To keep a multi-billion operation sustainable, you have to get money wherever you can. That’s why NASCAR president Steve Phelps considers himself a “big fan” of attracting private equity funding into the sport.
Advertisement
Up to now, private equity has been limited, but Phelps hopes that NASCAR teams start seeing even more private equity investment in the future. NASCAR’s charter system lets teams sell minority investment shares to private equity firms.
Phelps spoke recently with Brian Sullivan on CNBC Sport about how NASCAR is seeing more private equity investment in teams. “We allow private equity to buy a percentage of a charter, and they are (buying),” Phelps said.
“Harris Blitzer partnered with Joe Gibbs Racing, and they bought a piece. You have Trackhouse (Racing), which is where SVG (Shane Van Gisbergen), Daniel Suarez and Ross Chastain race, Avenue Capital came in there, Marc Lasry, former owner of the Milwaukee Bucks.
“And then you have Knighthead Capital, that’s based here in the (New York) city, that partners with Legacy (Motor Club). I think it’s a good thing, honestly. So we’re seeing lots of money, lots of capital come into NASCAR teams, not NASCAR proper, but NASCAR teams, buying equity position in the teams. And I think it’s a good thing.”
Having investment firms buy equity shares helps teams afford to race and be more competitive, as well as hire the best drivers and employees. Phelps then gave several reasons why.
“One, I think it makes the race team some more competitive, the fan wins and it’s good for the race team,” Phelps said. “Two, they’re bringing in, in many cases, knowledge and expertise that the race teams don’t have.
“And three, in many cases, they’re actually bringing in additional sponsorship with businesses they either own or are affiliated with. So I’m a big fan of private equity coming.”
However, Phelps was quick to point out that private equity firms can buy minority stakes in teams, but they cannot have majority ownership of teams.
NASCAR does not allow sovereign wealth
Another thing that NASCAR prohibits is what is called “sovereign wealth,” meaning investment from foreign governments, like Saudi Arabia with LIV Golf.
“Right now, our charters prohibit sovereign wealth, but we are fans of private equity,” Phelps said. “There’s a percentage that (an equity firm) can own. They can’t go over that percentage and there needs to be a control person that is a person, not a company.”
Phelps has been one of the spearheads of having private equity firms invest in NASCAR. “I’ve been pleased,” Phelps said. “I’ve probably met in the last two years with a couple dozen private equity firms.
“They are a buyer of NASCAR and they’re coming because they expect NASCAR to continue to grow, and that’s my expectation.”
