Can you easily invest in Formula 1? Definitely yes, even motor enthusiasts can take to the track investing in Formula 1.
Formula One is a multi-billion-dollar industry and the sport could grow even more in popularity, with famous investors Ryan Reynolds, Rob Mcelhenney and Michael B. Jordan investing their money in the F1 Alpine team in a 218 deal million dollars announced in June 2023.
Suffice it to say that Liberty Media, owner of the highest category of motor racing, recorded a turnover of 2.4 billion euros in 2022, up from 2 billion in 2021, thanks to record attendance and expansion of the global public.
In June 2022, F1 renewed its contract with ESPN – the American international basic cable sports channel owned by The Walt Disney Company – until 2025, with an agreement that is estimated to pay 75 to 90 million dollars per year for US media rights, according to the Sports Business Journal.
But how do you get financially into the Formula One game?
Investing in Formula 1- Table of Contents
Read also: How to Invest in Football (soccer)
How do Formula 1 teams and drivers make money?
Investments and Sponsors
Sponsors are the first source of income for Formula One teams. It is estimated that between 2010 and 2018, F1 sponsors disbursed about 20 billion dollars; approximately 11.8% of the total sponsorship during the period went to Ferrari.
Undoubtedly, advertising in Formula 1 means prestige. So, the audience will remember more easily the companies that sponsor the championship and the teams. Advertising on cars and drivers is a great source of revenue for teams. For example, a company that wants to insert a brand logo on the pontoons of a car will have to pay between 22 and 24 million euros, while if it wants to appear on the rear wing the cost will range between 20 and 22 million euros.
It is clear that to compete in the highest category of Formula 1 and face the costs that this involves, Formula One teams need to have powerful sports sponsors. All this without neglecting the thing most important: that the win is awarded in cash.
Prize Money
Formula 1 teams are financed according to the score obtained during the season. However, since the Teams with larger budgets tend to achieve better results and exclude teams with smaller budgets, F1 implemented budget limits in 2021 to make the competition fairer for the show’s benefit. The spending limit was $145 million when the rule was first announced in 2021 and is set at $135 million in 2023.
Each F1 team has two drivers paid by their respective teams. Driver’s pay is not part of the team’s budget limit. Formula 1 drivers receive a basic salary, earn bonuses based on their track performance and earn money from sponsorships and sponsorships. For 2023, wages for F1 drivers range from $1 million to $55 million.
Investing directly in Formula 1
Formula One Group
The Formula One Group is a group of companies that manages the promotion of the FIA Formula One World Championship and the exercise of the sport’s commercial rights. The Group was formerly owned by a pool of investment companies, partially by other directors and by Bernie Ecclestone – a former Formula One team chief and CEO of the company. The Group was acquired by Liberty Media in 2017.
Other than Formula 1, Liberty Media Corporation owns other companies like Sirus XM Holdings (satellite and online radio services, owner of the streaming music service Pandora), Braves Holdings (baseball franchising, entertainment and lodging) and Live Nation Entertainment (live music entertainment). All the three companies have shares listed on stock exchanges.
Shares that are exchanged in public equity markets can be purchased in minutes thanks to the availability of free investment platforms.
Investors can invest directly in Formula commercial rights by buying one of these three shares:
- Formula One Group Series A (FWONA) – owns 10 times the voting rights of Shares C and is the best choice for institutional investors willing to exert influence on the management of the company,
- Formula One Group Series B (FWONB) – trades outside regulated markets (over the counter or OTC) and are mostly owned by company insiders,
- Formula One Group Series C (FWONK) – the most suitable for retail investors.
Formula One Group stocks more than doubled their value in the last 5 years.
https://en.wikipedia.org/wiki/Liberty_Media
https://www.libertymedia.com/investors/financial-information/financial-results
Investing indirectly in Formula 1
Another way to get involved in the multi-millionaire business of Formula 1 this year is by investing in companies closely related to the competition. Car manufacturers, sponsors and other F1-related stocks may offer good investment opportunities for the long term.
