F1 valuation driven up to £7,6bn?

30/05/2012

There are lots of mixed messages about the F1 flotation at the moment. On Tuesday last week F1's boss Bernie Ecclestone formally announced the Singapore listing when he told Pitpass' business editor Christian Sylt that "it will be finished by the end of June." Since then, Pitpass has heard that there is so much interest in the float that it will value F1 at around £1.3bn ($2bn) more than the expected £6.4bn ($10bn).

However, on the other hand there is talk that the float has been delayed due to Facebook's lacklustre stock exchange start. Indeed, when Ecclestone was asked at last weekend's Monaco Grand Prix about when F1 will float he said that the sport's controlling shareholders, the private equity firm CVC, "are going to wait and see" because "the market doesn't look too bright after that little bit of a problem with Facebook."

One of the biggest problems facing Facebook is a lawsuit from disgruntled investors. They claim that Facebook influenced Morgan Stanley's financial reports of the company which did not disclose lowered revenue growth forecasts to all investors. It certainly doesn't seem appropriate behaviour for either Facebook to suggest influencing Morgan Stanley's reports or for the bank to go along with the suggestion. It remains to be seen whether this really happened and presumably it won't be a case of checking a few faxes or emails to find out if it did. Facebook is innocent until proven guilty but the allegation of this inappropriate behaviour alone could have put the brakes on its float if it had come to light before the company listed on New York's Nasdaq exchange.

Whilst there is absolutely no evidence that anything like this has taken place with F1, its flotation could suffer anyway as Facebook's troubles have reduced confidence in equity markets.

If the F1 flotation goes ahead CVC aren't the only ones who will be hoping that it values the business at closer to £7.6bn ($12bn). Earlier this month it came to light that CVC had sold a 21.3% stake in F1's holding company Delta Topco to three investment funds - BlackRock, Norges and Waddell & Reed. As Sylt revealed, the funds decided not to take out the protection which normally entitles shareholders to a rebate if a business floats for less than the price they paid for it.

It indicates that the funds must be very confident the float will value F1 at more than £5.8bn ($9.1bn), which is how much the business is currently worth based on the £1bn ($1.6bn) they paid for their 21.3% stake. If the float gives F1 a market capitalisation of £7.6bn ($12bn) the funds would get a 30% uplift on the value of their shares. Barring any further dips in market confidence, this seems on track to happen.

Sources have suggested that F1 could be facing difficulties in Singapore but others disagree. Company law dictates that two local businessmen must be appointed to the board and they were believed to be Liew Mun Leong, chief executive of real estate company CapitaLand, and Kwa Chong Seng, independent deputy chairman of wealth fund Temasek. However, Pitpass recently heard rumours that this was not going to plan so we asked sources close to the situation about it. They say that a new director has come on board after one of the Singaporeans couldn't take his seat due to time commitments. With F1 set to become a flagship for the Singapore stock exchange it could be a decision he lives to regret.