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Last year, when the markets were rallying, I wrote probably two positive articles. Most companies I wrote negatively about are down 30% to 60%. One of the things I consistently mentioned was that when the markets correct, it would be like shooting fish in a barrel. Well, President Trump has given us the long-awaited correction.
What a carnage it has been, and the impact of tariffs will continue to linger for a while. However, this provides an opportunity to buy high-quality businesses as all stocks get caught up in the relentless selling.
This blog used to be known as Ganges Post, and I rebranded it to The Orca Fin to better reflect the nature of my articles as I was going after the big fish and became more niche and less innocuous. The pivot was timely; it reflects in the success this blog has since achieved.
When I look at my subscriber list, my jaw hits the floor. The list includes finance professors from some of the top colleges of the world, hedge fund managers, and some of the world’s top portfolio managers. The subscriber list is like the who’s who of financial markets. In hindsight, going ultra-niche seems to have been the correct decision. I am humbled by the trust you have put in me.
The only currency I have is my premium content. From time to time, I give out complimentary access to those on the fence to become premium subscribers and showcase my premium content.
That aside, I really like sports franchises. The recent acquisition of the Boston Celtics for $6.1 billion—by a group of private investors—has brought a renewed spotlight on sports franchises and leagues. They have a dedicated fan base, and the fans are more than willing and happy to spend. Two such franchises are:
Atlanta Braves (BATRA) - Currently spun-off from Liberty Media.
Formula 1 (FWONA, FWONK). FWONA has voting rights.
While Liberty Media has a controlling stake in Formula 1, I prefer the option of investing in the franchises directly. In this article, I will be covering Formula 1 (F1). As mentioned earlier, the fans are what make F1 a great investment. The audience is global, and with the Las Vegas Grand Prix in the last few years, F1 has caught the collective attention of American fans.
F1 Fan Base
F1’s fan base is so huge that the monetization opportunities are immense. Every other sports league pales in comparison to F1. The numbers speak for themselves.
F1 Global Fan Base
Tailwinds and Market Size
Live event attendance is growing as fans prioritize experiential spending.
Sports content is differentiated by the ability to aggregate large audiences on a predictable basis.
The universe of media platforms interested in sports content continues to expand.
Growth in live sports engagement is driving increased sponsorship demand from brands.
Global sports media rights are growing by 4% CAGR and are expected to reach $64 billion by 2026.
Global sports sponsorship is growing at 8% CAGR and is expected to reach $90 billion by 2026.
Revenue and Cost of Revenues
Note
F1 doesn’t publish a 10K of its own. The financial details and management commentary are included in Liberty Media’s 10K.
F1 revenues are classified into two segments: Primary and Other.
Primary revenue
Formula 1 holds exclusive commercial rights with respect to the World Championship, an annual, approximately nine-month long, motor race-based competition in which teams compete for the Constructors’ Championship and drivers compete for the Drivers’ Championship. Formula 1 derives its primary revenue from the commercial exploitation and development of the World Championship through a combination of race promotion, broadcasting, and sponsorship arrangements.
Other revenue
Formula 1 earns other revenue from miscellaneous and ancillary sources, primarily related to facilitating the shipment of cars and equipment to and from the events outside of Europe, revenue from the sale of tickets to the Paddock Club at most events, support races at events, various television production activities, and other ancillary operations.
Source: 2024 10K PDF page 88
F1 Revenue Breakdown
The majority of our revenue is under contract, including our sponsorship revenue, which has been derisked by pulling the pipeline forward given the level of announcements made prior to the season.
This also allows our team to focus on future sponsorship pipeline with an emphasis on high-value and high-quality partners. The other revenue streams will predominantly be driven by renewals and escalators this season.
Cost of Formula 1 Revenue
Cost of Formula 1 revenue consists of team payments, costs of promoting, organizing and delivering the Las Vegas Grand Prix, hospitality costs, which are principally related to catering and other aspects of the production and delivery of hospitality offerings at the Las Vegas Grand Prix and the Paddock Club at other Events, and costs incurred in the provision and sale of freight, travel and logistical services.
Other costs of Formula 1 revenue also include sponsorship and digital product sales’ commissions, circuit rights’ fees payable under various agreements with race promoters to acquire certain commercial rights at Events, including the right to sell advertising, hospitality and support race opportunities, annual Federation Internationale de l’Automobile (“FIA”) regulatory fees, Formula 2 and Formula 3 cars, parts and maintenance services, costs related to the new F1 Academy series, television production and post-production services, advertising production services and digital and social media activities. These costs are largely variable in nature and typically relate directly to revenue opportunities.
