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Actual value of NASCAR charters still a mystery

Just how much are NASCAR’s charters worth?

That’s a question being asked throughout the garage area as the first season under the sport’s new ownership system winds down.

Designed to loosely mirror stick-and-ball leagues’ franchise formats and implemented in February, the charter system allows supply and demand to determine the value of the 36 Sprint Cup Series charters. The charters guarantee a starting spot in races and income from NASCAR over the life of the up to nine-year agreement, creating long-term equity for team owners. Most people in the sport projected a charter’s value to be worth seven figures heading into the 2016 season.

But to date, none of them have been sold since the start of the season, creating something of a mystery on their actual value.

Race Team Alliance Chairman Rob Kauffman said that charters were not meant to be a lottery ticket for smaller teams competing in NASCAR.
Photo by: GETTY IMAGES

The charters do not appear to have accrued a lot of added value from their starting points, observers said, because most NASCAR teams still rely on corporate sponsorship for around 75 percent of their annual revenue. That means a charter is just one part — albeit an important one — in making the NASCAR team business model attractive to new investors, which would raise the value of the charters with increased demand.

“Just because you have a charter and a slice of the league revenue, you still are reliant on raising a lot of external funding to make your team competitive,” said Rob Kauffman, who as chairman of the Race Team Alliance was an architect of the system and also is co-owner of Chip Ganassi Racing. “As long as that’s the case, it’s always going to keep a limit on charter values.”

Andrew Murstein, co-owner of Richard Petty Motorsports, indicated that he’s still unsure of charter values, but noted he’s seen enough interest in his team’s two charters that he hired investment bank Houlihan Lokey to look into bringing prospective new investors aboard.

“Frankly, I’m not sure what the charters are worth — but we will find out soon enough,” Murstein wrote in an email. “Richard and I believe tremendously that over time the charters can only go up in value, so we wouldn’t be selling too much.”

In February, Kauffman sold the two charters he got from the closing of Michael Waltrip Racing but said publicly only that they were for seven figures. Gene Haas, co-owner of Stewart-Haas Racing, which bought one of the charters, told Motorsport.com in February that the deal was not a flat fee but rather involved initial down payments to be followed by additional payments based off “what the value of the charter is going to be over the next three years.”

There are expected to be several suitors for charters this offseason, though the only team that has confirmed it will be in the market for one is Furniture Row Racing, which is expanding to a second car. Many of the charters expected on the market are from the back half of the garage, where, theoretically, charters are worth less because the teams are generally less stable and are not paid out as highly.

Many executives remain reluctant to go on the record with their valuations given the sensitivities around the topic. Some sources suggest the charters expected to be in play this offseason could sell for as high as $3.5 million to $5 million, while others scoffed at those numbers and insisted they had not accrued nearly that much value.

“I don’t know if you can articulate an exact price value, but I can assure you that now that there is sort of scarcity, that the value has absolutely gone up,” said Andrew Kline, founder and managing director of investment bank Park Lane, which works with NASCAR and International Speedway Corp. on other projects. “It’ll take years to understand what the value is of the charters, because it’s not like 100 people are going to buy them every day, so it’s going to take a while for the charter market to mature and actually sort of show what it’s worth. But I can’t see it not going up.”

NASCAR did not comment for this story by press time.

Kauffman noted that when the system was unveiled in February, executives said the charters would not be a silver bullet to perfect NASCAR’s team business model or fix every team’s woes. That has proved to be the case.

“The charters help the team to accrue value, but it’s up to the team to accrue value,” Kauffman said last week. “Hendrick Motorsports is worth more than Harry Scott Motorsports, and part of the value difference are the charters — but a lot of it is everything else the team has [like contracted sponsorship revenue]. … I think some of the smaller teams thought it was maybe a lottery ticket, which I don’t think is what it was ever meant to be nor what it is.”

While charters can be sold at any time, executives predicted that most deals won’t be cut until the offseason.

“It’s a brand-new system so we’ll see how it works,” Kauffman said. “It does seem like there’s some supply and some demand, so that bodes well for a market being created.”

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