F1 – Need for Speed



  • Intro
  • Universe and History
  • Formula One Group
    • Bulls
    • Bears
    • Key Metrics
  • Conclusion


There is a sport that has been around for decades but is just now gaining so much traction that most likely 6 of your 11 cousins at the 4th of July BBQ / Pool Party know at least one athlete of note.





The sport recently gained global excitement after Netflix started publishing their Drive to Survive documentary, taking viewers behind the scenes into the lives of these… let’s be real, kids driving some of the fastest cars in the world around a track 100 times.

But just because a sport has gained popularity in recent years, is that worth writing about in an investment newsletter?

Buckle up, Insiders – we’re about to put the pedal down!

Universe and History

Racing has been around since the dawn of time. Back then, cavemen were racing wooly mammoths and saber tooth tigers. Things got a little more advanced in Ancient Egypt when they raced chariots pulled by horses. In fact, that level of racing sustained mankind for years. Hundreds of years. A thousand years?

Then came the locomotive engine and the combustion engine and cars powered by these engines and the rest was history.

Seriously, since cars first existed, you can bet that Henry Ford’s son (or son-in-law) first thought “I bet I can get that thing up to 45 miles an hour and throw it around a corner… I bet Jack could, too!”

Since then, men and women have been interested in testing the limits of speed and maneuverability with each iteration and improvement on automobiles.

Formula One came about, post-WWII when racers wanted to create something unique – a racing league where each car must meet a predefined set of rules and regulations in order to level the playing field. The first Formula One Grand Prix took place in Turin in 1946.

23 racers started. Only 9 finished…

Oh – not because of something horrible! They all just had car trouble – ignition issues, gearbox problems, engine malfunctions. And one collision.


This was the car that crashed. 11 of the 23 racers drove this model and only one poor unfortunate racer crashed it.

Formula One is the pinnacle of racing for open-wheel single-seater cars that follow a set of rules to which all racers and constructors conform. These cars are the fastest road-course racing cars in the world, due mainly to their construction and style and the downward force applied on the cars in corners.

Downforce allows the car tires to stay firmly planted on the road even when turning a corner at incredibly high speeds. Think about when you tried to take that turn at 45mph and your 2003 Honda Civic just about rolled over sideways. Now, imagine doing that at 150mph+. Most cars are going to struggle keeping all four tires on the road with that much force being applied to one side. Example, Sir Michael Gambon in Top Gear:


Now compare that to an F1 corner…



No dual-wheelie happening here!

The point is that these cars are elite. They are fast and driven by highly trained drivers. In fact, most F1 drivers have been driving and racing for 20+ years and the average age of the driver?

27 years old.

That’s crazy! Sure, I could drive my car fast at 27… but nothing like these drivers! (Even though I thought at the time I was better than any other driver on the road)

Formula One Group

Liberty Media Corp is a large media conglomerate that owns and operates media, communication and entertainment businesses. They also own the Formula One Group, which has its own tracking stock, Ticker: FWON.K, that wholly owns and operates all business associated with Formula One.

Formula One Group (FWONK) is responsible for the World Championship of F1, in coordination with the regulatory body that oversees the races (FIA), promotions of events and teams, as well as advertisers and sponsors. They also oversee and manage the F2 and F3 series, which run as support races to the main events, F1, each race weekend.

The events are what drive revenue for FWONK as each season sees up to 23 race weekend events where more than 300k viewers show up to watch the races. And more than 1m tune in to watch the races live.

Racers score points based on race position, competing for the Drivers’ Championships and Teams compete for the Constructors Championship based on the points earned by each team’s 2 drivers. There are 20 racers and 10 teams competing in F1 each year.

The majority of FWONK’s revenue is earned in 3 main categories:

  • Race Promotion: the rights granted to hosts for each race event in the form of 3-7 year contracts with annual escalators and contract terms. These promoters are generally circuit or track owners, governmental bodies or automobile clubs that host each Race Weekend and provide access to the race tracks used. This makes up about 30% of FWONK annual revenue.
  • Media Rights: Can you claim any sports event happened without it being televised somewhere for someone to see? FWONK licenses rights to broadcasting partners to televise Race Events and other Formula One media events in specific countries, regions, and in specified languages. These contracts are also generally 3-5 years and include some form of an annual escalator. This makes up 40% of FWONK’s annual revenue.
  • Sponsorship: Would any win, or home run, or touchdown, be felt the same way without the massive Shell logo in the background, or a great big sign for Chase banking? Sponsorship is a necessity in any sports event due primarily to the number of viewers these types of events draw. On average, in 2021, the total viewership came in around 70.3m across in-person attendees and televised audiences. Those are numbers sponsors can’t ignore. Again, these contracts generally stand in the form of 3-5 years and have annual escalators. Sponsorship accounts for 16% of FWONK’s annual revenue.

