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Inside The $3 Billion Business Of Formula One

Formula One has no shortage of controversy. CEO Bernie Ecclestone may be on his way out and last monthhe said the most prestigious auto racing circuit is in deep financial crisis and he doesn’t know how to repair it. Formula One is burdened by $4.1 billion in debt, according to Moody’s Investor Services.

There were also rumors of a threatened boycott of the U.S. Grand Prix by a trio of Formula One teams (Lotus,Force India and Sauber) in Austin, Texas in late October to protest the the sport’s financial mess.

The Formula One racing team valuations compiled by my colleague Chris Smith last month showed the average Formula One team is now worth $494 million, up from $337 million two years ago. But while a few teams like Ferrari and McLaren make money, the average operating result (earnings before interest, taxes, depreciation and amortization) in 2013 of the nine current teams was a loss of $28 million.

Yet, despite its problems, some believe that should Formula One go public, it would be valued at $8 billion, or roughly 17 times this year’s projected operating income of $456 million.