00:45:58 · Toto Wolff, John Collison
[00:45:58] S0: have a stake in the team. And we said, well, that makes sense. I increased my stake a little bit, and then we were all one third. And today, Jim is a great resource that I use if I need to have a contrarian view. If someone that is highly experienced, but also shrewd in in the way he he looks at his businesses, And a very enjoyable, co shareholder that isn't really interfering. But Yeah. Because I I guess we do well enjoys enjoys the ride and is a resource that we can that we can utilize. [00:46:34] S1: F one teams have become radically more valuable. Like, this transaction valued Mercedes as f one as, £4,600,000,000, and that's many, many, seven times increase from even just a few years ago. That phenomenon has also happened in other sports like NFL and teams like that. There's two explanations you could have for the increase in value. One is sort of a monetary theory that you have more rich people who want to buy into teams. And so the businesses are the same, but you just have more demand, to become a sports team owner and more more dollars chasing fewer assets. The other is that you can say... And, obviously, this is somehow true for f one. They've become better businesses. I mean, the audience has grown so much, and you have drive to survive and things like that. Just as you think about the increase in value in Mercedes and f one teams, how much of it is f one teams have become a more desirable asset, and how much is it that they're actually just very good businesses now?
00:46:34 · John Collison, Toto Wolff
[00:46:34] S1: F one teams have become radically more valuable. Like, this transaction valued Mercedes as f one as, £4,600,000,000, and that's many, many, seven times increase from even just a few years ago. That phenomenon has also happened in other sports like NFL and teams like that. There's two explanations you could have for the increase in value. One is sort of a monetary theory that you have more rich people who want to buy into teams. And so the businesses are the same, but you just have more demand, to become a sports team owner and more more dollars chasing fewer assets. The other is that you can say... And, obviously, this is somehow true for f one. They've become better businesses. I mean, the audience has grown so much, and you have drive to survive and things like that. Just as you think about the increase in value in Mercedes and f one teams, how much of it is f one teams have become a more desirable asset, and how much is it that they're actually just very good businesses now? [00:47:27] S0: Yeah. You know when you buy a car today, you justify it with sometimes rational decisions, like lots of horsepower or good design or it's EV because I wanna, you know, I want to have an efficient car. The truth is it's an emotional decision why you buy a car. And the emotional decision is how you want to be, how you want to be perceived. Do I want to be perceived progressive? Do I want to be perceived affluent? [00:47:56] S1: Yes.
00:47:56 · John Collison, Toto Wolff
[00:47:56] S1: Yes. [00:47:58] S0: All of this. So that is gonna be a longish answer. Sports team are scarce as of today. You know, in f one, there's just 11 of us. Mhmm. And you could potentially have another 12 front that's within the regs, but nobody's really keen. And it's the biggest global sport in the world today. The Olympics and the football world championship are bigger, but they're only for every four years. [00:48:19] S1: Yes. [00:48:19] S0: So this is the biggest global sports in the world. Then you look at the NFL, very scarce as a two. And for you, US American, it doesn't doesn't go any bigger than the NFL. And I think how much? 32 teams or something around that. So the scarcity of the asset can be a rational decision to own it and hope for a value increase because of that factor. Okay? Then there is the trophy asset angle. There's many very wealthy people that love the sport and say, well, you really... I always dreamt owning an NBA or NFL team or Formula one team. [00:48:57] S1: Yes. [00:48:57] S0: And I enjoy going to the races Yes. Giving my input, and and I can afford it now. Very well. Very valuable. It's a win win. But then there is the people that have so much money and feel in a way maybe not recognized enough. Mhmm. Because you could have earned 10,000,000,000 with a business that is... Doesn't have as much as, you know, visibility. And you're saying, you know, actually, I'd spend a large chunk of money just for the courtside seat. [00:49:31] S1: Yes. Yes. Yes.
00:49:31 · John Collison, Toto Wolff
[00:49:31] S1: Yes. Yes. Yes. [00:49:31] S0: And and be more prominent. Mhmm. It's also a decision that you can understand, maybe. So that is that aspect of investing. The other part is fundamentals. You look at the landscape, and you can say, do I believe that this sport Mhmm. Is gonna continue to grow? What's the demographics of the sport? [00:49:54] S1: Yeah. [00:49:54] S0: How much income potential has the league? How much does the team earn? And and that today have have... These fundamentals have become reality. In Formula one, before we were all loss making. It was a marketing exercise. But today, few of us are generating very healthy profits. You know, in our business, more than 30% EBIT margin. We are distributing dividends. So it's not like The US American teams that Yes. Or the tax structure where you basically live in a debt Yes. Debt environment. And we don't have a lot of CapEx because we don't own the stadium. Obviously, also miss some of the revenues. Right. But so when you invest in a Formula One team today, you can attribute multiples to your investment decisions. [00:50:36] S1: Mhmm. [00:50:36] S0: And, you know, when I sold part of the team last year, those multiples justified Mhmm. The valuation you just stated. Today, I'll probably be able to generate 30% more. Mhmm. But I got the right partner, so that's okay. And and those multiples are also valid for most of the valid for most of The US American teams. [00:50:54] S1: What are the last publicly released financial figures from Mercedes?
00:50:54 · John Collison, Toto Wolff
[00:50:54] S1: What are the last publicly released financial figures from Mercedes? [00:50:57] S0: Well, we're generating around a billion dollar in revenue and 30% profit margin. [00:51:02] S1: Okay. [00:51:02] S0: So it's a very healthy margin. We [00:51:05] S1: Wait. So sorry. 300,000,000 of EBIT. Yeah. And so the $4,600,000,000 valuation is a 15 times EBIT multiple. So, I mean, yeah, it's very... Warren Buffett could could underwrite this business. [00:51:16] S0: Exactly. It was back in the day. It wasn't a billion, and it wasn't 300,000,000. Mhmm. It was considerably less because we're growing very strong, and the the spot is still growing strong. But, you know, we are Europeans. We don't talk so much about valuations and money. But as a matter of fact, like you say, these multiples are actually Yes. On the conservative side. [00:51:36] S1: And, actually, that's very different from, say, an NBA or an NFL team where I think every time one transacts, it's wackadoodle valuations that can only be justified by tax structuring or courtside seats.
00:51:36 · John Collison, Toto Wolff
[00:51:36] S1: And, actually, that's very different from, say, an NBA or an NFL team where I think every time one transacts, it's wackadoodle valuations that can only be justified by tax structuring or courtside seats. [00:51:48] S0: Yeah. But, also, you know, when when you look at the valuations of the of The US teams, you have fundamentals for some of the teams, but then there are some which are kind of being dragged along that are having valuations that are not real anymore. And if you look at Mercedes, we are probably generating, other than the Dallas Cowboys, the most profit of any sports team in the world. So we have kind of a USP Yes. In this in this world. When we compare our multiples to the NFL or the NBA Yes. In its latest crazy, you know, uplift of valuation in... I don't know what the multiples. The revenue multiples. Yes. Yes. Which is crazy. Who... You know, I'm a fundamental guy, fundamental figure. So I would never value a business on revenues. Yes. I would value it on return on investment, fundamental cash flow and profits. So that would value us at $1,012,000,000,000 if you look at the the Lakers sale, for for example, whatever else happened in this frenzy. But that's not the point. You know, my horizon is so long term that I'm a long term bullish investor with all the ebb and flow that can happen in this spot that it becomes irrelevant to actually, you know, starve for high evaluation because it's just on paper. But we could value the business today much more than it was a year ago.