Source: 2024 10K PDF page 89
Q4 2024 Highlights
Positives
F1 reported a 6% revenue growth in 2024, driven by additional races and new sponsorships.
The company has $14.4 billion in future revenue contracted under multiyear agreements, providing strong financial visibility.
Las Vegas Grand Prix—despite initial setbacks—has been a significant driver of F1's growth in the US.
F1 is in a strong financial position with $2.6 billion in cash and liquid investments and a leverage ratio of 1.3 times at year-end 2024.
F1 TV subscribers increased by 15%, with plans to launch a new premium tier offering enhanced features.
The brand refresh for MotoGP has gone down well with fans. Yes, if you buy FWONA, you get 86% of MotoGP.
2025 will have 22 MotoGP races compared to 20 in 2024, which is expected to boost revenues.
With Cadillac joining F1, F1’s profile in the US and, thereby, its fan base, should get a boost in 2025.
The management sounded upbeat about 2025 and their ability to fix the issues surrounding the Las Vegas Grand Prix. Some of the drivers highlighted in the Q4 earnings call were:
... specifically on '25 versus '24 for media rights, you're largely going to be seeing just regular uplifts and standard renewals. We would expect continued growth in F1 TV, and we're launching our new premium F1 TV product too. So those will be the primary drivers in '25.
Negatives
The Las Vegas Grand Prix missed internal expectations on revenue primarily due to ticket sales underperformance.
There was softness in hospitality offerings at the Las Vegas Grand Prix, impacting overall revenue growth.
The integration of the Las Vegas Grand Prix operations into the core London team suggests challenges in local execution and cost management.
Despite a strong overall performance, the standalone event economics for the Las Vegas Grand Prix need improvement to meet the original financial targets.
The Phase 2 regulatory process for the Dorna—holder of the commercial rights for MotoGP and the Superbike World Championship—acquisition is ongoing, with a long stop date extended to June 30, 2025, indicating potential delays.
Despite the disappointment with regards to Las Vegas Grand Pix, the management sees material benefits going forward.
Please note that we don't provide specific economics for any Grand Prix. Particularly for Vegas, we see material benefit accrue from LVGP to the broader F1 ecosystem, across sponsorship, hospitality, live entertainment, licensing, and data.
Vegas has served as a very successful test bed for product expansion and played a key role in F1's growth in the Americas, which is a continued focus.
The event we held recently at the O2 in London and the upcoming F1 movie are also powerful marketing engines for all of our F1 fans, but particularly for Vegas and the North American fans.
Financials
F1 - Income Statement Highlights
While there has been an improvement on the margins front, on the surface, things don’t look so good operationally, with the Las Vegas Grand Prix (LVGP) acting as a drag. However, there is a catch for the loss. There was a one-time impairment of goodwill and restructuring related charges of $73 million and $32 million.
Based on near-term business trends and their impact on long-term assumptions, we concluded that the estimated fair value of QuintEvents was less than its carrying value. As a result, QuintEvents recognized a goodwill impairment loss of $73 million during the year ended December 31, 2024.
Source: 2024 10K PDF page 60
Now, if back out the $105 million one-time charges from the income statement, the adjusted net income works out to $75 million profit. With improvements expected at LVGP and Cadillac (GM) joining as the 11th team in 2025, profitability is expected to improve.
The balance sheet is pristine, with F1’s current ratio of 2.7, thus, there are no liquidity concerns. Also, cash from operations for 2024 was a healthy $567 million.
Outlook
The current broad-based selling in the markets has brought down F1 shares too. This presents a wonderful opportunity to add a strong brand like F1 and, by association, MotoGP, to one’s portfolio. The average analyst price target is 105.98. With further selling expected over the next few weeks, I would look to accumulate FWONA. Again, this is one company to buy and hold for decades.
Verdict: While a price to free cash flow of 30.6 may seem a little pricey, with material improvements expected in 2025 and ongoing market selloff, buy all dips. If one can get FWONA around 60, that would be a steal.
Apple’s Starlink Update Sparks Huge Earning Opportunity
Apple just secretly added Starlink satellite support to iPhones through iOS 18.3.
One of the biggest potential winners? Mode Mobile.
Mode’s EarnPhone already reaches +45M users that have earned over $325M, and that’s before global satellite coverage. With SpaceX eliminating "dead zones" worldwide, Mode's earning technology can now reach billions more.
Mode is now gearing up for a possible Nasdaq listing (ticker: MODE) but you can still invest in their pre-IPO offering at $0.30/share before their share price changes.
*An intent to IPO is no guarantee that an actual IPO will occur. Please read the offering circular and related risks at invest.modemobile.com.
*The Deloitte rankings are based on submitted applications and public company database research.