F1 flotation
March 2, 2011
Shares in the Formula One team Williams, the first such stock ever to go on offer to private investors, fell by 2.8 percent in their first day's trading on the Frankfurt stock exchange on Wednesday.
Williams Grand Prix Holdings ended the day at 24.30 euros ($33.73), having gone on offer at a price of 25 euros. Most market analysts had predicted the desired price would prove too high.
Team principal Sir Frank Williams was upbeat despite the drop in value, saying that the new business move was a long-term strategy to secure a return to winning ways for his team.
"Our listing marks a new era in the history of the team," Williams said. "Williams' future as an independent constructor is sustained by this listing, providing us the base from which to further grow."
Williams floated shares worth 60 million euros and 24 percent of the team, thereby valuing the entire company at around 250 million euros.
Sir Frank Williams retains a controlling interest in the company while his business partner of over three decades, Engineering Director Patrick Head, is selling most of his stake in the team. Austrian investor Toto Wolff has held a 10 percent minority share since 2009.
Perennial privateer goes public
Williams' chairman Adam Parr said analysts shouldn't read too much into the difficult opening day's trading.
"It's not an easy moment to be born into the financial market," Parr told the Reuters news agency, adding that early trading was not usually indicative of a company's eventual growth.
As a major player in F1 since 1977, Williams has resisted several takeover enquiries from major partners in the automotive industry, most recently from German carmaker BMW.
"[Sir Frank Williams] never wanted to be bought out by a carmaker or a major company," Formula One's commercial supremo Bernie Ecclestone, a close friend of Williams and a former rival team owner, said. "If I were allowed, I would buy Williams shares."
Williams' team has always prided itself on individuality. Its founder, Frank Williams, began as a paddock wheeler and dealer, buying and selling parts for racecars, using his gift for European languages to secure the best deals.
After deals for a car chassis and an engine fell through almost simultaneously, Williams' receptionist pointed out that he could put the two together, and go racing himself. This utterly impromptu decision marked the birth of one of F1's three most successful teams.
Williams has said that the stock market flotation is a way to regain the team's competitiveness, while securing its personality as a privateer team, albeit one that's in part owned by the public.
A major challenge for the team will be to convince private investors not only that it's possible to make a profit in Formula One more generally, but also specifically with Williams, who have fallen off the pace of their decorated past.
In the short-term, the team has promised a swift initial dividend payout after the flotation funds from its Initial Public Offering have been recouped.
Glorious past, uncertain future
Williams won seven drivers' world titles and nine constructors' championships. World champions like Keke Rosberg, Nigel Mansell, Alain Prost, Ayrton Senna, Jacques Villeneuve and Damon Hill have all driven for the historic outfit, which was the dominant force in the sport for much of the 1980s and 90s. Germany's Nick Heidfeld, Ralf Schumacher, Nico Rosberg and Nico Hülkenberg have all raced for the Oxfordshire-based privateers.
But after two decades at or near the top, the team has hit its worst ever drought, and is showing few signs of resurgence. The team's last race win, secured by Colombian driver Juan Pablo Montoya, came in the last race of the 2004 season in Brazil. Williams has no individual or team championships to its name since 1997.
Struggling for sponsorship income and a competitive engine partner, the few flashes of former brilliance Williams has shown in the past few seasons have often been overshadowed by the financial and logistical problems the team is facing.
German rookie Nico Hülkenberg, for instance, secured Williams' first pole position in 100 grands prix at the penultimate race of the 2010 season in Brazil, causing jubilation in the garage. But a few weeks later the team had to let the promising youngster go, preferring the sponsorship monies offered by Venezuelan racer Pastor Maldonado and his connections to the country's state-controlled petroleum giant, PDVSA.
Maldonado was Hülkenberg's teammate in a lower formula in 2008, and was comprehensively beaten by the younger, less experienced German - but Williams' loss of a string of major sponsors over the past two years apparently forced their hand.
Williams will be hoping that the extra capital generated from this market flotation will give the team more financial flexibility in future, perhaps allowing them to avoid such tough decisions. But for this to truly work, the team still sorely needs on-track success to help boost share prices.
Investors will also earn a stake in Williams' sister companies, perhaps most notably Williams Hybrid Power, which is working primarily on alternative methods of utilizing electrical energy in engines.
Author: Mark Hallam
Editor: Susan Houlton