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F1 Team Values 2023: Ferrari on Top at $3.1B, Average Hits $1.5B

kurt badenhausen
·10 min read
4

Max Verstappen cruised to a comfortable victory this month at the Canadian Grand Prix. It continued a stunning run of success for the Dutch race car driver; he’s won 21 of the 30 Formula 1 races since the start of 2022 and made Red Bull Racing the favorite at each event. Red Bull’s dominance and the lack of passing on the track has some labelling the race action as boring.

Yet, the action off the track has never been hotter.

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Institutional investors, automakers and billionaires have been circling Formula 1 as its surges in popularity around the globe, particularly in a U.S. market where fans have been hooked by the Netflix docuseries Formula 1: Drive to Survive. New spending caps are viewed as a gamechanger. They have flipped the switch on profit potential and created a hope of more competition on the track after decades of dominance by a few teams; Ferrari, Mercedes and Red Bull have captured 21 of the last 24 championships.

“We were losing over £100 million a year with no ability to get back to the front because someone was always prepared to outspend you with no budget cap,” Zak Brown, McLaren Racing CEO, said in a phone interview. “We now have the same budget as Ferrari, Mercedes, Red Bull. It’s going to take some time, but there’s no reason why we can’t be a championship-caliber team again, and now we are profitable.”

“To have a racing series, or any sport for that matter, where over time there’s the potential for all teams to be competitive and profitable will drive much more franchise value for shareholders,” he said.

Over the last month, Sportico talked to more than 20 people, including bankers, investors and team executives, to gauge the current landscape of F1 as it weighs adding another team or two to the grid.

The 10 current teams are worth a cumulative $15.3 billion, by our count. Ferrari is on top at $3.13 billion, despite a title drought that will reach 15 years in 2023. Ferrari is likely “unsellable” but represents a unicorn team in the sport. Mercedes ($2.7 billion) and Red Bull ($2.42 billion) are up next, while Haas F1 Racing trails the pack at $710 million (click here for the full top 10 and a detailed methodology.)

Team Sales

A trio of NBA franchises have traded over the last seven months at sky-high prices, with the Phoenix Suns, Milwaukee Bucks and Charlotte Hornets all selling stakes at valuations that ranged from $3 billion to $4 billion. Asset scarcity and global potential are two of the primary drivers.

But the NBA can’t hold a candle to Formula 1’s scarcity and global reach. There are only 10 teams—most insiders are skeptical of an 11th, much less a 12th team being added right now—and after recent investments in Sauber and Alpine, there are limited opportunities to get in on team ownership. The 2023 race circuit schedule included stops in 21 countries before the cancellation of the Chinese Grand Prix because of COVID-19 concerns.

Multiple teams are regularly fielding calls from interested investors. “It’s a changed world,” Guenther Steiner, principal of the Haas F1 Team, said in a phone interview. Last decade, Caterham, HRT and Manor Racing all shuttered operations when F1 budget caps didn’t materialize, which made competing with the big spenders impossible. In 2015, French automotive giant Renault bought Lotus for a symbolic £1 with a promise to invest in the team, which ultimately became Alpine.

“All 10 teams are extremely healthy organizations, owned by people that have the ability to see through their F1 team,” Greg Maffei, Liberty Media CEO, said during a March earnings call. “I think that’s a great place for the sport to be.”

Alpine is the latest F1 team to raise money. RedBird Capital Partners and Otro Capital led an investor group paying $218 million (€200 million) for 24% of the team. Other investors included Paul Wachter’s Main Street Advisors, the family of late billionaire Jon Huntsman Sr. and actors Ryan Reynolds, Rob McElhenney and Michael B. Jordan. Alpine hopes Reynolds and McElhenney can generate similar buzz for the race team that they brought to Welsh soccer team Wrexham AFC after they bought it in 2020.

“This partnership will accelerate Alpine F1 development by diversifying revenue drivers and increasing brand value,” Renault Group CEO Luca de Meo said in a statement.

Alpine ranks 6th overall in Sportico’s valuation at $1.08 billion, a 20% premium to the valuation on the limited partnership investment (all of our sports team valuation estimates are based on control sales).

Audi will enter the sport in 2026 under a multi-year investment in Sauber’s Alfa Romeo team. Audi is expected to eventually own 75% of the team at a valuation of roughly $650 million, according to multiple sources. But in addition to that commitment, Audi is expected to also invest hundreds of millions of dollars towards infrastructure. “Motorsport is an integral part of Audi’s DNA,” Markus Duesmann, Audi CEO, said at a press conference in August to announce the investment. He cited the F1 team cost controls and future sustainability changes coming in 2026 for the reason behind acting now.

An F1 team sale includes any infrastructure, as well as a slot in the race series. Other assets can vary. The RedBird investment does not include Alpine Racing SAS, the France-based F1 engine manufacturer, which will remain wholly owned by Renault Group.

