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How to Invest in Formula 1

July 17, 2023
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Josh Viljoen
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Josh Viljoen

Are you an F1 fan wanting to invest into the sport?

 

If you are an F1 fan like me, you may be wondering how you can invest into the sport to capitalize on the rise in popularity the sport has seen since the release of the Netflix Documentary Drive to Survive in 2019.

 

In 2017 media giant Liberty Media acquired the exclusive commercial rights to the FIA F1 One Championship. Liberty then listed the F1 division of the company as its own stock allowing investors to invest directly into F1 without gaining exposure to the rest of the Liberty Media business. The Formula One Group trades under the ticker symbol $FWONA on the NASDAQ. The stock is currently trading at a share price of $52.49 and has a market capitalization of just over $29 billion making it US large-cap stock.

 

Since acquiring Formula 1 Liberty has been pushing hard to bring F1 to new audiences particularly in the US and this was event by the introduction of Miami into the seasons calendar. Los Vegas will also be brought into the F1 calendar in 2023 further the cementing Libertys ambitions of growing the popularity of the sport in the US.

 

Formula One has seen an impressive rise in popularity over the last three years. In 2021 Formula One was the fastest growing major sports league on the planet in terms of follower growth. In 2021, followers (across Facebook, Twitter, Instagram, YouTube, Tiktok, Snapchat, Twitch and Chinese social platforms) were up 40% to 49.1m, video views up 50% to 7bn and total engagement up 74% to 1.5bn.

 

In the most recent financial 2021 year the Formula One Group generated revenue of $11.4 billion and had a total cost of revenue of $5.78 billion resulting in a gross profit of $5.62 billion. This equates to a healthy gross margin of 49.28%.

 

Operating profit for the year after taking into account sales, general and administrative costs was $1.98 billion. Operating margins are around 17% which is above competing media companies like Disney, Netflix, Comcast and Warner Media. Net income for the year was $398 million giving rise to a positive but lackluster net profit margin of 3.5%.

 

When taking a look at the balance sheet for the Formula One Group I noted that the company has a current ratio of 0.73 meaning that current liabilities exceed current assets which is a cause for concern. The capital structure of the entity also appears to be over geared as the entity is funded mainly through long term debt rather than through equity. As a potential investor in the stock I would like to the see the debt levels of company come down before investing any money into the company.  


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