The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Karen Kwok

LONDON, Dec 5 (Reuters Breakingviews) - In Netflix’s “Formula One: Drive to Survive”, engineers measure driver weight and tyre pressure to exact decimal places to prepare their cars for races. With Qatar joining Bahrain in owning an F1 team, it’s clear Gulf wealth funds have been looking just as intently at the finances of individual F1 teams. The trend has mileage.

John Malone’s $4.4 billion purchase of Formula One itself in 2017 has been an unqualified success: the Liberty Media FWONA.O tracking stock representing the F1 business has a market capitalisation of $21 billion now. But before 2021, most of the F1 teams were unprofitable: the likes of Ferrari and Mercedes would outspend each other on salaries to keep themselves at the front of the grid. To attract sponsors and investors beyond carmakers, Malone’s Liberty Media and the motor sports governing body introduced a new rule in 2021 which capped total team spending at $145 million, falling to $135 million a year between 2023 and 2025.

This has put team finances on a more secure footing. According to calculations by Sportico, a sports information group, eight out of the 10 F1 teams made an operating profit in 2023. Meanwhile, the average F1 team sponsorship deal rose from $2.87 million in 2019 to $5.08 million now, according to a Nielsen Sports study. Even so, Ryan Reynolds and RedBird Capital's 200 million euro deal for 24% of Alpine Racing in 2023 valued the team at a mid-teen multiple of EBITDA, a person familiar with the deal details told Breakingviews. That’s cheap compared to the wider F1 Championship, which trades at 23 times EBITDA.

Click here for an interactive version of the graphic.

That explains why Qatar Investment Authority on Friday snapped up a 30% stake in Audi’s Sauber team, joining Bahrain’s Mumtalakat fund which owns McLaren. The lack of financial disclosure complicates assessing whether it got a bargain. But the QIA says it will provide a “substantial” capital injection to support infrastructure and team buildout to get Audi, which only got into racing with this year's takeover of Sauber, ready to start competing in 2026.

Others will be eager to join the Grand Prix race. Saudi’s Public Investment Fund, which once had a bid for the whole of F1 rejected, is an obvious candidate. It has a new sports vehicle, SURJ Sports Investment, and the kingdom's oil giant Aramco 2222.SE is already a partner of both F1 and the Aston Martin team.

As Malone has shown with F1 as a whole, there’s value to be created by building up merchandising and audience experiences. Saudi could push that sort of thing by copying spectacles like the Ferrari-branded theme park in Abu Dhabi. Private equity and luxury giants like LVMH LVMH.PA may see the logic of a team punt too. But F1 and Gulf sovereign wealth funds in particular seem destined for further laps.

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CONTEXT NEWS

Qatar Investment Authority is buying a significant minority stake in Audi's Formula One team, the sovereign wealth fund and the German carmaker said on Nov. 29.

The holding will be 30% of the team, a source familiar with the matter told Breakingviews. Financial terms of the deal, which builds on the Qatari state's global sports portfolio, were not disclosed. The QIA also holds a 17% stake in Germany's Volkswagen, which owns Audi.

Audi, Volkswagen's luxury brand, is set to make its Formula One debut in the 2026 season and turn Switzerland-based Sauber into its factory team, after flagging in March it would acquire 100% of the firm.

(Editing by George Hay and Streisand Neto)

((For previous columns by the author, Reuters customers can click on KWOK/
karen.kwok@thomsonreuters.com))