Now, most of you math nerds might be saying “That only adds up to 86%!” Relax. The rest of FWONK’s revenue is considered “Other” and includes things like shipment and transportation of cars for teams to and from events. This helps to streamline and ensure that no teams get special treatment in the transportation of their vehicles, but also helps to ensure that lower budget teams are not forced to use lower-quality transportation and risk loss of their vehicles. Other areas of revenue include ticket sales from Paddock Club access (the area where drivers and teams spend most of their time in between races and where all of the garages are located) and revenue earned from F2 and F3 races.


1) F1 is one of the most-watched sporting events on the planet 

At the start of the 2021 season, on average, each race weekend was garnering roughly 1.4 million televised views. Add on the average 350k-400k in-person attendances and some races top 2 million viewers per weekend. 

Imagine being any sponsor or promoter and know that roughly 2 million people will see your name plastered all over the racers, track and paddock in one weekend. We would be clawing and fighting our way to the front of the list to get Charles LeClerc to sport the Short Squeez logo 😂

2) Explosion in global interest led to a 56% increase in viewers in 2021

One word brought this renewed interest in a global sport mainly followed in Europe: Netflix. The Drive to Survive docu-series opened the world’s eyes to the fact that these racers were young, handsome, and dealing with an immense amount of stress each week. 

After season 3 hit streaming and the rivalry between Max Verstappen and Lewis Hamilton put everyone (even my mom) on the edge of their seats, we all understand why this sport is so awesome. 

Disney, who owns ESPN and currently has exclusive rights to broadcast F1 races in the US, had to pay an 1,500% premium for those rights after this new wave of fans joined. Disney initially had paid $5 million for the broadcast rights and a three-year deal. That deal renewed this year, Disney maintains their broadcast rights, but had to pay between $75 and $90 million per year for three years. A huge win for Formula One Group.

3) 100-year contract from FIA 

FIA is the regulatory body that oversees the technical and safety aspects of the global phenomenon that is F1. In fact, they oversee all international motor sports, F1 is just the most well-known and popular (looking at you, Reliant Robin Racing). 

The 100-year agreement allows Formula One Group to maintain the exclusive trademark and commercial rights to the World Championship event, as well as naming a representative to the FIA Commission. The contract is set to expire in 2110… just before the F1 of hover cars is set to start.

4) Liberty Media is owned by John Malone, one of the greatest CEOs of our generation

Malone is a storied CEO, with his first time in the driver seat as CEO at age 29. He took Tele-Communications Inc (TCI) from a 400k subscriber base to an 8.5m subscriber base, becoming the second largest cable company after Time Warner in less than 20 years. 

The books that are written about incredible CEOs (like The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success) always reference Malone. With Malone running Liberty Media, the company that owns Formula One Group, we can all be rather confident that the reach and power of F1 is only going to expand from here.

5) Warren Buffett owns $539m worth of FWONK

Certainly, Mr. Buffett has a knack for buying companies at attractive prices that he believes are durable and profitable businesses, poised for long term growth. He has never been the type to day trade penny stocks.


1) FWONK is purely a tracking stock – it tracks the business that is ultimately held and managed by Liberty Media

And, Liberty Media has other tracking stocks in their portfolio already: SiriusXM and the Atlanta Braves. While we can parse together the connections between these three businesses, it should be rather apparent that buying FWONK means exposure to other businesses that may follow a different cycle trend and nature. 

Liberty Media may experience problems in their division of SiriusXM that in reality, plays no part in the world of F1, but market sentiment may significantly impact the price of FWONK. That is a large unknown.

2) FWONK has no voting shares

Not only is FWONK a tracking stock, but it has no voting rights attached to the common stock either. 

FWONA, the voting version of FWONK, does have those rights. While some investors may not be concerned with voting their ownership, there does appear to be some discrepancy in returns between these two tickers even though the only difference is voting rights. In reality, there should be no difference between them, unless there is some unknown value we have not yet uncovered around voting rights…


Key Metrics (as of 7.6.22)

  • Current Price: $61.05
  • NTM Ratios:
    • EV/Sales: 6.4x
    • Price/Sales: 5.6x
    • EV/EBITDA: 25.2x
    • Price/Earnings: 197.6x
  • Price/Book: 1.3x
  • Total Cash: $2.2bn
  • Total LT Debt: $2.9bn


Whether you are a racing fan, or just a Carlos Sainz fanboy, there is no denying the meteoric rise in popularity of Formula One. Some of us ask the question, how did we never know about this? Well, thanks to Netflix, now we know and we are so happy to be a part of the journey!

Even if you don’t love racing, and hate good-looking athletes, there is still some value to be found in the Formula One Group as a business.

In fact, take the next hour and listen to the Business Breakdowns episode with Patrick O’Shaughnessy and CEO Stefano Domenicali, the former director of the Ferrari Formula One team.

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