As much as we love this sport, unfortunately, like many industries, it has some bad eggs. In the past, horse racing has been notorious for “ripping off its owners”. Thankfully, over the last 10 years corporate horse racing partnerships like West Point Thoroughbreds, Eclipse Thoroughbred Partners and Little Red Feather Racing have attempted to turn perception. With transparent pricing, communication, and first class service, corporate horse racing partnerships have given the industry a big creditability boost. In fact, one of the only growth areas in horse racing besides online pari-mutual gambling is thoroughbred partnerships. Look at any racing program today and you will see at least 50% of all horses are now owned by more than one person/entity.
The reason is simple. Owning 25% of four horses is better socially and financially than 100% of one. Everyone is joining forces and we wanted to blog about the 3 scams to watch out for when joining a horse racing partnership.
1. My Trainer or Bloodstock Agent Doesn’t Mark-up Horse Purchases.
I hear this all the time. “Why would I buy into a $100,000 horse you just bought yesterday at a sale for the hammer price of $60,000… when I can partner up with my trainer and three of his owners on a horse bought for the hammer price of $125,000 at the same sale without a mark-up?
The reason is simple. You can’t.
Scam number 1 is believing the trainer. They all say they don’t do it. But here’s what I hear at every sale. “Trainer X just privately bought horse Y for $75,000 and will bid up the horse to $125,000 tomorrow so he can show his owners that hammer price.”
I know YOUR TRAINER WOULD NEVER DO THAT. Guess what? He would. And he does.
2. The Double Mark-up.
This is my favorite. Some partnerships claim “WE DON’T MARK-UP HORSES”. And it looks real. You see a hammer price of $100,000 and you’re buying a 10% share for $10,000. But did you check the seller’s name to see if there is any business relationship to the buyer? Often times we see a competitor buy from an entity they own or control! For example, a partnership will buy a yearling in a “secret name”, give the horse to a consignor to re-sell at a 2yo sale. Then they simply buy back the horse under the partnership name everyone knows.
Here’s the bets part. Many partnerships double up! For instance, syndicate A buys a yearling for $50,000 under a secret name. Then syndicate A buys it again as a 2YO for $100,000. WOULD YOU BELIEVE SYNDICATE A THEN MARKS IT UP TO $150,000 TO ITS PARTNERS?
Happens all the time.
3. Read the Partnership Agreement
Sometimes the biggest scams are right in front you – and in writing. Make sure you know exactly what you are buying. You may think you’re buying 10% of a thoroughbred racehorse…. but because you didn’t bother to read the entire 50 page agreement you might learn later on that you only LEASING THE RACEHORSE. That’s right. You get all the purses but when the stakes winning colt is retired, guess what, someone else gets all the lucrative breeding rights. Or the syndicate manager gets 50% of the net proceeds. Or 10% of purses.
So, how do you avoid these traps? Like any business, invest with confidence with a horse partnership you trust. Ask around for recommendations and don’t be afraid to grill the general partner of a syndicate. This is an investment and now you have the power to ask the right questions.