The Crazy side of "buying" a piece of a Racehorse

[eye123]

Example from Myracehorse (Highlighted numbers are "their piece of this pie) (MRH= Myracehorse) (Horse Name Balletic)


OFFERING
Total Offering: $800,000

Share Price: $80/share

Total Shares: 10,000
Equity Per Share: 0.0100%

PER SHARE PRICE BREAKDOWN

Horse value: $45
Acquisition Costs: $4 - Includes Vet Check and Bloodstock Fee
Prepaid Expenses: $19 - Includes 2 Years Prepaid Training, Admin and Mortality Insurance
Management Fee: $12
FINANCIAL DETAILS

Ownership Group Fees and Compensation: MRH fee of 15% of offering and 10% of gross revenue applies
Insurance: Mortality and Loss of Use Insurance Included

So......

This horse sold for $450,000 at auction. They're valuing it at $800,000.(Considering this offering is sold out) Off the top they pocket $120,000 "management fee". Then they "retain" a 15% share valued at $150,000.Then should this horse turn out to be good they "pocket" 10%(of purse) right off the top plus an additional 15% for their shares. Cost of training and insurance for two yrs(by the way this was purchased as a yearling) is absorbed by the 8,500 buying in. Crazy investment......or buying an experience. (Hey $80.....when at the OTB you can say..."I own a piece of that horse" )


        

[1hooper]

myracehorse.com/app/buy

[eye123]

Just for fun run the numbers considering for a one share purchase ($80) and myracehorse taking 10% off the top of any winning...just what this filly would have to earn to get you back to even. (Consider the 10% trainer cut..and Jocks piece) Lotto anyone.

[1hooper]

Latest SEC filing. www.sec.gov/Archives/edgar/data/1744448/000168316821004079/xsl1-A_X01/primary_doc.xml
I know people that own shares for fun. They know they won't make money but it gets them into the game. Seems like they are transparent upfront with the financials.
It's like owning shares of Green Bay Packers.  packersstock.com/start/usa

[eye123]

What Bev was offering a while back if he was volunteering his time free (as I think he was)....you skip the "management fee" fee here, the 10% off the top on purse and you're not giving up any percentage (15%) upfront. Yep, it's still horse racing and all a gamble as to if you have a runner. The upside was , yes profit was attainable, experience would have been hands on (here at UIC), and you know the other owners. Surprised a bit that didn't get more traction. What I show here (with myracehorse) is, your living a "pipe dream"(as to profit).....not sure getting into the game at this level is worth anything.Then again, for some maybe it is. Anyone here join an offering like this...and did you feel it was worth it? (paying for the experience)

[jolyb]

eye, the numbers that you presented certainly make the possibility of a profit for investors quite remote.  However, in looking at the Offering Circular, I think that you might have double counted the way that the Management Fee is treated.  They receive a Due Diligence Fee (which could also be called a Management Fee) of $120,000 out of the proceeds, which represents 15% of the amount of a fully subscribed offering.  That is paid off of the top.  I don't believe that they also receive a 15% "carried interest" in the horse.  They intend to sell 100% of the ownership shares in order to raise the $800,000 amount.  As I read the Circular, in the event that all of the units are not sold, the Sponsor has the right, but not the obligation, to purchase ownership units on the same terms as investors.  That is still a very steep markup, but not quite as shocking as the numbers you presented.

I could be wrong in my reading of the Circular - some of it is fairly opaque.   Much of this reminds me of the tax sheltered real estate limited partnerships that were offered during the late 80's, in which the Sponsors make their money at the time of offering and the investors received tax losses and in most cases real cash losses as well. 

[turffan]

My nice has a share like this in Got Stormy. I think they offered it relatively recently, not early in her career. She lives near Saratoga so goes there often and we were there when Got Stormy won the Fourstardave last year. Cool, but she (my niece) will not be retiring early off of it.

[eye123]

I believe should the offering be "sold out" (with 10,000 shares..not sure if 1500 are reserved for MRH and only 8,500 are available for sale...or all are offered with the proceeds of the 1,500 ($120,000) going directly to MRH (didn't go that far into the reading of the offering) that either way (all 10,000 available...walking away with $240,000 and 10% of any future earnings...or retaining the 15% with the management fee and 10% on earnings..is a pretty sweet deal on their part. Another thing to maybe address you'd mentioned "in the event that all of the units are not sold, the Sponsor has the right, but not the obligation, to purchase ownership units on the same terms as investors" That in itself is an added bonus for MRH......nice knowing before hand what you have (horse with expectations, vs one with little)before you take a bigger piece of the pie. (Those sharing coming in blind)

PS...personally I can't see this selling out, but if anyone was interested why would they consider more than one share. (that gets you the experience) vs say 5, or ten where there is no upside....and burning off more money.

Another PS.....not sure if the "management fee" and the MRH fee (15%) are the same...anybody done this, and have this answer ? (What I've written so far is based on them being separate fees) But even if the same..... only half as bad...but still.....

[eye123]

Feb 15, 2022 12:25:08 GMT -5 turffan said:

My nice has a share like this in Got Stormy. I think they offered it relatively recently, not early in her career. She lives near Saratoga so goes there often and we were there when Got Stormy won the Fourstardave last year. Cool, but she (my niece) will not be retiring early off of it.

I'd be intrigued on the numbers of Got Stormy (seems to be their biggest success  (MRH) ) how those who got in (if he was an early offer or not, and how they did) vs the offering (late) of those who took shares there late. Did they make a profit ? What they were offered perks wise...tickets,seats etc ?  Would make the "best case scenario" of taking a share. (If they couldn't make anything there(profit).....well then....)  

PS...was Got Stormy offered before training ? Or did they (MRH) retain ownership.....THEN decide later with purses bankrolled...in later races to spread ownership ? (and at an added cost)

[cherokeescot]

Feb 15, 2022 10:10:07 GMT -5 1hooper said:

Latest SEC filing. www.sec.gov/Archives/edgar/data/1744448/000168316821004079/xsl1-A_X01/primary_doc.xml
I know people that own shares for fun. They know they won't make money but it gets them into the game. Seems like they are transparent upfront with the financials.
It's like owning shares of Green Bay Packers.  packersstock.com/start/usa

To be fair they do clearly detail their outrageous fees in the prospectus. I’m sure it is a lot of fun .. for the managing partners 🤑 Spendthrift cashing in at every opportunity here. Horse is by Into Mischief , their stallion. The bloodstock agent fee probably paid to them too. Training fees paid in advance coming in at $8000 a month …those drugs don’t come cheap ! It’s really just a glorified fan club. I haven’t heard of one person making an actual profit yet. If the “investors” are happy then who am I to complain. The Got Stormy and Monomoy Girl deals were I believe for one racing season only … no participation in any breeding value . Brilliant way for Spendthrift to get more blood from the stone while retaining the mares breeding rights to guess who - Into Mischief !!