolution didn’t just happen through content. Liberty Media has also “changed the rules relating to car design. Not only by making single-seaters more beautiful, but also simpler with an architecture that facilitates overtaking, thus creating more entertaining races”, explains Paolo Aversa. “And they also enhance the value of an F1 Grand Prix, adding concerts, exhibitions, while the race remains the highlight of the weekend,” he continues.
As with any promising stock, the question remains whether F1 has the wherewithal to push back its stock market highs. According to Nasdaq.com, the consensus of analysts following the stock is buy, with an average price target at $75.
“The stock should rise further because the United States remains a huge market and they are just starting to reap the fruits of their efforts in the country. There are still enormous prospects for growth”, considers Paolo Aversa.
“There are also a lot of opportunities for women. We are in the 21st century and there are still no female drivers on the grid. which can generate a more female audience and promote products that are more oriented towards women”, also judges the professor.
Note also that there is also speculative potential. Because the success of F1 attracts covetousness. In January, Bloomberg reported that a Saudi sovereign wealth fund had considered the possibility of making an offer for “much more” $20 billion but had been refused by Liberty Media, which did not want to sell.
Julien Marion – ©2023 BFM Bourse