A few months ago, Forbes published an article estimating the valuations of all ten Formula One teams. The TLDR of this article is that the value of all F1 teams has increased significantly in the past few years, making them more attractive investments. Here is a summary of what each team’s estimated worth:
🇮🇹 Ferrari: $3.9 billion
🇩🇪 Mercedes: $3.8 billion
🇦🇹 Red Bull: $2.6 billion
🇬🇧 McLaren: $2.2 billion
🇫🇷 Alpine: $1.4 billion
🇬🇧 Aston Martin: $1.4 billion
🇮🇹 AlphaTauri: $1.1 billion
🇨🇭 Sauber: $900 million
🇺🇸 Haas: $780 million
🇬🇧 Williams: $725 million
The only real surprises are at the bottom of the table. I am a bit surprised that Alpha Tauri is valued higher than Sauber despite the latter having top-notch facilities and mostly better results over the years. Also, I would have expected Williams to be valued higher than Haas given the American team’s model of contracting out as much work as possible to it’s partners like Dallara and Ferrari. Anyway, that’s splitting hairs; the point is these teams are worth something today.
This wasn’t always the case, just a few years ago several of the teams on this list were in financial trouble. I’ll examine these in separate posts but when you consider even iconic teams like Williams were struggling to survive, the financial model was not sustainable. Plus, think about all the teams that have come and gone over the history of the sport that didn’t have any success. Formula One has been an exceedingly difficult sport to participate in historically.
But that is changing. Liberty Media has grown revenues, changed the distribution of revenue, and (crucially) implemented cost controls that kept the teams from spending themselves into receivership. With respect to one of the changes:
…the cost cap ended an era in which top constructors were spending more than $400 million annually—money they would struggle to recoup no matter how well they performed on the track—and introduced the concept of profitability. In 2018, the series’ ten teams combined to lose nearly $200 million in operating income (in the sense of earnings before interest, taxes, depreciation and amortization); this year, Forbes estimates that the teams combined will make nearly $600 million in EBITDA.
Forbes
From a financial perspective, this is a welcome development. A necessary one too because the series needs a grid of competent and well-run teams to put on a season of grand prix events. A healthy grid of teams will enable F1 to endure unexpected events better because they will be more resilient. Going forward that means that when the next Black Swan Event happens, the sport won’t be at risk of losing one or more of it’s competitors.
Now are these valuations too high, especially given slower growth and declining viewership in some markets? Time will tell but for now Formula One teams look to be on solid financial footing. This is certainly a welcome change meaning that for the near-term at least we’ll continue to see these ten teams on the grid.
