Many readers have written
expressing concerns about CART's future, and asked for advice
or insight as to what is happening. While we don't have
access to the inner sanctum at CART headquarters on a daily
basis, we do hear things, and here are some things for you to
ponder.
1. If CART were fast
approaching its demise, you would expect the likes of David
Clare and many of the other people hired over the past year to
jump ship ahead of time. That such big-name defections haven't
occurred as yet seems to be a positive sign.
2. Mr. Ecclestone would
have a much more difficult time picking up the Long Beach GP
if he were to double cross Mr. Pook, given the latter's
influence and reputation with the event. Nor would Long Beach
automatically want to pay a fee multiples of what they are
currently paying for CART's race given the current state of
municipal finance in the U.S. today and, in particular, in the
State of California.
3. If CART's management
were really trying to tank the stock to make it cheaper for
someone else to buy, it also would ruin the value of the
holdings of some key people in a resurrected organization:
-
Gerry Forsythe, the company's
biggest shareholder (23% as of 23 May) and part of a rumored
buyout group
-
Carl Haas, a 2% owner and a
director
-
Pat Patrick, a 1% owner and a
director
While these individuals may be
willing to eat their losses for the good of the sport, there
are other investors who simply can't be expected to.
4. Shareholders may have a
difficult time claiming they were duped by CART management.
More than a year ago Chris Pook laid his cards out on the
table, proposing to buy television time, to support new teams,
to promote a number of its own races and to buy engines from
Cosworth. Everyone knew and discussed how that strategy would
use the company's cash reserves at an unprecedented rate. That
it has now come to pass should not surprise anyone.
Moreover, the fortunes,
strategies, tactics, problems and risks of this company have
been openly discussed in more venues than just about any
public company in the world. You don't see this kind of
coverage relating to IBM or Wal-Mart. AR1 is not the only
forum that has reported on the rumors and suggestions of the
company getting taken private, bought out or failing.
That a shareholder - particularly
a significant one with resources to do firsthand research -
could claim that they did not see this - whether it is a
rescue or failure - coming unless they have other evidence
that the rest of the public does not. With that said, I
expect a major shareholder lawsuit to be filed by Friday
unless CART steps in at the 11th hour and negotiates a
settlement of some sort.
5. Given the financial
trend at CART, it is hard to imagine that the IRL and its
chief supporters - the descendents of Tony Hulman - haven't
endured an even worse financial drain. They have admitted in
the past week that they still are not profitable after eight
years in business and that the addition of the Brickyard 400
is what helped finance the series. Also consider that they
started their operation from scratch and had a couple of
formula changes thrown in for good measure, all suggesting
that their losses might make CART's look meager. Talk about
grounds for a lawsuit.
6. If I were a shareholder,
the people I would look to sue would be the former team
owners, shareholders and directors who took advantage of their
positions as insiders to disparage, belittle and defame the
organization they were entrusted to oversee.
7. If a buyout does occur,
will the media in Indianapolis focus any attention on the
"sexed up" comments from CART's competitors about the
company's fortunes in the same way the national media has
regarding Weapons of Mass Destruction in Iraq? Will the
SEC look into the origins of negative rumors relating to the
shares of a publicly listed company?
The author can be contacted at
markc@autoracing1.com
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