OCTOBER 14, 2000

A week is a long time in business

THOMAS HAFFA, the boss of Formula 1 shareholder EM.TV, could be forgiven for saying "Thank God. It's Friday".

THOMAS HAFFA, the boss of Formula 1 shareholder EM.TV, could be forgiven for saying "Thank God. It's Friday". The Stock Markets have closed and Haffa now has a chance to reflect on a week in which his company underwent a rollercoaster rode on the Frankfurt Neuer Markt.

EM.TV started the week with shares worth around $51 each. This value the company at around $6.3bn. By Wednesday morning EM.TV shares had dropped to just under $30 and the company value had dropped by over $2.5bn. And there they stayed, unstable and apparently unloved until Friday morning when the shares suddenly began to rise from $31.80 to a closing price on Friday evening of $37.

Analysts seem to think that after the plunge the company stock was undervalued and expect a gentle return to normality but the fundamental problems which caused the share price to collapse have not changed. Investors are not comfortable with the company's foray into Grand Prix racing and want Haffa to get back to the business he knows - selling cartoons and merchandising cartoon characters. EM.TV may have borrowed a lot of money to buy The Muppets but it was a good investment. Once the package has been integrated into Haffa's empire it will make sense. But the investment in F1 seems to be a gamble which has not paid off. The cartoon characters on the pitwall in Formula 1 have a voice. They have told Haffa that they are not interested in his plans to centrally-market the sport. This may be a shortsighted view but then great vision has not always been a talent needed to run a Formula 1 team.

Haffa now wants to sell and a collection of car companies would like to buy. It is a deal which makes sense for everybody: Haffa will get his investment back and will be able to use that money to either pay some of his debts or buy up some more cartoons; the Formula 1 teams will get more money and more control in the sport while Bernie Ecclestone will have a nicely-balanced political situation in F1 which should guarantee the long-term future of the sport. That has long been Ecclestone's aim. He does not want the F1 team bosses to fight among themselves and destroy the empire he has built which they assuredly would do if left to their own devices.

With a balanced shareholding structure between the 12 teams, Ecclestone would then be in a position to float the shares that currently belong to his wife and children. This would mean that he will have liquidated his assets while remaining in control of the business. The perfect result. When he decided to retire or dies, someone else could be appointed to run the sport in a sensible businesslike fashion.

There is a long way to go before that is achieved but the battering Haffa received this week should have convinced him that it is best to get out of F1 and leave it to people who are involved in the business.