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Williams flotation will avoid transparency, claim lawyers

Legal expert Charles Braithwaite examines a couple of oddities thrown up by Williams F1's impending stock exchange flotation as the team prepares to sell off 27 per cent to investors.
With just a couple of days to go until shares in the Williams F1 team begin to be traded on the Frankfurt Stock Exchange, motorsport law firm Collyer Bristow has raised a couple of questions about the Grove squad's strategy.

Williams announced at the end of January that it was contemplating a flotation as a means of securing its future, with current overseers Sir Frank Williams and Patrick Head aware of their age and ability to run the team long-term. Confirmation that Williams Grand Prix Holdings PLC would launch its Initial Public Offering (IPO) on the Frankfurt Stock Exchange came a couple of weeks later, with the first tranche consisting of up to 27.39 per cent of the company - equating to 2,739,383 existing shares - with a nominal value of £0.05 per share.

The IPO includes a public offering in Germany, the UK, Austria and Switzerland and a private placement for institutional investors outside Germany, the UK, Austria and Switzerland, the United States of America, Canada, Japan and Australia.

“One of the big stories of the season so far has been the flotation of Williams F1 on the Frankfurt Stock Exchange,” Charles Braithwaite, a partner at Collyer Bristow, commented, “and there are two interesting elements to this story. Firstly, why Frankfurt? And, secondly, why issue no new shares?

"The answer to the first of these would appear quite straightforward. By listing on the Frankfurt Stock Exchange at the Entry Standard level, Williams F1 will not be subject to the same stringent transparency obligations as those companies listed at higher levels and in other European exchanges, and will not have to reveal the details of its various sponsorship deals. This is helpful for preserving confidential details even if, for investors, this means Williams F1 is a higher risk, lower transparency proposition.”

With as many as 330,000 shares coming from an over-allotment option, and no new shares being offered, the decision to float is not being seen as a money-raiser for the team, begging the second question - and no real explanation - from Collyer Bristow.

“The second interesting element of the story – why issue no new shares – is slightly harder to explain," Braithwaite continues, "As a result of floating in this way, Williams F1 will not raise any additional funds, [which is] perhaps slightly surprising considering the team's loss of some big sponsors (and corresponding sponsorship income) over recent years.”

Thanks to our colleagues at Collyer Bristow. For more information, click on the following link: Motorsport Law

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Alan D - Unregistered

March 01, 2011 1:48 PM

DTS, normally yes, if Patrick Head is selling his share holding then the money goes to him, and if the company is selling unissued shares then it goes to the company. However, with IPOs, you often see the initial shareholders selling shares with a portion of the sale price being reinvested into the company, so that the shareholders can get some cash out of the deal, but the buyers see also some of their cash being invested. Otherwise it can be difficult to make the shares into an attractive proposition.

Alan D - Unregistered

March 02, 2011 4:53 PM

DTS, "Manipulation" makes it sound like you think it is somehow underhand. It isn't, and no there isn't a standard formula. Its just a case of working out what you think is going to work best. If all of the money paid by the buyer went into the business then the shareholder obviously would not be willing to sell because he would just be giving away his share of the company. If the shareholder is taking all the money then the buyer might not think it worth his while investing in the company. You've got to find the deal where both the buyer and the seller are happy. Remember, this only happens when you are restructuring the company and creating a broader share base. Normally, if you hold a share in, say, IBM, and sell that share to someone else, you get all the money and IBM sees none of it.

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