The Formula 1 (F1) championship officially started in the year 1950, and it remains at the top of the motorsport world 73 years later. The business of F1 has evolved dramatically over that time, with more races on the calendar now than ever before, and endless opportunities for monetization thanks to social media and streaming.
Those initiatives have accelerated in the last few years following Liberty SiriusXM Group's acquisition of the sport in 2016.
The media conglomerate owns several sporting and entertainment assets, which can dilute investors' exposure to the F1 brand, so it offers three separate securities that specifically track its performance: Liberty Media Formula One(NASDAQ: FWON.A)(OTC: FWON.B)(NASDAQ: FWON.K).
Don't worry, I'll tell you exactly which of the three types of shares you should buy, and I'll explain why buying a stake in the sport right now might be a great move.
Image source: Getty Images.
Formula 1 is bigger than ever!
While there were three seasons prior to 1950, that year marked the inaugural Formula 1 World Championship of Drivers. It consisted of six races primarily in Europe, plus the Indianapolis 500, with 20 drivers taking to the grid in each Grand Prix.
There are still 20 drivers participating today spread across 10 teams, supported by some of the world's largest automotive manufacturers contributing to car and engine design. They include Ferrari, Mercedes Benz, McLaren, and Aston Martin (to name a few), with brands like Ford and Audi entering the sport starting in 2026.
But the big difference today is the number of races -- the 2023 season has a record 23 Grand Prix events on the calendar, up from 22 last year. Advancements in travel and logistics have allowed the sport to reach nearly every corner of the globe, starting in the Middle East and stopping in Asia, Europe, and the Americas along the way. The latter region is a key focus for F1 at the moment; it added a race in Miami in 2022 that was a raging success, and it will visit Las Vegas this year.
More races equal more ticket sales, more viewership, and more sponsorship opportunities, which is one way Liberty has grown the sport in its tenure so far. A record 5.7 million fans cumulatively attended all Grand Prix races in 2022, up from 4.2 million in 2019 (the most recent year unaffected by COVID-19 restrictions).
Fans also have unprecedented access to the drivers today, all of whom have unique personalities that have elevated the brand overall. Prior to Liberty's acquisition, drivers were heavily restricted with what they could share on social media, whereas today they often pull back the curtain on F1, bringing fans closer to the action than ever before.
Not to mention that Netflix's Drive to Survive series continues to be an absolute smash hit. It first aired in 2019, covering the juiciest behind-the-scenes action from the 2018 season.
The Formula One Group is producing record numbers
The sport is also bigger than ever from a financial standpoint. It earns revenue in three ways: race promotion (ticket sales), media and TV rights, and sponsorship fees. But it's not just the Formula One Group reaping the rewards of its recent success. For example, the 2022 Miami Grand Prix generated an estimated $350 million in spending within the local economy.
Las Vegas is set to be an even bigger spectacle. Liberty executives are expecting the race to generate $500 million in revenue for Formula 1, and it could be a top five races in terms of profitability. That's one reason Wall Street analysts expect a massive 28% increase in the Group's total revenue in 2023.
If those analysts are right, then Liberty will have come close to doubling the sport's revenue since officially sealing the acquisition in early 2017.
Building a larger presence across America will be key to growing F1 in the future. While F1 is traditionally a European sport, the U.S. is now its largest audience across TikTok, Meta Platforms' Instagram, Alphabet's YouTube, and Snap's SnapChat.
In fact, the sport had 43% more American social media followers in the first quarter of 2023 than it did one year ago. Those are all signs engagement is surging in this area of the world.
Here's which Liberty Formula One stock to buy now
As I mentioned at the top, there are three different securities tied to the Formula One Group. There are Class A, Class B, and Class C shares, all of which have different characteristics.
The Class A shares trade under the ticker FWONA, and they give investors voting rights when the company makes changes that require shareholders' approval. The Class B shares are almost exclusively owned by the management team, though they can be purchased occasionally on the over-the-counter market.
The Class C shares are probably the most convenient to own, and they trade under the ticker FWONK. These directly track the performance of the Formula One Group, and they don't have voting rights attached so investors don't need to worry about getting involved in the affairs of the company. In my view, this is what regular investors should consider buying.
Overall, each class has soared in value by 28% this year and trades near an all-time high, which reflects investors' optimism about the future of the sport. Given its rapid expansion across America, new car giants waiting in the wings to join the action, and a 24-race calendar slated for 2024 thanks to the return of the Chinese Grand Prix, further upside appears likely in the long run.
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