How much a slot is worth is the question in front of Liberty and the International Automobile Federation (FIA) as it considers expansion, with at least four parties expressing interest and a decision expected this summer. F1 is a closed ecosystem without the threat of relegation that exists in global football.

The Concorde Agreement is the contract between FIA, Formula 1 Group and F1 teams that governs the sport. The last one set a price of $200 million for a slot, but it was signed in 2020 before the recent surge in valuations. Teams have balked at the lowball figure and even a rumored bump to $600 million might not be enough to get them onboard. Teams are worried about a dilution of their share of money from Liberty. Another concern is logistics—space for 10 teams is already tight at several tracks, such as Monaco.

Formula 1 CEO Stefano Domenicali weighed in on the subject this month during an appearance on F1’s Beyond the Grid podcast. “I think 10 teams are more than enough to create the show or the business and the attention that we want to see on the track,” he said. Domenicali added that teams are rejecting offers of “almost billions” from potential entrants.

Coming to America

In early 2017, Liberty Media bought F1 for $8 billion, including debt. F1 had long catered to rich older men. “I don’t know why people want to get to the so-called ‘young generation’,” longtime F1 boss Bernie Ecclestone once said. “Most of these kids haven’t got any money. I’d rather get to the 70-year-old guy who’s got plenty of cash.”

Liberty took a more egalitarian approach as it looked to raise F1’s profile in the U.S. and broaden the sport’s appeal. Drive to Survive opened F1 to a demographic that was both younger and more female, with women representing 40% of the viewing audience of the Netflix series. The Miami Grand Prix was added in 2022, and the inaugural Las Vegas race this fall is highly anticipated. The three U.S. races, including Austin, are more than any other country. Corporate America opened its eyes to the groundswell.

“U.S. companies are generally the best at spending money in sports marketing, but they always looked at F1 as a European marketing initiative, which had its limitations,” Jefferson Slack, head of the commercial operations at Aston Martin, said in a phone interview. “Now they're not, and so they're piling in in a good way, which I think is driving a lot of the underlying values in the sport.”

Lawrence Stroll bought the Force India team in 2018 for $135 million and ultimately rebranded it as Aston Martin—only the 2020 acquisition of Williams for $180 million was a more recent control sale.

Before he invested, the Canadian billionaire was confident a spending cap was finally coming to F1. Stroll has poured money into building out the physical infrastructure of the team with a new factory and wind tunnel. Headcount has doubled to 800 employees.

The spending has produced results on and off the track. Fernando Alonso sits third in the driver standings, while the Aston Martin team is also third behind Red Bull and Mercedes.

The Aston Martin name resonates with marketers—thank you James Bond. Sponsorship revenue has increased 1,000% since Stroll bought the team; it is expected to top $220 million this year led by Cognizant and Aramco. Aston Martin ranks fifth in Sportico’s valuations at $1.14 billion on revenue of nearly $250 million last year.

F1 teams generated $300 million on average in 2022—only 10% below the NBA average—but their valuations significantly lag those in basketball and American football because profitability is much worse, even with the $140 million cost cap last year. Driver salaries, travel, marketing, legal and other costs are excluded from the cap. Aston Martin had an estimated cumulative operating loss of roughly $100 million over the past two years with its spending spree.

The result is F1 teams are valued at five times revenue on average, while NBA teams are at nine and climbing based on recent transactions.

The profit picture is slowly improving under the cost caps. McLaren lost $137 million in 2018 but is expected to turn a profit this year. Mercedes turned the biggest operating profit last year at $114 million, but the only other teams to generate more than $10 million in income were Ferrari and Alpine, by Sportico’s estimates.

Teams are pushing the limits on the cost cap. The FIA punished Red Bull last year for violations and the motorsport governing body is reviewing current team accounts from 2022, with any punishments expected later this year. F1 skeptics question whether teams will ever generate significant profits.

The cap was expected to level the playing field—or track, as it may—over time, with every team a contender in theory to start the season, as in the NFL. But there is a school of thought that the cap will prevent the bottom of the grid from ever catching up to the billions of dollars already invested in performance by the top teams, which gives them institutional advantages.

An alternative play to investing in individual teams is banking on Liberty’s operation of F1, which has been a home run so far. Liberty launched a tracking stock when it bought the race series, and the compounded annual rate of return is 23% through March, versus 6% for the S&P Media Index and 10% for the S&P 500.

Last year, F1 generated $2.6 billion in revenue, up 20%, and it is expected to increase 27% this year, according to S&P Global Market Intelligence. Formula 1’s current enterprise value is $18.6 billion, including debt, and 20% higher than the combined value of the 10 teams. The stock trades at 7.2 times 2022 revenue.

“One of the things that we at F1 with Liberty's help have been trying to do is build a mentality that I'll credit the NFL for, which is one league, that we benefit when everybody benefits,” said Maffei. Teams compete very hard on Sunday, but on Monday, we need to think about growing the entire ecosystem. It was critical that we have healthy teams so that we could have a healthy league.”

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