Ferrari
Ferrari, the automaker founded by Enzo Ferrari in 1947 listed both on the Italian Stock Exchange and on the New York Stock Exchange with the ticker RACE, in recent years has recorded impressive growth in turnover and staggering profits.
Ferrari stock increased its value by about 600% from the spin-off of Fiat Chrysler and the stock exchange listing in 2016.
It is not by chance that the “Cavallino Rampante” (Prancing Horse) is recognized as the most valuable automobile manufacturer of all. Ferrari has already put in advance investments of 4.4 billion until 2026 to support its development.
Also called the House of Maranello, Ferrari is the only team to have taken part in all the editions of the World and winning with 15 different drivers, is worth well over a billion dollars: precisely 1.350 million.
Morgan Stanley believes Ferrari’s entry into the electric vehicle market will constitute an important growth factor for the company. The investment bank also believes that Ferrari is a safer investment than Tesla in the light of more predictable profits and brand strength.
Aston Martin
Aston Martin Lagonda Global Holdings plc designs, develops, manufactures, markets, and sells luxury sports cars worldwide. It also engages in the sale of parts, sale and servicing of vehicles, and brand and motorsport activities. The company has a strategic technology agreement with Mercedes-Benz AG.
Despite the challenges of increased costs, delays in delivery and delays in the post-pandemic supply chain, sales of Aston Martin have continued to increase, with the current range GT/ Sport sold out for 2023 in view of upcoming launches. The company attributes this success to its focused strategy on ultra-luxury, which led to high demand throughout its portfolio. Although Aston Martin reported an annual loss of £118 million, up from $74.3 million a year remains optimistic about future prospects.
Aston Martin stocks trade in the London Stock Exchange with the identifier AML.L and over the counter with the ticker ARGGY.
Aston Martin stock lost most of its value since the first quotation due, among other things, to the persistent negative earnings of the company.
Do you need help understanding how financial markets work to make sure you know all you need to manage your savings independently? Take a look at our condensed investment guides here.
Pirelli
Pirelli, a multinational based in Milan, is the market leader in the production of high-performance tires for cars, motorcycles and bicycles. Founded in 1872, the company has a rich history of innovation and technological advances in tyre design, which has allowed it to establish itself as a market leader in the industry
automotive.
Although the partnership between Pirelli and F1 could end after 2024 it would not surprise if the contract will be extended, which would ensure Pirelli greater exposure in the coming years.
Pirelli stocks are traded on the Milan stock exchange under PIRC.MI; their performance has been volatile over the last years but – in our last review – the company seemed in a better shape than its main rivals Michelin and Bridgestone.
Invest in Formula 1 – Teams and Sponsors (2024 Season)
Oracle Red Bull Racing
Team Principal: Christian Horner
Motor: Honda Red Bull Powertrains
Pilots: Verstappen Max. Perez Sergio
Sponsors (listed stocks only, in alphabetical order):
- Oracle (ORCL) – Software / Infrastructure
- Honda Motor (HMC) – Automotive
- Pirelli & C. S.p.A. (PIRC.MI) – Tires
- Walmart Inc. (WMT) – Discount Stores
