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Formula One's total revenue was $1.5-billion last year; its earnings have been growing at a compound annual rate of over 9 per cent since 2003


From the FT's Lex blog

It is the perfect backdrop for a sales pitch. This weekend Formula One is in Monaco for motorsport's annual showcase race around the streets of Monte Carlo. A heady mix of speed, money and bling is guaranteed. It has appealed to petrolheads since 1950. The problem has been to turn that appeal into something investors can buy. So as he masterminds Sunday's spectacle, F1 impresario Bernie Ecclestone will have another roadshow in mind: selling F1's proposed initial public offering on the Singapore stock market to a world wary of investing in sport.

The fact that the IPO has reached the point where a draft prospectus is being circulated suggests that Mr. Ecclestone is willing to ease his iron grip on the creature he created (the sellers in the offering include CVC Capital Partners and the estate of Lehman Brothers). The 500-page document suggests an exceedingly complex business. In fact, broken down to its essentials, F1 is fairly simple: three income streams - from race promotion, broadcasting, and advertising. Total revenue was $1.5-billion last year; its earnings have been growing at a compound annual rate of over 9 per cent since 2003.

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The main concern investors should have is the extent to which F1 is dependent on Mr. Ecclestone, 81. Three financial institutions bought a chunk of F1 this year for $1.6-billion, so worries about what might happen if and when he leaves the scene may be overdone. But it could become an issue if the 12 teams that provide the actual racing spectacle decide after Mr. Ecclestone steps aside that they are unhappy with the sport's structure and their returns from it.

Bear in mind, too, that sport and the stock market have not been kind to each other. Investors still bear the scars of putting money in European soccer clubs. F1 is not a club, and is not in danger of relegation. But at heart it is indubitably a sport. And beyond the obsessions of fanboys, that remains a hard sell.

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