We've all seen how the Facebook IPO, or initial public offering of stock, has tanked, dropping 24% since the offering. The stock came out at $38 per share and as I write this ten days later, it's trading at $28. Although investors should be looking at the long term (I think it will rise and one day be in the hundreds of dollars) initial investors are feeling the pain. Reports are also coming out about technical glitches and communication problems that plagued the release. Even Facebook founder Mark Zuckerberg has lost over $5 billion dollars in the value of his personal wealth as the stock dropped, all while traveling through Europe on his honeymoon.
Formula One Management (FOM) is the company that runs and owns the rights to Formula 1 racing, it's controlled by Bernie Ecclestone. After strong demand for a while now, FOM is finally going public and will do their own IPO in June. I think we will see a vastly different scenario with F1's offering. There have already been some big moves ahead of the IPO, which is planned for the Singapore stock exchange. The IPO price is expected to be set before the end of June, based on what the company and its bankers think the demand is. The offering is expected to be about $3 billion in stock.
One of Formula One's owners, CVC Capital, just sold a $1.6 billion stake in the company to three outside investors. The sale lowers CVC's stake in F1 from 63.4 percent to 40 percent and values the overall company at about $7 billion, based on that transaction. Finance Asia reported the CVC deal and also values Formula 1 at about $9.1 billion, which includes $7.2 billion of equity and $1.9 billion in debt.
I think the Formula One IPO will do much better as there is a long history of events and a proven schedule of new revenue. Most GP races are made with long-term contracts, guaranteeing a strong flow of income for years and years into the future. While Facebook is popular, the revenue history is not there and who knows whether people will lose interest, like they did with MySpace.
A lifetime auto racing fan, Freddy Sherman collects vintage muscle cars and attends races and rally events in the U.S. and around the world. You can follow him on Twitter -@thefredshermanMore from this contributor: Will Michael Lewis Be the Next American Formula 1 Driver? Fan Interview
- Investment & Company Information
- initial public offering