- América Móvil, S.A.B. de C.V. (AMX) – Telecom Services
- Pokerstars (Flutter Entertainment (FLTR.l / PDYPY) – Betting
- Esso S.A.F. (ES.PA) – Oil & Gas Refining & Marketing
- Zoom Video Communications, Inc. (ZM) – Software / Application
- Siemens Aktiengesellschaft (SIE.DE) – Specialty Industrial Machinery
- Hewlett Packard Enterprise Company (HPE) – Communication Equipment
- AT&T Inc. (T) – Telecom Services
- DMG Mori Co., Ltd. (6141.T) – Tools & Accessories
- ANSYS, Inc. (ANSS) – Software / Application
- Quanta Services, Inc. (PWR) – Engineering & Construction
Scuderia Ferrari
Team Principal: Frederic Vasseur
Motor: Ferrari
Pilots: Leclerc Charles. Sainz Carl
Main Sponsors:
- Shell plc (SHEL) – Oil & Gas Integrated
- Banco Santander, S.A. (SAN) – Banks / Diversified
- AWS (Amazon – AMZN)- Internet Retail
- PUMA SE (PUM.DE) – Footwear & Accessories
- Pirelli & C. S.p.A. (PIRC.MI) – Tires
- Brembo S.p.A. (BRE.MI) – Auto Parts
- ManpowerGroup Inc. (MAN) – Staffing & Employment Services
- Garrett Motion Inc. (GTX) – Auto Parts
- Iveco Group N.V. (IVG.MI) – Farm & Heavy Construction Machinery
Mercedes AMG Petronas
Team Principal: Toto Wolff
Motor: Mercedes
Pilots: Hamilton Louis. Russell George
Main Sponsors:
- PETRONAS Gas Berhad (PNAGF) – Utilities / Regulated Gas
- TeamViewer SE (TMV.DE) – Software / Application
- UBS Group AG (UBS) – Banks – Diversified
- Advanced Micro Devices, Inc. (AMD) – Semiconductors
- Monster Beverage Corporation (MNST) – Beverages / Non-alcoholic
- PUMA SE (PUM.DE) – Footwear & Accessories
- Pirelli & C. S.p.A. (PIRC.MI) – Tires
BWT Alpine F1 Team
Team Principal: Otmar Szafnauer
Motor: Renault
Pilots: Ocon Esteban. Gasly Pierre
Main Sponsors:
- Renault SA (RNO.PA) – Automotive
- Microsoft (MSFT) – Software / Infrastructure
- The Boeing Company (BA) – Aerospace & Defense
- 3D Systems Corporation (DDD) – Computer Hardware
McLaren F1 Team
Team Principal: Andrea Stella
Motor: Mercedes
Pilots: Norris Lando. Piastri Oscar
Main Sponsors:
- Dell Technologies Inc. (DELL) – Computer Hardware
- Cisco Systems, Inc. (CSCO) – Communication Equipment
- The Goldman Sachs Group, Inc. (GS) – Capital Markets
- Hilton Worldwide Holdings Inc. (HLT) – Lodging
- The Coca-Cola Company (KO) – Beverages / Non Alcoholic
Stake F1 Team Kick Sauber
Team Principal: Alessandro Alunni Bravi
Motor: Ferrari
Pilots: Vallteri Bottas, Zhou Guanyu
Main Sponsors:
- Orlen S.A. (PKN.WA) – Oil & Gas Integrated
- Randstad N.V. (RANJY) – Staffing & Employment Services
- Siemens Aktiengesellschaft (SIE.DE) – Specialty Industrial Machinery
MoneyGram Haas F1 Team
Team Principal: Ayao Komatsu
Motor: Ferrari
Pilots: Kevin Magnussen, Nico Hulkenberg
Visa Cash App RB Formula One Team
Team Principal: Laurent Mekies
Motor: Honda Red Bull Powertrains
Pilots: Yuki Tsunoda, Liam Lawson
Williams Racing
Team Principal: James Vowles
Motor: Mercedes
Pilots: Alex Albon, Franco Colapinto
Potential investors should do extensive research and seek financial advice before investing in football-related stocks. Remember that past performance is no guarantee of future results. Additionally, never invest with funds that you cannot afford to lose.
SOURCES:
https://www.we-wealth.com/news/investimenti/altri-prodotti/come-investire-sulla-formula-1
https://www.lombardreport.com/2017/9/9/azioni-della-formula-1/
https://www.sportbusinessmanagement.it/2022/09/formula-1-e-investimenti-le-scuderie.html
https://www.markets.com/education-centre/how-to-invest-in-formula-1/
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Image by kjpargeter on Freepik
